2023 proved to be a significant year of change in top deal rankings. Simpson Thacher & Bartlett, previously known for their robust dealings, experienced a noteworthy fall. The shift out of the top 10 deal rankings even allowed Kirkland & Ellis to claim the crown from this former frontrunner.
According to Bloomberg data, Simpson Thacher oversaw deals worth about $160.3 billion last year, marking a 63% drop from their transactions in 2022, which totaled $430.4 billion. Such a significant decrease precipitated the law firm’s slide from the number one position down to 11th place in the rankings for deal volume by principal legal adviser.
Noted law firm consultant, Peter Zeughauser, dubbed 2023 as a peculiar year, mainly due to larger deals becoming far less frequent while smaller deals continued to proliferate. This observed pattern, coupled with clients’ reluctance to pursue mergers and acquisitions due to high credit costs, misaligned valuation expectations, and regulatory hurdles, caused an overall slump in the deals market.
As a result, global deal activity in 2023 only reached $3.6 trillion, a decline of around 20% from the previous year. Simpson Thacher, despite having a history of tackling considerable deals, was unable to resist the downward trend.
Simpson Thacher’s position was seized by Kirkland, the world’s largest firm by revenue. Kirkland oversaw 603 deals amounting to nearly $343 billion. Following in the rankings were Wachtell Lipton Rosen & Katz and Latham & Watkins, handling 77 deals worth close to $295 billion and 494 deals nearing $290 billion respectively.
For observers, these significant shifts may seem to outline a change in a firm’s overall strength or positioning. However, it is argued that the fluctuation of deal activity should not be assumed to illustrate the impact of competitive forces or other factors- it may simply reflect natural shifts in the market. As law professor Paul L. Regan explains, any significant change in position within a year could occur due to a multitude of factors and should not be observed in isolation.
It is also noted that Simpson Thacher’s impressive deal volumes in 2022 can be traced back to an overflow in activity from the prior year. Large transactions often take months to disseminate through the pipeline, resulting in a period of stagnation for the firm’s deal volume after May 2022.
As for the energy industry, it constituted the majority of M&A transactions last year, with Gibson, Dunn & Crutcher, Davis Polk & Wardwell, and Paul Weiss taking the lead, while Simpson Thacher trailed behind.
Throughout 2023, Simpson Thacher bade farewell to several of its partners. Chris Bennett, previously a partner at Simpson Thacher, was picked up by Weil Gotshal & Manges while James Hays was welcomed to Gibson Dunn to inaugurate a new fund formation practice in Houston. This comes after a string of lateral departures in Houston’s legal market.
Despite the lean year, Simpson Thacher did take charge of a few remarkable deals, including advising Cisco Systems Inc. on its acquisition of Splunk. This deal marked one of the five largest transactions of 2023, totaling a whopping $28 billion. Furthermore, the firm aided private equity firm TCV in acquiring the listings business Adevinta for approximately $15 billion, and Karuna Therapeutics was advised by Simpson Thacher for its roughly $14 billion acquisition by Bristol Myers Squibb.
You can read more about this matter in its original coverage, here: Bloomberg Law.