M&A legal giant Lipton sees no merger slowdown

By Jonathan Stempel

NEW YORK (Reuters) - Martin Lipton, arguably the best-known U.S. mergers and acquisitions lawyer, on Monday said the growing importance of private equity firms and availability of capital is fueling a merger boom that shows no signs of abating.

"We entered (a) wave of mergers three years ago, basically, recovering from the collapse of the bubble stocks and the Enron/WorldCom scandals," Lipton said at the Reuters Investment Banking Summit in New York. "This one has been fueled by the great growth in private equity transactions, and the availability around the world of debt capital. We've entered a new era."

Wachtell, Lipton, Rosen & Katz, the law firm that Lipton co-founded, handled $265 billion of M&A transactions last year, 34 percent more than No. 2 firm Skadden, Arps, Slate, Meagher & Flom LLP, according to The American Lawyer.

Among its clients this year have been Golden West Financial Corp., which agreed to a $24.3 billion takeover by Wachovia Corp. (WB.N: Quote, Profile, Research, Stock Buzz); North Fork Bancorp Inc. NFB.N, being acquired for $14.6 billion by Capital One Financial Corp. (COF.N: Quote, Profile, Research, Stock Buzz); and Israel's Iscar Metalworking Cos., which sold a $4 billion stake to Warren Buffett's Berkshire Hathaway Inc. (BRKa.N: Quote, Profile, Research, Stock Buzz) (BRKb.N: Quote, Profile, Research, Stock Buzz).

Credited with inventing the "poison pill" anti-takeover defense, Lipton said many target companies have grown more constructive toward mergers, even where activist shareholders are agitating for change.

"There has been a very significant change in attitude," he said. "Whereas 30 years ago, it was almost invariable that the target company would reject any idea of restructuring, or take any action in the face of a takeover bid, ... companies today are much more inclined, in the face of that kind of pressure, to undertake strategic revisions."

Still, he said this caution, along with growing competition among buyers with financial clout, has raised market risks.

This comes amid signs the U.S. economy is slowing, and expectations by many economists and lenders that corporate defaults will rise from current record- or near record-low levels. Still, he said this is not dissuading dealmakers.

"There's no question that risk has increased," Lipton said. But he added: "I don't see how anybody can say that the risk is too great, or that we're on the edge of a collapse ... Absent a very significant world kind of event, I don't see where there's going to be a significant slowdown."