Bay Street lawyers are rejoicing as loosening credit markets and a sense that the Great Recession may be a thing of the past have made way for a wave of new deals in September.
“All of a sudden, we came back from the holidays in September, and deals which clients were putting off or which had been moving along but at a slow pace all of a sudden picked up,” McCarthy Tétrault LLP partner Vanessa Grant tells Law Times.
Grant suggests a pair of factors have prompted the swift rebound. Credit markets have opened up, and there is a renewed optimism about the state of the economy, she says.
“I really see this as people are saying, ‘enough is enough,’ and the economy is moving on,” says Grant. “It’s really terrific.”
The upbeat predictions come a year after the symbolic collapse of Lehman Brothers Holdings Inc., a historic fall from grace that put the deep freeze on markets worldwide and shelved many potential deals.
But many of those deals appear to have a renewed shelf life as Thomson Reuters reported that the first week of September saw Canadian companies bring in almost $5.9 billion through stock sales, setting a new mark for the most money raised in a single week in history.
Grant, who deals with a wide range of clients in her practice, is jubilant about the sudden increase in mergers and acquisitions and capital finance activity.
“We are seeing both prongs of that,” she says. “I am hoping we are like the canary in the coal mine, signalling that, like the economic indicators we have seen, we really are out of the recession.”
Grant is hopeful that work will continue streaming in for the rest of the year and into 2010. So far, she doesn’t see anything standing in the way of a return to typical deal levels, “even slightly heightened activity levels.”
“I am cautiously optimistic that with the credit markets opening up a little more, with valuations coming more into line with expectations of what valuations should be, that what we’re seeing is a return to historical activity levels,” says Grant.
“I’m really just thrilled that the plug seems to have been pulled and some of these deals are actually coming to fruition. It’s really nice to see it across the board. My practice right now is a very nice mix of some M&A, some acquisitions, and some capital finance transactions, and, you know, it’s just great to see.”
Reflecting on the downturn over the past year, Grant says the period was particularly stressful for lawyers.
“There was always the next deal on the horizon, but it just wasn’t moving at the pace that we would have expected,” she says.
“And certainly clients were more cautious about the deal because there was economic uncertainty. So I think that uncertainty was reflected in the deals that were moving more slowly and the deals that were just not getting done.
“And we felt that uncertainty internally as well, no question about it. It’s not that we weren’t busy; it’s just that it was a slightly different pace than what we’ve been used to.”
Davies Ward Phillips & Vineberg LLP partner Shawn McReynolds pegs the recovery as far back as the second week of July. He notes that the summer is traditionally the time when activity slows.
“The capital markets have been on fire the last couple of weeks,” he says. “We’ve done three deals in the last 24 hours alone as well as having done the big Barrick [Gold Corp.] deal last week with a couple of others.
“It’s a robust time. All of a sudden, the capital markets are quite robust.”
He notes the activity has not been confined to certain areas of the economy as it was earlier in the year.
“There were certain spaces where you could still raise capital, but right now it’s across the board.
We’re seeing a bunch of diversified companies raising capital right now, companies that probably wouldn’t have been interested in raising capital at the prices their stocks traded at four, five, six months ago. We’ve had quite a sustained rally in the equity markets, and that helps too.”
McReynolds notes that the United States has experienced a surge in initial public offerings with five deals coming to market recently. He suspects the Canadian market will soon follow the pace set south of the border.
“It’s all good,” he says. “It’s a virtuous circle. Confidence on the part of business that the world has stabilized has precipitated more transactions, which themselves have precipitated more confidence. And so a certain amount of momentum has built up.
How sustainable it is – who knows? But at the moment, we’re seeing a high level of activity and a high level of optimism going forward.”
While a few staff at his firm have endured some sleepless nights working on the recent influx of deals, McReynolds says “people are happy.”
“People want to be busy. You would rather hear people complaining that they are too busy than people complaining that they’re not busy. And so I think people are delighted to see high activity levels and to be doing interesting transactions.”
McReynolds notes it’s difficult to have a “clear crystal ball” about whether the rally will last but says the sense is that more deals will keep lawyers busy at least until the end of the year.
“I don’t know if anybody has much vision beyond next week, but to the extent that people have a kind of gut feel, my perception is that business levels will be active,” he says.