Here's Exactly How the Raytheon UTX Deal Impacts Every Single Law Firm

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Deals are getting bigger than anyone is thinking about. Way bigger.

Older established companies—Raytheon, UTX, Fiat Chrysler, and Renault come to mind—now see M&A as only 1 of a small number of strategies to drive growth, reduce costs, create the necessary scale to compete, or take on the massive R&D risk to develop transformational products. This is part of the new world order.

Newer companies—Amazon, Apple, Facebook, and QUALCOMM—look to M&A to position themselves for the future. These companies don’t let size faze them. They may face strong political headwinds, but these organizations are smart and relentless. The headwinds just add to the complexity—making these deals high risk even if they are not mega-sized.

Clients believe only a handful of law firms are truly positioned to handle the size, scale, and complexity these deals bring. Ultimately, clients see the field of law firms able to play lead counsel on these deals as small—maybe 12 to 20 players total.

The Titan Deal Firms (TDF) will configure themselves, build the infrastructure, and staff up for the biggest deals to come. And, they will hunt this work down around the world. The successful TDFs will enjoy premier branding to attract inbound leads. TDFs will learn to hone their business development skills to position themselves to be hired 6 months before clients seriously start acting on any deal—which is how most M&A hires are made.

We also see this happening in the Private Equity world. Deals are getting bigger and more capital is being put to work. These shifts in deal size lead to unprecedented opportunity for law firms of all sizes and stature.

Great News for All Other Firms

As law firms in the M&A space migrate to the Titan deals in the market, there is unprecedented opportunities for new players to get into this lucrative space. Firms outside the mega-deal firms will win big. These firms will take on the deals the TDF firms leave behind or refer out. All firms will move up and have access to larger deals as they step in to fill the void in the market. The real winners will start to position themselves now—changing their pitches to engage large clients in dialogue about M&A. You can follow the playbook:

 
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I also recommend revisiting your strategic plans for M&A. The successful firms, the ones able to fill the void (and the TDFs) will design their strategy, resources, metrics, and goals to drive success. This includes deep and penetrating feedback on how clients are planning their M&A—as your clients are key drivers in your success.

There are few opportunities to witness, never mind participate in, a fundamental redefinition of the market. There is little downside risk for anyone with (or who wants) a meaningful M&A practice. The upside is enormous—and you can say you were there.

Congrats to Shearman & Sterling and Wachtell on their roles in the market-defining deal between Raytheon and UTX. And look for more to come.

Best of luck in the market ahead.

MBR

5 New Trends Point to Big Changes

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The ink isn’t quite dry yet on our most current research. But, we see clear signs of subtle change with big impacts. We just finished in-depth interviews with more than 300 top legal decision makers—here is what we are learning:

Complex Work is Morphing into Bet-The-Company Work Mid Matter

Matters starting out as complex are growing into bet-the-company matters. Top legal officers report the newly bestowed bet-the-company status is a direct result of increased financial exposure. Litigation matters start out contained—then grow and attract regulators, other plaintiffs, and a growing list of securities litigators if the company is public.

This trend is bad for clients but gives law firms real opportunity to join the exclusive bet-the company club for firms who are looking for entry. It is also causing serious damage to law firms who don’t realize they are now handling bet-the-company work.

Clients Have Less Patience than Ever

The value of a client’s time is increasing as the complexity of their matters remains at peak levels. Clients are spending more time managing risk and strategizing—leaving less time to track down attorneys, matter details, budget status, and other issues which steal precious time from your client’s main mission. And the more valuable a client’s time—the less they have for nonvalue-added tasks. Law firms are losing serious work because they don’t provide comprehensive and timely status reports. This reporting is just as important as the legal strategy.

Large firms are in their 4th year of outspending other law firms in client development—and keep winning more work than other firms.

Much is being made of the largest law firms growing much faster than other firms. 2018 marks the 4th year in a row these largest firms spend 1/3 more on client development than all other law firms. This is the reason they are winning so much new business—they have been spending more and working harder to get it.

Mid-size Firms Living Large in Mid-size M&A

Mid-size and smaller firms are carving out preferred relationships with the largest law firms to handle the small deals larger firms don’t find economical. The largest firms are all chasing large deals and private equity. It’s a great market with great clients. But these large firms can’t do small deals—and don’t want to. A clever group of mid-size firms, think 100 to 400 attorneys, are making a nice living developing preferred relationships to handle these smaller deals and service the daylights out of the clients and larger law firms.

This adds to the already established trend of mid-size firms having an especially strong position with non-US-based companies for making US-based acquisitions.

AFAs are Back

Client interest in AFAs is gaining new momentum as complex litigation grows faster than budgets are increasing—and is squeezing the routine work. Top legal officers are finding AFAs and settlements are 2 powerful tools to manage budgets and squeeze more litigation money out of the budget for the more expensive and complex matters.

Spot and Ride the Trends

The fast movers are grabbing clients while other law firms aren’t even looking as they take advantage of these trends. It is 1 the most effective tools to develop business and build enduring relationships.

Partners in a continuing dialogue with their clients are the first to learn these trends—clients will have shared them through words and behaviors. You can also predict and anticipate these trends through well-crafted and executed client feedback. Your chances of picking and using these trends to your advantage are directly linked to the frequency and depth of your client feedback. They are also linked to knowing exactly why clients bring you in and if the reason they bring you in changes. And, one thing is as sure as death and taxes—client needs will change.

MBR