Welcome back to the Big Law Business column. I’m Roy Strom, and today we look at Davis Polk’s plans for growing its M&A practice. Sign up for Business & Practice, a free morning newsletter from Bloomberg Law.
As the hiring market surges for Wall Street law firms, Davis Polk’s small mergers and acquisitions practice with a high concentration of lifers remains a throwback.
But even stalwarts must cede to change. The new co-head of the group, Oliver Smith, is ready to expand the team and grow its private equity practice—while still hoping to hold on to the attributes of a close-knit partnership.
“We have the brand, we have the capabilities, and when and if you have opportunities, you have to nail them,” said Smith, who started his career at the firm in 2004 and took the leadership role last month. “That has been a part of our focus as we continue to grow that private equity business.”
Smith acknowledged competing with the largest firms in the private equity space is “difficult” because private equity clients are particularly “sticky.”
Davis Polk’s US M&A practice consists of 23 partners, and it just turned in one of its strongest quarters, handling $92.3 billion worth of deals and placing second in Bloomberg Law’s first quarter league tables. The firm was bested only by Kirkland & Ellis, a behemoth with more than 100 M&A partners in its New York office, according to its website.
Smith shares leadership of the Davis Polk practice with Will Aaronson. The firm advised Sycamore Partners LLC in its acquisition of Walgreens Boots Alliance Inc., and Intra-Cellular Therapies Inc. in its sale to Johnson & Johnson.
Davis Polk has been among the top 10 firms by global deal value for the past five years, according to Bloomberg and Bloomberg Law league table reports. Its ranking for global private equity deal value has been close behind its broader global deal value position in most of the years, indicating a larger portion of its work comes from company-side or strategic clients.
Hiring Success
Davis Polk is still run relatively traditionally compared to massive firms like Kirkland or Latham & Watkins, which have rocketed to the top of the deals practice by aggressively hiring competitors’ partners and cultivating strong relationships with the largest private equity sponsors.
It’s one of only a handful of firms to retain a single-tier partnership, eschewing the growing trend among Wall Street firms of adding non-equity partners. Last year, it boosted the high end of its pay scale to compete in the lateral partner market, which its chair Neil Barr said is reshaping the industry.
The effort has already led to some hiring successes. In March, the firm hired Michael Diz, formerly the M&A co-leader at Debevoise & Plimpton (which placed third in the first-quarter league tables). Based in Northern California, Diz has strong ties to private equity firm TPG Inc., helping it complete numerous acquisitions, and he has represented other private equity shops, including Kelso & Co. and Providence Equity Partners.
Smith, who’s also advised TPG, said Davis Polk is engaging in the lateral market in a “thoughtful yet aggressive way.” Hiring Diz furthered some of the M&A group’s top priorities: overall growth, greater scale in California, and increasing its presence in the private equity practice, Smith said.
Davis Polk has focused on representing a stable of mid-market private equity funds, using that base to grow in scale and size as it competes for opportunities from larger asset managers. That strategy has led to “good success” in the last several years, he said, but the firm wants more.
The first three months of the year was a “great quarter” for the firm’s M&A practice, Smith said, but it’s hard to predict what will happen in the current quarter. Dealmakers are working with anxious clients who are unsure what the global trade landscape will look like going forward.
“In the short term, some of the volatility probably impacts everybody. Long-term, there is a real question as to what cross-border transactions look like,” Smith said. “That’s the biggest question at some level. And then it’s industry-by-industry and we have to wait and see how things transpire.”
The firm’s goal of increasing lateral hires exists in one of the most competitive, expensive markets for legal talent.
The 65 New York M&A lateral partner hires last year was up by about a third from 2023, according to legal recruiting firm Macrae. Davis Polk’s closest competitors were particularly busy. Paul Weiss made six such hires; Freshfields hired five New York M&A partners; and Simpson Thacher & Bartlett added four, Macrae said. All three firms were in the top 10 in the first quarter league tables.
“Given our size, our overall place in the league tables will fluctuate a little bit depending on what our clients are doing,” Smith said. “If you look at our competitors who have 100 or more partners, they will do more deals, just by the rule of large numbers.”
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That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.