Corporate Tax

Separations strengthen file M&A piece for US corporations

  • Cravath, Baker McKenzie leaders Johnson & Johnson
  • Paul Weiss, Gibson Dunn control GE

(Reuters) – The breakups of three corporate giants this week are contributing to a record M&A boom among US law firms.

On Friday, Johnson & Johnson announced that it would split its business with the help of the law firms Cravath, Swaine & Moore and longtime advisor Baker McKenzie.

J & J’s announcement comes days after Toshiba and General Electric Co announced the three-way split.

The breakups create work for M&A attorneys who have already had a busy year. According to data firm Refinitiv, global deals worth more than $ 4.9 trillion have been announced so far this year, nearly 71.3% more than in the same period last year.

Cravath corporate partners Robert Townsend III, George Schoen and Jenny Hochenberg are offering M&A advice on the separation from J&J, the company said in an email.

Baker McKenzie’s team is led by tax partner Maria Eberle, who heads the state and local tax department, and transaction partner Alan Zoccolillo.

Backer McKenzie has advised Johnson & Johnson for more than 30 years, the company said in an email.

The healthcare giant will split into a business focused on consumer health products like the Band-Aids brand and another business specializing in pharmaceutical and medical devices.

For the tripartite division of GE announced on Tuesday, the group has teamed up with Paul, Weiss, Rifkind, Wharton & Garrison and Gibson Dunn.

Toshiba representatives did not immediately respond to requests for comments from its advisors.

David Canvas, an M&A partner at Cleary Gottlieb Steen & Hamilton who is not involved in the three transactions, said one reason for the company liquidations could be the fluctuations in valuations between different industries.

“When you put them together, the market valuation isn’t as high as it could be if you split them up,” said Canvas. “From a shareholder value perspective, it makes more sense to split up the business.”

For law firms, divisions are complex processes that can take a year or more to complete, according to Frank Aquila, a Sullivan & Cromwell M&A partner who was not working on the three transactions.

Aquila said that while the announcement of three “mega” breakups was uncommon for a week, law firms should expect more breakups as companies continue the COVID-19-fueled practice of reviewing their business structures and shareholder value.

(UPDATE: This story has been updated with comments from a Sullivan & Cromwell attorney.)

Continue reading:

Health giant Johnson & Johnson splits into two companies

Toshiba plans to split into three parts but is declining calls to go private

GE turns to Paul Weiss to help navigate the three-way split

Sierra Jackson

Sierra Jackson reports on legal matters relating to major mergers and acquisitions, including deal work, litigation, and regulatory changes. You can reach them at sierra.jackson@thomsonreuters.com

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