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They Shopped Till They Dropped: Corporate Scorecard 2009

Private equity funds' long run came to a halt in 2008. And the fourth quarter was particularly poor. 'There were relatively few signs of life last year," says Simpson Thacher & Bartlett's Alan Klein. "And what signs of life there were occurred in the first nine months."

Those few signs didn't amount to much. In 2007, 294 deals were announced; in 2008, 148--an almost 99 percent drop. Overall value took an even bigger hit. In 2007 the private equity market totaled some $568 billion. A year later, that number dropped to $71 billion. Simpson Thacher, the top firm in terms of deal value, went from completing $159 billion worth of deals in 2007 to only $13 billion last year.

Moreover, the biggest private equity deal announced in 2008 was Nordic Capital Fund VII's and Avista Capital Partners' $4.1 billion acquisition of ConvaTec. That pales in comparison to 2007's top deal: the $48 billion BCE Inc. buyout. (Those big dollars didn't last, though; the BCE deal collapsed in December when a valuation expert at KPMG LLP said that the transaction would create an insolvent entity.)

Though 2008 didn't see any blockbusters, smaller-scale deals did keep some firms busy. Kirkland & Ellis shot up to first place in 2008 for deal volume, completing 69 deals overall in 2008, according to Mergermarket Ltd. But while each of the first three quarters brought between 16 and 26 deals for the Chicago-based firm, the fourth quarter saw only seven deals. That's better than many other firms, which saw only one deal in the last quarter of 2008.

Kirkland's sweet spot is middle-market funds and, in 2008, it paid off. "The large megabillion-dollar deal market was quiet, but the middle market was pretty alive and robust for the first three quarters of the year," says Kirkland partner Jeffrey Hammes. Middle-market transactions, generally identified as around $1 billion, were more insulated, says Hammes, because their lenders weren't as tied up in toxic assets as the big banks. Kirkland deals included representing Apax Partners, Inc., in its $1.2 billion going private acquisition of The TriZetto Group, Inc. (Apax's Incisive Media is The American Lawyer 's parent company.)

Charles Hardin, Jr., the chair of Jones Day's private equity practice, which completed 27 deals in 2008, second behind Kirkland, says that deals last year were smaller, slower, and harder to finance. But at least until September there was still work to be had. That's all changed. "The problem with doing a deal right now is if in three or four months the market keeps going down, you're going to look like an idiot," says Hardin. "The go-go days are gone."

Still, Ropes & Gray's R. Newcomb Stillwell says that activity may pick up if hard-hit businesses have no choice but to sell, providing an opportunity for funds. So far, though, the money is still sitting on the sidelines, and it's unclear when the funds will get back into the game. "Caution is the key word right now," says Hardin. "There is a lot of fear out there."