Call them gluttons for punishment. Akin Gump Strauss Hauer & Feld’s appetite for private equity work hasn’t tapered off even after a brutal couple of years.
The firm’s total private equity deal value dropped from about $10 billion in 2010 to $8 billion last year, even as the number of deals rose, according to L.A. partner C.N. Franklin Reddick III, who co-chairs the firm’s corporate group. Despite that, Akin Gump is investing in the practice with the idea that better days are coming.
“We are looking to build in private equity M&A to achieve long-term strategic goals so the near-term outlook is not driving our decision,” Reddick said. “We have a very strong funds practice in New York and we represent a wide variety of private equity firms.” The firm would like to replicate that on the West coast by adding partners with books of business across California, he said.
Akin Gump and other firms lining up for a share of the private equity fund market aren’t all crazy. The bigger private equity deals—those worth more than $1 billion—seem to be coming back, accounting for a little more than half of all capital invested in 2011, according to my new favorite friends at Seattle-based research firm PitchBook (they respond fast to my frazzled requests on precarious deadlines).
Capital investment into business and consumer services companies rose last year, and funds have been shifting more money into the IT, health care and energy sectors.
And as I reported Monday, private equity firms are sitting pretty on about $425 billion in “dry powder”—capital ammunition that hasn’t yet been invested—of which $100 billion is nearing the end of its investment horizon. That means the firms have to find a place to park the money.
While many New York and Silicon Valley firms train their sights on California’s high-tech and life sciences sectors, Akin Gump is pinning its hopes on its specialty in the clean-tech, renewable energy and media and entertainment practices.
Last year, Akin Gump represented Cerberus Capital Management in its $1.5 billion acquisition of DynCorp International Inc. and handled transactions for New York private equity firms Angelo Gordon & Company, RNK Capital and Halyard Capital, among others.
“We seek to expand our private equity representation on the West coast in order to better serve our existing clients and expand our practice, leveraging our strengths in our fund formation, cross-border transactions, tax and public policy practices, which currently are centered in our other markets,” Reddick said.