M&A the boutique way: Chang, Pistilli & Simmons

Chang, Pistilli & Simmons managing partner Mark Pistilli reveals that his firms rapid growth and success in M&A has led to requests for mergers from domestic and international law firms alike

Mark Pistilli's eyes start to twinkle and the swivelling of his chair accelerates when the topic of conversation turns to his professional pice de rsistance: his involvement in the Alinta acquisition by Singapore Power and Babcock & Brown.

"There was the firm at its infancy and about to lose one of its major clients... [but] ultimately ending up not only with that client remaining a client, but also the predator itself ending up a subsidiary of another client – in effect, a client as well," he says.

The clients involved were the Australian Pipeline Trust (APT) and Babcock & Brown. The adventure started a little over a month after Pistilli and his colleagues, Danny Simmons and Diana Chang, opened the doors to their own firm, when APT called to say it was expecting a hostile move on its share registry by Alinta, as part of Alinta's takeover attempt of AGL.

Chang, Pistilli & Simmons (CP&S) subsequently got dragged into an 18-month rigmarole that took them to the supreme, federal and high courts, and required them to appear before the takeover panel twice as a legal stoush developed over the constitutional powers of the panel.
Meanwhile, APT was involved in a series of fundraisings and acquisitions, "as was the flavour of that particular market they were in," says Pistilli. The saga ended with CP&S client Babcock & Brown buying Alinta in consortium with Singapore power for $A8 billion.

"I've never seen a hostile move before where you've got a predator starting at 40 per cent [of APT's shares] and ultimately ending up with zero," says Pistilli.

International interest

The defence of APT against Alinta is one of the many large cases the boutique firm has been involved in since opening its doors in July 2006. Another high-profile case was the notoriously expensive C7 litigation, in which the firm acted for Optus.

CP&S has grown rapidly in size since opening, adding two partners and one special counsel to its ranks.

Financially, the firm seems to perform well, too, but Pistilli does not want to reveal revenue figures, or any financial data for that matter. "I like not to get into any numbers," he says. "We've only been in existence for two years and we haven't been through a full reporting season yet, so it's hard to get a feel of where the firm will effectively land."

The firm's focus on M&A in the energy, resources and utilities industries, however, ensures it is right in the middle of the boom, says Pistilli. And in previous interviews he has indicated that revenues have come in well above expectations.

The success of the firm has not remained unnoticed and Pistilli says he has received many expressions of interest in his practice. "We get approached often by domestic and international law firms about merging our practice into theirs. [But w]e haven't to date felt the need to do anything like that."

International approaches have come from firms that, as of yet, have no presence in Australia.

"We're an obvious type for lots of people," he says. "You have to keep in mind that we've created this firm from a wonderful base. Looking at Atanaskovic Hartnell, we were able to take from that firm the aspects and the people that we thought would suit the environment that we were trying to create. We've created a very streamlined firm, which is doing quite amazing work in the areas in which it practises, so it has an outfit which would fit very well with law firms that have other competencies."

When Pistilli is asked what that new environment exactly is, he chooses his words carefully. "Atanaskovic Hartnell was a firm which, from a marketing perspective, was about promoting the individuals within it," he says.

Inspired by the success of top-tier firms, Pistilli and his colleagues were more interested in promoting the brand of the firm rather than the individual partners. "Rightly, or wrongly, it was [our] view that that wasn't the direction the firm was going."

CP&S has kept the boutique model and Pistilli says they are not likely to change this. "Most of us come from the larger firms and ... we prefer this kind of environment. I don't think there are any practitioners in this firm who [would] readily transfer back into a large firm environment."

Lack of cash

The current credit squeeze in the global economy stemming from the sub-prime crisis in the US is starting to affect business sentiment in Australia. Although most law firms have not experienced an impact on the amount of work that has come through the doors, it has certainly changed the nature of transactions.

"It completely changed the structure of our practice," says Pistilli. "Late 2007, most corporates could raise as much money as they wanted in the debt markets and almost overnight that disappeared," he says.

But Pistilli remains positive about the prospects of the M&A market. He says the fallout in the market also means there are more potential targets.

"There is a lot of active consideration about takeouts of listed companies, where there is a perception that they are trading at a lot less than they are worth." Some companies have become more "valuable," says Pistilli, as their share prices have fallen. For cashed-up companies, this could be the time to pick up bargains.