The Mergers and Acquisitions (M&A) industry saw record activity in 2021 with approximately $5.9 trillion in activity, smashing the volume in 2020 by nearly 65%. This is the highest volume the M&A industry has experienced since 1980. In this post-pandemic era, companies pivoted their business models and found innovative ways to grow despite the lingering COVID-19 pandemic, rising inflation, disrupted supply chains, and social crises. Despite such innovation, companies and their legal and financial advisors are somewhat lagging in the area of gender equity in M&A.
It’s not news that the M&A industry is largely a male-dominated field. Although there has been some forward movement toward gender parity recently, there remains a significant opportunity for improvement to ensure women have a seat at the table.
The truth is in the numbers
Undertaking an M&A deal takes many different actors to plan, negotiate, and execute a deal: a corporation’s board of directors, its senior management, and legal and financial advisors. As reported by the Women Business Collaborative, women held 27% of all S&P 500 board seats in 2021 (up from 24% in 2020). At this rate, it could take as long as eight years to reach gender parity on corporate boards of directors.
By 2021, the number of women chief executive officers (CEOs) of Fortune 500 companies hit an unprecedented high of about 8% — you read that right: 8% — and women still make up fewer than a quarter of C-level executives. Not only are women underrepresented as CEOs, but few leaders in the corporate development teams responsible for executing M&A transactions are women.
For purposes of corporate law, boards are at the center of corporate governance in M&A. The central role that boards play in corporate governance has made them an institution that is a target for gender diversity efforts. Thus, while women continue to be underrepresented on boards, board diversity has accelerated over the last decade.
For instance, in 2008, only sixteen percent of S&P 500 board seats were held by women; by 2021 that number had increased to thirty percent. In August 2021, NASDAQ implemented a board diversity rule approved by the SEC, which is a disclosure standard designed to encourage a minimum board diversity objective for companies and provide stakeholders with consistent, comparable disclosures concerning a company’s board composition.
Nevertheless, women remain underrepresented in board leadership roles, an important element of what some scholars call “substantive gender diversity,” or ensuring that women and other diverse members of the board assume influential roles in board decision-making. For M&A transactions, substantive gender diversity is particularly important because the board chair plays a critical role in setting a board’s agenda, and board members often view the chair as influential in board decision-making.
Focusing specifically on legal advisors, the gender gap is even greater. Although women have comprised nearly half of US law school enrollment for the past thirty years, women only account for 23% of partners and 20% of equity partners in BigLaw100 firms.
A study reported in a recent UC Irvine Law Review article found that, from 2014–2020, women only accounted for 10.1% of lead counsel positions for buyers in M&A deals and 12.43% of lead counsel roles on the seller side. There is little industry, firm, or deal-specific disclosure on women’s leadership in M&A investment banking, though numerous reports suggest it remains male-dominated.
Moving the needle toward gender parity
As an M&A attorney at Nixon Peabody LLP, I am glad to be part of a firm that values diversity on deal teams and am proud to have been a member of many women-led deal teams. Nixon Peabody is one of four firms nationwide to participate in the Move the Needle (“MTN”) Fund, an initiative created by Diversity Lab. MTN requires those four trailblazing firms to invest more than $5M over five years; set aggressive, public firm-specific diversity goals; experiment with innovative, research-based methods to achieve them; and measure and share outcomes successes with each other and the rest of the legal community. Nixon Peabody is piloting a workflow app through its participation in MTN, which asks that at least 30% of the attorneys considered for staffing on new matters be from underrepresented groups. This will help ensure that client teams, including deal teams, have greater representation of women and attorneys from other underrepresented groups.
On my recent podcast episode (She Talks Law, available on Apple and Spotify), I invited our Chief Diversity Officer, Rekha Chiruvolu, and the Founder of Diversity Lab, Caren Stacy, to discuss gender parity in law. Though our discussion was not specific to M&A, the DEI trends we discussed largely mirror the gender equity trends in the M&A industry. The main takeaway: we have come very far, but still have a way to go to achieve gender parity in law.
Aside from MTN, we discussed several ways to encourage women retention in law firms but several of those techniques can be easily translated to other industries to support substantive gender diversity. In no particular order, we discussed the importance of creating gender neutral policies (balanced parental leave policies), celebrating each other’s successes (big and small), promoting allyship with male colleagues, creating affinity groups for various underrepresented groups (not just women) to develop a sense of community and offer support, and use tools such as the “Mansfield Rule” to diversify law firm leadership and, in turn, to diversify deal teams (including M&A deal teams). Also developed by Diversity Lab, the Mansfield Rule is used by 118 major law firms nationwide to increase and sustain a diverse and inclusive workforce by striving for at least 30% of women, lawyers of color, LGBTQ+ lawyers, and lawyers with disabilities leadership and governance roles, partnership, client pitch opportunities, and promotions.
Companies place greater emphasis in the investment world on social responsibility, or ESG (environmental, social, and governance) factors. Now, more than ever, companies feel pressure to dedicate a significant number of resources on developing ESG-focused practices to attract socially responsible investors. Morgan Stanley Bank recently conducted a survey that found that nearly 90% of millennial investors were interested in pursuing investments that more closely reflect the values they hold (i.e., “impact investing”). Gender equity is a small, though significant, piece of the larger ESG pie.
While the industry is still a long way from gender parity, the narrative about women in M&A has progressed forward (somewhat). For the legal industry, nationwide initiatives such as MTN and the Mansfield Rule, coupled with more inclusive policies and protocols, help to ensure that women and individuals from historically underrepresented groups can attain success and leadership in some of the nation’s top law firms. On a broader scale, prioritizing substantive gender diversity and placing an emphasis on socially responsible models will continue to help close the gender gap in M&A, the C-suite, and in boards globally.
Jennifer Jovcevski is an associate in Nixon Peabody’s M&A and Corporate Transactions practice and she is the founder and host of the She Talks Law podcast. This first appeared in the Rochester Business Journal.