The ravages of the global recession and the European sovereign debt crisis have threatened to turn the long boom law firms have enjoyed into a painful bust. But Europe’s resilient full-service firms are weathering the storm, and many are finding that economic turmoil is bringing opportunities as well as challenges.
In law’s long boom years, it seemed to many that the bumper revenues and profits from an ever-rising tide of transactions would last forever; there was always another wave of deals to be done. But since the collapse of Lehman Brothers in 2008 and the global financial crisis, law firms that once thrived on a seemingly insatiable demand for everything M&A have faced the painful realisation that this lucrative era is over.
‘Adapt or die’ is the unspoken mantra Europe’s major domestic law firms have been reluctantly forced to accept. But even as economists’ forecasts for when the financial tempests would subside have stretched from five years to ten, and still longer, the surprise is that so many legal firms have successfully evolved to meet the realities of a new, more modest, age.
While banks are key clients for many firms, and the bumper flow of deals before the implosion of 2008/09 was a big driver of expansion, banking work is only one leg for most full-service practices’ work. But during difficult economic times firms have seen a natural rise in litigation work, while government initiatives to quell the growing deficits in certain countries have also given law firms extra work. Especially in the areas of labour law and taxation.
Rather than the crisis heralding an end to swathes of legal work for banks, instead the recession and sovereign debt crisis have seen the nature of that business evolve (see ‘On the Mend’), with a decisive shift to more restructuring and refinancing activity than in the good times. For many law firms, the economic storm clouds have come with a silver lining. ‘Like much of the rest of Europe we’re going through a peak of refinancing and this has been going on for a few years,’ says Maria-Pia Hope, managing partner of Vinge in Sweden.
With banks unwilling or unable to lend, there has been a rush to other forms of financing, in particular debt capital markets. In certain countries, the potential to develop bond-driven financing is huge.
Bonds to the rescue
Historically, the bond markets have been a far more common form of corporate financing in the US, while businesses in European countries have relied more on direct bank finance. But with credit from banks increasingly scarce in Europe, and available at premium rates where it can be had, more European companies are turning to the bond market as an alternative means of financing themselves in the present climate. Inevitably these companies are using European law firms to advise them on this fund-raising. US law firms are clearly more experienced in this area, but Europe’s legal industry is quickly building a considerable skills base for corporate bonds.
‘We have done a lot of bond work in the last year and we didn’t have a domestic bond market until the beginning of 2012. Norway has had a bond market for a number of years, we waited for it to come over to Sweden,’ says Maria-Pia Hope. She also says that bonds are being used now for refinancing purposes.
‘Austria’s bond market was almost nil until relatively recently.
It has really peaked this year.’
Erik Steiger, Wolf Theiss
Her firm assisted Swedbank in connection with Svensk FastighetsFinansiering’s establishment of its current programme for secured medium-term notes (MTN) in 2011 and the changes to the programme, which was updated in December 2012. The MTN programme is listed on NASDAQ OMX Stockholm and includes bond issues totalling E580.8m. The team was led by capital markets partner Mikael Ståhl.
Vinge also assisted Carnegie Investment Bank and DNB Markets on the Svensk FastighetsFinansiering II bond issue, which had a total value of E145m. Carnegie is a large investment bank in Sweden and DNB is among the largest investment banks in Norway. Together they acted as financial arrangers and issuers of one of the largest bond sales on the Swedish real estate market and were again led by Ståhl last year.
Erik Steger, managing partner of Wolf Theiss in Austria, also points to a resurgence of the domestic debt market. ‘Our bond market was almost nil until relatively recently. [It] has really peaked this year,’ he says.
The firm advised Linz-based construction company Swietelsky in November last year on the issue of a E85m corporate bond and on the buyback of a hybrid bond – a bond that has some characteristics of equity and often certain rights to convert to shares. This deal, led by banking and financing partner Claus Schneider, was one of a number of debt capital market deals which the firm advised on last year. This included acting for Borealis on a E125m bond issue and Telekom Austria on establishing a debt issuance programme and a E750m senior bond issue.
Steger remains cautious about the potential development of a local bond market as such techniques are relatively new to Austria. ‘We don’t have the experience to know the bond market yet but it appears positive,’ he says. Banks are not left out of the picture either as they are needed to place the bonds in the market and distribute them, therefore firms can keep up their relationships with what are often their most important clients.
Alternative sources of funding are increasingly needed to get deals started and the market has adapted. The biggest casualty of the debt crisis for law firms has been the subdued M&A market, however, even in a depressed market, there are deals out there.
M&A down but not out
According to mergermarket, M&A market activity was down 22.6% in Europe in the first three-quarters of 2012 compared to the previous year. Nicolai Ørsted, managing partner of Plesner in Denmark, says that in 2009 M&A activity dropped there by a staggering 50%. It has been crawling upwards since but is still nowhere near pre-banking crisis levels. He says that during the boom, transaction work made up to 40% of his firm’s revenues, this is now down to 20%. But this has been replaced by insolvency and restructuring work at his firm and at many others.
Ørsted doesn’t expect the deals market to pick up much this year. ‘We will expect the M&A market to be the same as 2012 with a small increase,’ he says. Despite this, he has added some noteworthy lateral hires to his M&A team. He took Henrik Rossing Lønberg from Bruun & Hjejle and hired Tue Ravnholt Frandsen from Bech-Bruun, one of his biggest rivals. For someone who is not overly optimistic about the state of the M&A market, he has invested in some notable talent. The Legal 500 describes Frandsen as ‘a very experienced M&A specialist and he has been involved in a number of Denmark’s largest M&A transactions’. Ørsted says the partners are ‘good opportunities’. Plesner advised international real estate fund Niam Nordic V on its acquisition of a property portfolio worth DKK1.3bn last February.
Despite Ørsted’s caution about the Danish M&A market, his firm ranked fifth in mergermarket’s M&A table by value for 2012 in Denmark and advised on three of the top five deals of the year. These included acting on Kirkbi and William Demant Invest’s acquisition of renewable energy company Borkum Riffgrund for E632m in February 2012 and for Novo Nordisk on its acquisition of Chr. Hansen from PAI Partners in January last year. This deal was worth E557m.
Garrigues was the top firm by value and volume in Spain for advising on M&A deals in 2012, according to mergermarket. Fernando Vives, managing partner of Garrigues, says: ‘Other practice areas have helped with the weakness of M&A activities.’ His firm advised Generalitat Valenciana, Banco CAM and Bankia on the acquisition of Spanish theme park Terra Mítica for E65m in June last year.
Vives himself acted on the E405m sale of Groupama Seguros to Grupo Catalana Occidente last year. The Legal 500 describes him as ‘highly respected’.
Surprisingly, given the huge challenges facing the Italian economy, local lawyers are optimistic about the M&A market.
‘The real change is in M&A, not distressed – some industrial, some private equity and some exits,’ says Filippo Modulo, managing partner of Chiomenti in Italy. His firm advised Italian private equity fund Investindustrial in its acquisition of a controlling minority stake in Aston Martin for £150m in December last year. The firm also advised Mayhoola for Investments when it bought fashion label Valentino from Permira for £850m in July last year.
In Sweden, Vinge has advised on some noteworthy transactions as well. The firm acted for Swedish holding company Danir when its subsidiary Epsilon sold its shares to technical consultants ÅF Group, for E197m in October last year. Vinge fielded a team out of its Malmö office, which comprised partners Peter Oscarsson, Jesper Ottergren and Pär Remnelid.
Despite market conditions Vinge also advised the management of Norwegian trading company Ahlsell on its sale to CVC Capital Partners by Cinven and Goldman Sachs for approximately E1.9bn. The deal also saw the management’s reinvestment in the new holding company for the Ahlsell Group. The new holding company is jointly owned with CVC Capital Partners. Vinge’s team consisted of partners Christina Kokko and Mattias Schömer.
While the Nordic countries have generally performed well since the banking crisis, those in Southern Europe have obviously fared far worse. In the testing conditions imposed by the present economic climate, a revival in trading conditions will be gradual at best. In Portugal, Raposo Bernardo managing partner Nelson Raposo Bernardo sees no sign of a quick recovery. ‘We do not see it [M&A recovery] happening in Portugal. Not even the privatisation programme announced by the government was able to develop a wave of M&A operations,’ he says.
He goes on to say that the outcome of those privatisations was just the sale of minority stakes in two companies in a two-year period. These included national energy company Galp Energia and airline operator ANA Aeroportos de Portugal.
But privatisation is far more advanced in the one country that has faced the sweeping intervention of the troika (the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Union) over the state of its economy. Greek lawyers, despite striking at some point last year, remain surprisingly upbeat about their legal market, even with regards to M&A. ‘The crisis has created a number of opportunities,’ argues Dimitris Zepos, managing partner of Zepos & Yannopoulos in Greece.
The firm was involved in the sale of Greek dairy company Dodoni last year for $665.5m to a British consortium including London-based firm Strategic Initiatives.
Ireland, meanwhile, continues to wrestle with subdued deal activity despite attracting major corporates such as Intel and Microsoft with its seductive 12.5% corporation tax rate. Despite poor market conditions, Irish firm Arthur Cox was involved in one of the biggest M&A transactions Ireland has ever seen last year. The firm advised Cooper Industries on its E9.34bn acquisition by Eaton Corporation for cash and shares by way of a scheme of arrangement. Dublin-based partner Fintan Clancy advised on the tax issues of the deal, which was one of the key factors in involving Ireland.
While some of the hardest-hit countries are not seeing much in the way of M&A work, more robust markets, such as the Netherlands, have proved far more resilient.
‘Generally for us 2012 was a very good year and significantly better than 2011,’ says Amsterdam-based Martijn Snoep, who is managing partner of national leader De Brauw Blackstone Westbroek. This firm is a force to be reckoned with, not just in the Netherlands as it follows its clients wherever they go. For example, it has an office in Singapore. It has a client list that bears comparison with the Magic Circle and a history of advising on big ticket M&A deals.
In January this year, De Brauw advised the largest insurance company in Italy, Assicurazioni Generali on its acquisition of the remaining stake in Generali PPF Holding for E2.5bn. Snoep clearly thinks that the international outlook of his firm gives it a distinct edge over domestic rivals.
‘Other European firms are more domestic focused and our clients don’t see a great future for investments in Europe,’ he says.
‘Clients look for suggestions where to go for
finding new markets, especially outside the EU.’
João Caiado Guerreiro, Caiado Guerreiro & Associados
Germany is undoubtedly Europe’s economic powerhouse and Hengeler Mueller is one of the country’s best firms according to The Legal 500, which says the firm’s ‘level of expertise sets the benchmark’ when it comes to corporate work. Daniela Favoccia and Matthias Hentzen, the firm’s managing partners, have noticed a clear decline in the M&A market. However, the firm still advised Metro on the sale of its grocery chain Real in Eastern Europe to Auchan for E1.1bn in November last year. The deal was led by corporate partner Christof Jäckle.
‘To be successful in equity capital markets you have to be able to work out various scenarios,’ says Favoccia. This was seen when the firm advised longstanding client Siemens on the spin-off of its lighting company Osram in January this year. The deal was originally meant to be an IPO and was led by Hans-Jörg Ziegenhain, who joined from Freshfields Bruckhaus Deringer.
Hengeler’s overall corporate practice seems to be in good shape – it is even advising those brave enough to invest in Europe. The firm acted for Chinese automotive company Weichai Power on its acquisition of a 25% stake in German hydraulic truck manufacturer Kion. This deal was worth E738m and took place in September last year. The firm came second by value in mergermarket’s M&A rankings for 2012 in Germany, with a total deal value of E33.3bn.
Meanwhile, Austria’s Wolf Theiss has an advantage with its regional reach in Central and Eastern Europe as it can advise companies across different jurisdictions where it has a presence. This was illustrated when the firm advised Euris Group on its acquisition of Croatian aluminium producer TLM-TVP. The deal was led by Dieter Spranz in Vienna and Luka Tadic-Colic in Zagreb.
Given the huge amount of debt in Europe, it’s unsurprising that hedge funds have been looking to snap up assets at bargain prices. The flood of distressed M&A has been expected for a while but banks aren’t willing to crystallise losses onto their balance sheets so not many deals have been struck. Yet.
Banks won’t budge
Greek firms would be an obvious choice for hedge funds to use in order to target the stricken country’s distressed assets. However, this market has not exactly exploded. ‘There are quite a few distressed assets and we see vulture funds circling over Greece. It’s a natural consequence of a distressed economy,’ says Dimitris Zepos. He goes on to say that there have been no big deals and hedge funds have not been as active as he would expect.
Across Europe, distressed M&A has not taken off. The difference in price expectations between the buyer and seller is one of the reasons for this but asset classes that were hit hard by the downturn have been attracting attention.
‘We’ve seen a pick up in real estate although they are distressed assets. There is genuine international interest in buying these assets,’ says Arthur Cox managing partner Brian O’Gorman.
In Spain, Vives of Garrigues thinks that it is simply a matter of time before banks have to sell their assets. ‘We are working with different clients in the hedge fund field. The prices are low, not just for the assets held by the banks but also in the stock exchange,’ he says. Garrigues has been involved in distressed M&A work. It advised OpCapita in April last year when it bought debt-ridden video game retailer Game for a nominal fee. OpCapita also recently acquired bankrupt electronic retailer Comet for £2 and has taken on its debt.
In fairness, European firms would probably not be the first port of call for hedge funds going after distressed assets in Europe. US-based advisers Bingham McCutchen and Cadwalader, Wickersham & Taft (see ‘Get debt go’, LB228, page 56) have made the pursuit and acquisition of distressed assets an art form of which they are the grand masters. Bingham advised on Wind Hellas’s E1.8bn restructuring via a pre-packaged administration sale and advised on eight European debt mandates since 2010. Cadwalader came in second with three mandates according to Debtwire. But the sovereign debt crisis has brought other practice areas to the fore and it is firms with balanced practices that will weather the storm.
German efficiency
Although central to the European debt crisis, Germany did not suffer as badly as its neighbours. The nation was key to the negotiations about bailing Greece out.
‘Clients have looked into this and tried to structure their businesses with a view to a potential breakdown of the euro. It’s a lot of work for us looking at financing agreements [and] how they would be affected by a break-up,’ says Matthias Hentzen, co-managing partner of Hengeler Mueller.
Although German Chancellor Angela Merkel faced the wrath of her voters over her policy of providing substantial support to Greece, it looks like it may have paid off. ‘The most fundamental aspects of recovery include the biggest economies like Germany. There is an indication that the exports to Germany from neighbouring countries will start growing again,’ says Dariusz Oleszczuk, global managing partner at Salans, a firm with offices in Frankfurt and Berlin.
Partners at other European firms look at how Germany handled the pressures on its banking system and wished that their own governments had acted in the same way. ‘If the Spanish authorities had taken the decisions four years ago like the Germans the situation would have been very different,’ says Fernando Vives, managing partner of Garrigues.
Even a global decline in M&A activity sees Germany doing relatively well. According to mergermarket, the total value of deals completed in Germany last year for the top ten legal advisers was over €214bn, almost double France’s total of €110bn.
Although last year saw the acquisition finance deals struck during the boom up for repayment and a subsequent surge of restructuring and refinancing, new money deals are being done, with suggestions that Chinese investors view Germany as a safe bet, as seen in the example of Weichai Power’s investment into German industrial truck company Kion.
So sue me
It is obvious to say that when crunch time hits, people still want the money they believe they are owed. So when transactions are down, litigation partners usually get a counter-cyclical lift as parties fight over the shrinking market. In the downturn, Vinge’s Maria-Pia Hope saw that litigation and arbitration made up for the hole left by a lack of transactions. Her firm is particularly strong in arbitration; James Hope heads the disputes practice and was successful representing a state-owned Chinese company’s action against a US engineering company in a $80m Stockholm Chamber of Commerce arbitration.
‘If the Spanish authorities had taken the decisions
four years ago like the Germans the situation would
have been very different.’
Fernando Vives, Garrigues
De Brauw’s practice is split evenly between transaction and litigation, so the firm is certainly well hedged against the business cycle. Ruud Hermans, head of the firm’s corporate litigation practice, has been involved in some high-profile cases. He represented Dutch financial institution Zurich Financial Services in the Converium Holding settlement in March last year. Converium is a large reinsurance company and the decision was binding for any potential claimants across multiple jurisdictions. Hermans regularly represents multinational companies in inquiry proceedings before the Enterprise Chamber of the Amsterdam Court of Appeal.
Garrigues’ Vives says there has been a lot of litigation against banks in Spain. As his firm has some of Spain’s largest banks on its client roster, it has won a steady stream of work. There has been an upsurge of claims against Spanish banks over derivatives, including swaps. Purchasers of these products claim to have been misled by the banks involved. Not only is Garrigues advising on aspects of the huge restructuring of the Spanish banking system, which was approved by the European Commission last year, it is also one of the top advisers for banking litigation.
‘‘There have been difficult situations with preference bonds, derivatives and swaps. There is a lot of litigation on this. The way in which some banks have been said to commercialise these products over the years, and certain accusations of not following the requirements of the EU has led to clients asking for compensation for these products. We are acting for the banks,’ says Vives.
In Ireland, O’Gorman also sees that working on banking litigation is important for his firm. ‘Our litigators have been very successful working for the banks in high end enforcement proceedings – the complex stuff. [There are] a lot of assets hidden in jurisdictions abroad. Our litigators have targeted that kind of work and have been quite successful,’ he says.
Litigation represents up to 25% of Arthur Cox’s revenues and the firm has been involved in some of the most high-profile cases in Ireland. It acted for Irish Bank Resolution against Sean Quinn, the controversial former billionaire whose contracts for difference gamble to gain a 25% stake in Anglo Irish bank went south. Quinn owed Irish Bank Resolution Corporation (formerly Anglo Irish Bank) billions and it was one of the biggest legal stories in Ireland last year. Partners Richard Willis, Eve Mulconry and Isabel Foley acted for the bank in this dispute.
O’Gorman himself acted for Bank of Ireland against Brian O’Donnell, who built-up a property portfolio worth billions that abruptly collapsed during the crisis. This case was brought late last year and shows the closeness of relations between Arthur Cox and the major Irish financial institutions.
Hengeler also points to the fact that its litigation practice is busier than ever as clients ask for dispute advice once an M&A transaction is complete. ‘Following M&A transactions if the target is considered to be worth less and performing badly; then the buyer will litigate,’ explains Hentzen.
Portuguese firms could really benefit from an upturn in litigation but have yet to see it. Nelson Raposo Bernardo confirms that the ascendance of litigation hasn’t taken place. ‘The increase hasn’t been so impressive that one can say it is a trend or even a very obvious effect of the crisis,’ he says.
He does say that there is some increase in disputes, particularly in the use of litigation to renegotiate a contract or an action for debt recovery. But the increase is not significant, ‘to justify saying it is a trend’ he suggests.
The actions of governments across Europe, as well as of the EU institutions, have also given firms plenty of opportunities.
Fed to the PIIGS
Portugal, Italy, Ireland, Greece and Spain (PIIGS) have had the global economy focused on them for the last three years. Greece received a total of €240bn in bailouts from the European Union (EU) and the International Monetary Fund (IMF) and many assumed it was only a matter of time until the International Swaps and Derivatives Association signalled a ‘credit event’; a default on their loans. This happened in 2012 and a number of commentators thought that the nation would be forced to exit the euro and other countries which had received bailouts would soon follow. Italy refused a bailout but Portugal, Ireland and Spain all needed them.
‘The times are difficult, the unemployment rate is very high in Spain. All of the economic areas are suffering because of this, but law firms are in a better situation than other sectors,’ says Fernando Vives, managing partner of Garrigues. Four Spanish banks – BCA Bankia, NovaCaixaGalicia, Catalunya Banc and Banco de Valencia – needed restructuring and Garrigues was put in the position of restructuring the banking system under conditions set out by the European Commission.
In Portugal, another major casualty of the debt crisis, Nelson Raposo Bernardo, managing partner of Raposo Bernardo, sees the impact it has had on his rival firms.
‘As for the legal market in Portugal, there’s no doubt that many firms are clearly suffering the effects of this severe crisis, especially firms which had a concentration of activity in a few large clients and firms that were oversized for the size of the country. We believe that all these firms are living bitterly amid the effects of the crisis,’ says Nelson Raposo Bernardo.
Brian O’Gorman, managing partner of Ireland’s Arthur Cox, is far more positive. ‘I can happily report that we are extremely busy and we have been since September so it’s not a short-term thing,’ he says. He has noticed that a number of non-Irish banks are exiting the market but this is providing his firm with plenty of work. ‘We’re doing a massive amount of work for Lloyds Banking Group selling its loan portfolios as it looks to exit the Irish market. It had a big presence in Ireland due to its subsidiary Bank of Scotland,’ he says.
Filippo Modulo, managing partner of Chiomenti in Italy, is optimistic and seems proud of how his country has dealt with its problems. ‘Things have been taken seriously. The government action has really improved the Italian image abroad,’ he says. In what may be considered a swipe at the UK and France, Modulo says: ‘No banks needed state intervention in Italy. The state did not need to save any banks.’
It was the Greeks that became the whipping boy of Europe, blamed for all manner of economic ills. Dimitris Zepos, managing partner of Zepos & Yannopoulos, says that Athens Stock Exchange is ‘quasi dead’ so equity capital markets work is hardly thriving.
‘Many of the measures imposed by the troika should have been implemented by the Greek government a long time ago. There’s no doubt that when your back is against the wall you certainly don’t do things with the same comfort and ability as when you have breathing space. Of course, nobody likes being told what to do and this is evident,’ says Zepos. Despite IMF and EU intervention, there are signs that the PIIGS have survived the worst and their legal markets will be able to get back to traditional areas of work soon.
Government action benefits lawyers
Countries worst-affected by the debt crisis have been forced to impose serious austerity measures in order to meet stringent terms for bailouts and other support from the likes of the IMF and the ECB. But some of the resulting rapid changes in legislation bring work for full-service law firms, especially in the fields of labour law and tax.
‘There are practice areas that have benefited from the crisis, like tax restructuring and labour law,’ says Zepos. One area of business where his firm has seen a big increase since the crisis is tax litigation, although government initiatives have paid dividends for the firm’s overall tax practice.
‘There are quite a few distressed assets and we see
vulture funds circling over Greece. It’s a natural
consequence of a distressed economy.’
Dimitris Zepos, Zepos & Yannopoulos
‘With all the new tax legislation, we have been advising corporates and individuals on a 24/7 basis,’ he says. Zepos & Yannopoulos has one of the best tax practices in Greece, according to The Legal 500, and has a client list that includes Hewlett-Packard, Nokia and Nike.
One area of taxation that many partners believe to be central to the future of tax advice is transfer pricing. This is an area in which Zepos & Yannopoulos is well established.
‘In 2012 [the firm] was entrusted by the government with the conduct of the first two transfer pricing disputes initiated in Greece in the context of a new specialised transfer pricing reporting and documentation legal regime,’ says Athens-based tax partner Daphne Cozonis.
The firm is considered to be so expert in taxation that the Greek government sought its aid when drafting legislation for the introduction of a special tonnage tax on foreign flag vessels managed by Greek companies.
Garrigues’ Vives says that not only has his firm been helped by the diversity of its practice areas, but other Spanish firms have also benefited. Similarly to the experience in Greece, the speed of changes to labour and tax regulations have provided the firm with a steady stream of work.
Like Greece, Portugal has been at the epicentre of Europe’s economic turmoil. Businesses across the country’s economy are engulfed in a period of rapid and continuing upheavals.
Raposo Bernardo, a firm not just based in Portugal but with nine offices in various jurisdictions, including five offices in Africa, has seen clients forced by the actions of the authorities in Lisbon to turn to Raposo Bernardo for advice.
‘New and complex issues arising from the downturn are forcing clients to use more legal services than in the past, especially in areas such as litigation, labour, financial restructurings, restructuring of the company itself and tax litigation,’ says Nelson Raposo Bernardo.
Sweden already endured its own severe banking crisis in the 1990s, so it was not so drastically affected by the present events sweeping Europe. Even so, Vinge’s Maria-Pia Hope is worried about the impact of Europe’s much-delayed Basel III Directive to toughen capital and liquidity requirements on banking groups, meaning still more expensive, large-scale regulatory change for an already struggling banking system.
‘The big Swedish banks are in good shape – we had our banking crisis in the beginning of the 1990s. But the mere threat of Basel III and the increased costs for the banks is worrying,’ she says. Maria-Pia Hope is worried about the potential impact Basel III could have on the Swedish M&A market.
Even in European countries known to have relatively robust economies, such as Denmark, the banking crisis has taken its toll. Ørsted says that some Danish banks needed loan guarantees to ensure liquidity. But he is quick to point out that no bank needed to be taken over by the state, as was the case in the UK.
However, even if the nature of bank work for law firms has changed, it’s still there. While acquisition finance was the name of the game in 2007, refinancing and restructuring now drives the market. In Spain, Garrigues advised on the ‘fund for orderly bank restructuring’ ordered by the European Commission last year. The latest four restructurings include the recapitalisations of BCA Bankia, NovaCaixaGalicia, Catalunya Banc and Banco de Valencia. The total value of these measures so far is E100bn. The partners acting on these matters include Javier Ybáñez Rubio, José Luis Buendía and Mónica Martín de Vidales.
Perhaps one declining market that cannot be blamed on flawed public policy, is real estate. Most lawyers admit that recent years have been extremely difficult for real estate practices. In Denmark, for instance, Ørsted says that a lot of the insolvencies involved real estate. Steger jokes that after the collapse of Lehman Brothers real estate practices were replaced with restructuring lawyers. But he adds that looking at his property practice more recently there is little or no sign of a crisis, suggesting that not every country’s real estate market is stuck in the doldrums.
Maria-Pia Hope says that real estate activity is not too bad, although ‘not exactly booming’. Practice head Patrick Forslund is described in The Legal 500 as ‘professional and experienced’ while his 25-strong team is described as ‘excellent’. However, the group has not seen much in the way of big ticket instructions over the last 12 months. In 2010 Morgan Hallén and Fredrik Sonander advised Norwegian Property on the E1.7bn sale of Norgani Hotels.
Hengeler, meanwhile, has acted in some major real estate deals to such an extent that Favoccia says the practice is ‘booming’. The firm advised the German bank LBBW on a sale of a property portfolio worth E1.4bn last year.
‘Other clients are preparing for IPOs, as real estate prices are good so it’s a good time for going public,’ argues Favoccia.
Global pressure
The internationalisation of the legal industry has included Europe for many years, with the Magic Circle and Wall Street firms well known in key jurisdictions. For some lawyers like De Brauw’s Snoep, the entrance of international firms into the Netherlands was a good thing. ‘The biggest impact that the entrance of the Magic Circle had was to increase the momentum of the professionalism of the industry,’ he says.
Others feel that the fact that some international firms entered their markets on a specific platform, rather than with a full service, has meant that these foreign rivals have suffered more than their own firms. ‘We saw an increase in independent firms’ market share thanks to their full-service capability. Other firms really suffered as they didn’t have other sectors,’ says Chiomenti’s Modulo. He says, for example, that firms entering on an equity capital markets platform were hit if they did not have a litigation practice to balance out their practice activities.
This argument is not reflected in mergermarket’s league tables for M&A deals in mainland Europe. Across Europe, Magic Circle and Wall Street firms dominate these league tables. So while domestic firms are holding their own in certain areas, the major deals across Europe are still handled by the global elite.
But internationalisation is what strong domestic firms view as the best way to move forward, either via opening offices abroad in the case of De Brauw, or by using a ‘best friends network’. Hengeler is a firm with an impressive network of allies, including Slaughter and May, Paris-based Bredin Prat, Uría Menéndez, and De Brauw in Europe. In the US, the firm has associations with the likes of Cravath, Swaine & Moore, Davis Polk & Wardwell, Simpson Thacher & Bartlett, and Paul, Weiss, Rifkind, Wharton & Garrison. The strength of these relationships was shown when Hengeler and Davis Polk both advised on software company SAP’s acquisition of cloud-computing firm Ariba for £4.3bn last year.
Raposo Bernardo may be operating under severe economic conditions in its home country of Portugal but it has offices in other jurisdictions that are helping to offset these difficulties. The firm has five offices in Africa (Angola, Cape Verde, Mozambique, Guinea Bissau, São Tomé and Príncipe) and one in Poland. ‘Africa and Poland are not suffering the effects of the crisis. The five African countries have higher growth rates, between 3% and 7%, and even Poland is going very well through these hard times of crisis in Europe,’ says Nelson Raposo Bernardo.
Another Portuguese firm is helping clients look further afield than the debt-laden EU for opportunities. ‘Clients look for suggestions where to go for finding new markets, especially outside the EU. Brazil, Angola or Mozambique for example,’ says João Caiado Guerreiro, managing partner of Caiado Guerreiro & Associados.
Garrigues also has international aspirations and has a natural advantage for handling work in Latin America for cultural reasons, although this is not just outbound work. ‘Countries like Colombia, Chile and Brazil and their investors are interested in Spain,’ says Vives. The firm uses Affinitas, the Latin American Alliance of Lawyers to conduct work in the region. Vives himself was involved in the Latin America insurance distribution agreement between Banco Santander and Zurich valued at E2.31bn back in 2011. It is clear that the region is important for Garrigues as a strong emerging market with impressive growth potential.
‘The big Swedish banks are in good shape. But the
mere threat of Basel III and the increased costs for
the banks is worrying.’
Maria-Pia Hope, Vinge
Some partners think that law firms which remain focused on domestic work will suffer badly. ‘Other lawyers’ work will be purely domestic as companies do not want to invest into European countries,’ says Snoep.
‘We strongly believe in investing in our firm in times like this. We’ve introduced a state-of-the-art disaster recovery software and hardware system. It will be completed soon,’ says Zepos, explaining how he is managing risk.
If even the Greeks can spy a glimmer of light at the end of the tunnel, maybe law firms have ridden out the storm of economic turbulence in Europe and can start to gear up for a gradual revival.
Dariusz Oleszczuk, global managing partner of Salans, is well placed to view the European market as his firm has offices in many of the region’s countries and is optimistic. He says: ‘I think that the data indicates that the crisis is over. The pricing of Spanish and even Greek debt is becoming more attractive. The currency movements from Japan, Korea and Latin America are being affected by the flow of money back to Europe.’
So while European firms coped well despite a decline in certain practice areas, such as equity capital markets and corporate, if Oleszczuk is correct, the region is poised for a comeback. With fears of a break-up of the single currency finally receding, the hope among many leading European law firms is that the region’s advisers can at least begin rebuilding for the future. LB
david.stevenson@legalease.co.uk