In last year’s overview, we predicted full steam ahead for the Benelux market – a reflection of the buoyant sentiments swirling in the region as Europe emerged from the Covid-19 pandemic. But the road turned out to be rockier than expected as the outbreak of the largest land war in Europe combined with the after-effects of the pandemic to send inflation soaring and rupture supply chains.
Nonetheless, there were times throughout 2022 when dealmaking thrived across the Benelux region. Hans Witteveen, managing partner in Stibbe’s Amsterdam office, observed ‘a remarkable level of activity, certainly involving large-cap deals’. However, this didn’t last. As the year progressed, the foreboding economic climate dashed hopes of a continued M&A surge. This tapered growth was felt strongly in capital market hotspots, including the Netherlands, as financings struggled to gain a foothold in the face of increasing inflation and reactive interest rate hikes.
‘The big question will be whether there really will be a serious downturn across
the Benelux region or on the continent as a whole.’ Wouter Ghijsels, Stibbe
The combination of lacklustre financing options and economic slowdown has also hit large private equity deals particularly hard and, although mid-market activity persists, even these deals are increasingly difficult to get off the ground. The real estate market was viewed a touch more positively, with activity more consistent throughout the year, though this too slowed off the back of interest rate increases towards the final quarter.
A general rule of thumb in the legal profession is that when dealmaking is down, disputes are up. This countercyclical relationship held true in the Benelux in 2022. ‘We’ve seen a significant growth in the broad dispute resolution market’, says Sjoerd Kamerbeek, managing partner at Van Doorne. ‘Existing relationships are under pressure, obviously due to inflation and interest rate increases, and also, somewhat, due to shocks in demand.’ He comments inflation and supply-line disruptions have hit the construction sector especially hard, provoking an uptick in contractual disputes that lawyers expect to see continuing into 2023. In Belgium, this increase in disputes is exacerbating a backlog in the courts, and clients, frustrated with the slow pace of litigation, are turning to alternative forms of dispute resolution, with arbitration in particular on the rise.
Another expected change in a time of economic downturn is an increase in restructuring work. Companies become distressed and call on their legal advisers to aid with renegotiations, refinancings, restructurings, and, potentially, insolvencies. A situation like this requires flexibility from firms, and, as Witteveen puts it: ‘Stibbe is well equipped for this change, and we’re cautiously optimistic that we’ll do just fine, like in previous recessions.’ This will also be an area to watch in terms of the recently introduced Dutch WHOA scheme, a new mechanism that facilitates restructuring agreements despite dissenting creditors, which has gone from being used for SMEs to larger companies over the past 12 months.
However, a true boom here has not yet materialised. Wouter Ghijsels, managing partner in Stibbe’s Brussels office, comments that the ‘big question will be whether there really will be a serious downturn across the Benelux region or on the continent as a whole’. Restructurings are set to be increasingly important in 2023, then, though the full extent of the damage is yet to be determined.
Some changes, by contrast, are visible and undeniable. The consequences of Russia’s invasion of Ukraine have been most acute in the field of energy. Europe’s decision to wean itself off Russian gas has combined with the ongoing green transition to produce a real expansion in the energy sector. In the Netherlands, issues with grid congestion have left investors more cautious than elsewhere in the Benelux. But the picture across the region is one of increasing activity, with clients ever more interested in novel technologies such as hydrogen, carbon capture, and electricity storage, though questions remain over how cost-effective these technologies will ultimately prove.
Firms in the region continue to note the effects of Brexit. Again, this trend is especially notable in Luxembourg which, due to its triple-A credit rating and favourable regulatory environment, remains a popular destination for multinationals that would once have set up in the City of London. Another related trend is an increase in US firms establishing offices in Brussels, to be on the doorstep of the European Commission (EC). Still, this shift does not worry established domestic players in Belgium. As Ghijsels explains: ‘Although Brussels is a crowded market, this won’t have a major impact on other firms, as they are here to service their existing US clientele on competition matters.’ Similarly, while the Dutch market is not a target for access to the EC, it has seen a handful of US firms open their doors. Again, though, the legal landscape in the Netherlands has grown accustomed to the presence of both domestic and international firms. As Witteveen puts it: ‘The market is big enough to have all these firms in it, so there isn’t a big change in the composition at the top.’
Despite the lack of major disruption from big international firms, the Benelux legal market remains competitive, with many lawyers speaking of a war for talent. ‘We expect to see increased competition for the pie that we have on the table’, says Kamerbeek, and ‘there is a talent problem’, as the number of law graduates leaving university declines, and fewer are interested in ‘taking the classical partnership route’. Though few expect to see a wave of upheaval crash through the region, and lateral hiring remains muted, ‘more junior partners are being appointed’ to ensure firms can continue to meet demand. Witteveen sets this change in a wider context. ‘There is still quite a shortage in the labour market’, he points out. And, as a result, ‘it is very important to make sure you attract and retain the right people.’
With an uncertain outlook for transactional work and an increase in disputes and restructurings, as well as major changes to the regulatory landscape, this may be more important in 2023 than ever. LB
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| Rank (by Legal 500 ranking) | Firm name | Region | Total lawyers | Total partners | Promotions | Offices | Partner hires |
|---|---|---|---|---|---|---|---|
| 4 | Loyens & Loeff | Benelux | 1205 | 102 | 13 | 10 | 4 |
| 5 | NautaDutilh | Benelux | 400 | 68 | 7 | 6 | 2 |
| 7 | Stibbe | Benelux | 434 | 76 | 2 | 5 | 2 |
| 15 | De Brauw Blackstone Westbroek | Benelux | 356 | 52 | 5 | 5 | 4 |
| 18 | Houthoff | Benelux | 313 | 51 | 1 | 5 | 1 |
| 55 | Van Doorne | Benelux | 200 | 48 | 5 | 2 | |
| 90 | Arendt & Medernach | Benelux | 400 | 52 | 10 | 5 | 1 |
| 92 | Elvinger Hoss Prussen | Benelux | 206 | 49 | 4 | 2 |