The past three years have been nothing but challenging for Portugal and Spain. The neighbours, whose economies are hugely reliant on the hospitality and tourism sectors, were hit hard by the series of lockdowns imposed to battle soaring rates of Covid-19 infection in 2020. But fast forward to 2023, and the outlook has shifted significantly.
Emerging from what could understatedly be described as a turbulent period in 2020, with a 10.8% economic downturn, the Spanish legal sector has successfully regained its footing and competitive outlook. While the pandemic made economic constriction inevitable, it has also heralded an opportunity for significant year-on-year growth.
‘The Spanish legal market is extremely mature and competitive, but it grows consistently year after year,’ says Fernando Vives, executive chair of Garrigues.
The real estate, technology, and renewable energy sectors continued to garner serious attention from both domestic and foreign investors despite accelerating interest rates and galloping inflation, globally.
While Spain still trumps Portugal in both volume and scale, the latter has belied its size with a robust comeback. Despite GDP contracting by 8.4% in the first year of the pandemic, the country is on track to make a sound recovery.
The relaxation of Covid restrictions coupled with a wave of investment in the infrastructure and energy sectors spurred a 4.9% spike in growth in 2021, followed by a 6.7% boost in 2022, according to the OECD. With increasing pressure on private equity firms to deploy their ample reserves, Portugal’s sell-side M&A market remained an attractive option, especially for long-term investors seeking to diversify their portfolios both in terms of location and industries.
‘As the inflationary trend continues to spike, we are seeing client activity driven by a desire to use existing liquidity,’ says Paula Gomes Freire, who succeeded João Vieira de Almeida as VdA’s managing partner in February 2022. ‘Market volatility due to inflation, and rising interest rates are favouring investment-grade targets and driving investment into ESG-compliant assets and companies.’
Time and again, elite Iberian independent firms have proved that they can face adversity head on. Their breadth of service offering makes them well placed to adapt and reinvent themselves in periods of turbulence: the Eurozone crisis, the Covid-19 pandemic, and the current inflation surge.
Among the top Iberian firms, revenue grew on average by 12% in 2021. In a market with such strong competition, it is even more impressive to see powerhouses like Garrigues, Cuatrecasas and Uría Menéndez maintain pole position, continuing to report the highest revenues.
‘As the inflationary trend continues to spike, we are seeing client activity driven by a desire to use existing liquidity.’ Paula Gomes Freire, VdA
When it comes to growth strategies, Pérez-Llorca has set a standard for Spanish firms looking to expand in Asia after announcing it will become the first to have a presence in Singapore, with a new office set to open in the city state in early 2023.
‘Clients’ requirements have accelerated law firms’ digitalisation processes, as the need for efficiency and productivity are higher on their agenda,’ comments Vives. ‘Another important trend is the competition for hiring and retaining the best talent in the market.’
While some firms have focused on internal growth, others have sought out talent at rival practices. Lateral hires in Portugal have largely held steady over the past year, but top-tier firms have increasingly turned to recruiting former government officials. Assunção Cristas – a former minister of agriculture, sea, environment and territorial planning in Portugal – joined VdA to lead its environmental practice, while PLMJ’s finance and corporate groups were bolstered by the arrival of Pedro Siza Vieira, who served as minister of the economy between 2018 and 2022.
‘Attracting and retaining talent is clearly one of the sector’s key challenges and one we have been looking at very closely,’ says PLMJ’s managing partner Bruno Ferreira. ‘The leading Portuguese law firms are now competing for talent with the large London firms. And when it comes to UK law firms, compensation is a key driver where it’s very hard to compete.’
Iberia has a relatively stable legal market, particularly at the top end. Well-established independent law firms are at the helm of the most high-profile mandates and significant transactions in the region. VdA, Morais Leitão and PLMJ dominate the Portuguese market, while in Spain that role is shared by Uría Menéndez, Garrigues and Cuatrecasas, all of which have also managed to establish credible footholds in Portugal.
Save for a handful of Spanish firms, few international outfits have successfully made inroads into the Portuguese market. Among them is Linklaters, the only Magic Circle firm with a tangible presence in the country. But while international players are absent from the market, their impact is still significant.
‘Over the past few years, we have seen new entrants such as DLA Piper, CMS and Eversheds Sutherland using their international credentials and competing on scale, sector and local capabilities, while Spanish firms are also trying to capture market share,’ comments Gomes Freire. ‘This has created increased competition in a very small market where the proportion of high-end, complex, high-value and international work is relatively limited.’
Despite the increased competition faced by independent law firms in Iberia, the legal sector holds promise. Though 2023 will be marked by uncertainty, lawyers in Portugal are cautiously optimistic.
‘Law firms with strong transactional profiles and focused on large deals are particularly well-positioned to face what could be a few months or years of economic downturn,’ says Ferreira.
But perhaps optimism should be tempered. As Vives warns, market players would be remiss to forget that ‘geopolitical conflict, the energy market crisis, and the tightening of monetary policy’ loom around the corner. LB
Return to the Euro Elite contents
| Rank (by Legal 500 ranking) | Firm name | Region | Total lawyers | Total partners | Promotions | Offices | Partner hires |
|---|---|---|---|---|---|---|---|
| 8 | Uría Menéndez | Iberia | 643 | 134 | 5 | 12 | 2 |
| 10 | Cuatrecasas | Iberia | 1200 | 261 | 9 | 27 | 10 |
| 11 | Garrigues | Iberia | 1504 | 331 | 16 | 31 | 2 |
| 31 | Gómez-Acebo & Pombo | Iberia | 300 | 54 | 4 | 9 | 3 |
| 34 | Pérez-Llorca | Iberia | 291 | 59 | 5 | 6 | 7 |
| 45 | VdA | Iberia | 271 | 47 | 4 | 3 | 1 |
| 46 | PLMJ | Iberia | 224 | 47 | 1 | 4 | 1 |
| 47 | Morais Leitão, Galvão Teles, Soares da Silva | Iberia | 260 | 79 | 7 | 6 | |
| 94 | Abreu | Iberia | 180 | 66 | 13 | 6 | 5 |