IFLR 1000
The Guide to the World's Leading Financial Law Firms

Banking teams at law firms are considerably smaller than they were this time last year. And even smaller than the year before that....

Banking teams at law firms are considerably smaller than they were this time last year. And even smaller than the year before that. Completing a leveraged buyout is a rare occurrence in today's market, so banking lawyers are predominantly working on debt refinancing and restructurings.

This means that there are very few new mandates out there. Most of the work is taken up by companies scouring over their original documentation to look for opportunities. They therefore want legal advice from people who are familiar with these documents. It is no surprise to see that in the vast majority of cases companies are turning to the firms who negotiated and drafted the original terms.

This is no great shock. Since the rapid collapse of Lehman Brothers at the end of 2008, global banking has been somewhat in disarray. And lawyers predict that restructurings will continue to dominate banking work long into next year.

"Until the market regains confidence, I cannot see a return to the frequent investment grade lending that we took for granted before," says banking partner in London. "In the meantime, we will just have to keep our restructuring helmets on, knuckle down and hope for the best."

The doom and gloom that surrounded capital markets this time last year has lifted a little. While it is true that the work capital markets lawyers are doing is very different to that of a couple of years ago, they are being kept occupied in certain areas....

The doom and gloom that surrounded capital markets this time last year has lifted a little. While it is true that the work capital markets lawyers are doing is very different to that of a couple of years ago, they are being kept occupied in certain areas.

In debt capital markets, there has been a vast number of issuances by companies who used to tap the banks for credit. Debt refinancings and other private work-out situations have provided a lot of mandates and work has been created out of restructurings. Companies have to raise emergency finance and make share placements, and the secondary markets have been hyperactive.

"There has been a much larger upsurge of work from our corporate clients," says one senior partner in the UK. "Volume-wise, we are coming through this period at the busiest we have ever been."

Not everyone agrees though. "This has not been the best year in terms of volume in debt deals," says another partner. "But the high-yield market has had a resurgence in the first half of 2009."

The equity market has changed too. The daily churn of large IPOs are now reserved for reminiscing only. There is hope that IPOs will return in the autumn of 2009 or the first months of 2010 though. "All the firms have proposals for IPOs sitting on their desks," says one magic-circle partner. "It's just a case of who will go first and whether that encourages confidence."

The crossover from 2008 into 2009 was the domain of the rights issue though. Banks and financial institutions were first to go down the route of diluting stock to raise capital. But other corporates, predominantly real-estate companies, were quick to follow in a flurry of activity in the spring.

Unsurprisingly, structured finance and securitisation have not been as resilient to the financial crisis. Apart from a handful of small transactions, lawyers are not overly optimistic. "The structured finance market is in complete disarray, so it is interesting for all of us," says one partner. "Everyone is doing bits and bobs, but nothing substantial."

Competition law regulation and enforcement has played a significant role in the political and economic landscape during the recent credit crunch, and that focus is set to continue at national, European and international levels in the time ahead. Firms in Brussels have not been without work in the last twelve months....

Competition law regulation and enforcement has played a significant role in the political and economic landscape during the recent credit crunch, and that focus is set to continue at national, European and international levels in the time ahead. Firms in Brussels have not been without work in the last twelve months. On the contrary, whether it was a cartel or behavioural investigation, a joint venture transaction or litigation before the national and European courts, the many competition firms in Brussels served a wide range of companies and corporations from all over the world.

The central and eastern European EU member states create a huge demand in Brussels for legal services, and many corporations, institutions and companies from mainly Poland, the Czech Republic and Hungary need the specialised Brussels firms to make sure they do not get lost in the maze of European legislation. An exceptional amount of state aid procedures have begun since the start of the financial crisis.

Cartel investigations and, of course, the abuse of dominance cases were on top of many lawyers' agendas. Anti-competitive practices dominated the news. EU Commissioner Neelie Kroes, also known as the 'Iron lady' of Brussels, shocked the anti-trust world two years ago by handing out a €497 million fine to Microsoft. That was nothing compared to this year. Early 2009, EU regulators decided the US computer manufacturer Intel should be fined a record €1.06 billion for antitrust violations and ordered it to halt illegal efforts to force arch-rival AMD out of business.

The M&A market is the only sector which is relatively quiet. "We are making our money mainly from cartel investigations," says a leading lawyer. "[It is] clearly the bulk of our work. The M&A market dried up, but by the end of next year it will take off again. The cars are waiting at the red traffic lights - When can we go?"

With even the most optimistic of data providers suggesting that total M&A activity is down over 25% on last year, corporate departments at law firms have faced a tough challenge to stay busy. Firms in the top tiers have found it more essential than ever to use their regional offices to maintain a steady flow of business....

With even the most optimistic of data providers suggesting that total M&A activity is down over 25% on last year, corporate departments at law firms have faced a tough challenge to stay busy. Firms in the top tiers have found it more essential than ever to use their regional offices to maintain a steady flow of business. Pipelines may be narrower and shorter, but corporate departments are not sitting on their hands as expected in the fallout from the boom times in the middle years of the decade. As a result, firms in the top two tiers have consolidated their positions this year.

Liability management remains a top concern for European companies and the market is seeing a mixture of small- to medium-sized non-core assets alongside some less frequent large carve-outs. These transformational types of deals will continue well into 2010 as companies try to secure their strategic objectives.

Cash-rich companies are in a very strong position and they will be able to take advantage of depressed prices to consolidate markets. However, it is widely expected that sovereign wealth funds will return to Europe in the next year. It is hoped that that will be able to fulfil the role vacated by private-equity houses that are still reacting to the lack of leverage in the banking market.

Many M&A lawyers are quietly frustrated that they have been shifted onto less familiar restructuring work, but the hopeful signs of recovery are becoming a little clearer. Mergers and restructurings in the banking and financial sector kept the market incredibly busy at the end of 2008 and the start of 2009. Now that most banks have stabilised their position, confidence in the market will grow. This will lead to more lending and companies will be able to plan acquisitions without having to resort to private placements or rights issues to raise the capital.

Western Europe has always been a hotbed of project finance activity. As well as projects in the region and in central and eastern Europe, it has also had a strong pipeline of work coming out of the Middle East....

Western Europe has always been a hotbed of project finance activity. As well as projects in the region and in central and eastern Europe, it has also had a strong pipeline of work coming out of the Middle East. With the onset of the financial crisis and the steady stream of law firm offices opening up in, firstly Dubai and now, Abu Dhabi, the expectation would be for work to slow down considerably.

But projects need to be completed. Governments are committed to infrastructure plans and are doing everything they can to complete building work. This is especially the case in countries where governments are using infrastructure works to create jobs and keep unemployment figures stable. The hesitancy of lenders is being replaced by government support. To say that project finance is recession proof may be stretching the truth a little, but it is certainly less affected by the economic crisis than other areas of financial law.

European project finance has even been boosted by the Third Internal Energy Markets Liberalisation Package that was approved by the EC Council in June. Member States will have to invest in cross-border connections to harmonise electricity and gas markets.