Germany

IFLR1000 Reviews

Overview

Solicitors governing body: BRAK (Bundesrechtsanwaltskammer)

Competition authority: The Bundeskartellamt

Financial regulator: BaFin

IFLR1000 ranking categories in this jurisdiction:

Financial and corporate (published October) - Banking, Capital markets : Debt, Capital markets : Equity, Capital markets : Structured finance and securitisation, M&A, Private equity, Project development, Project finance, Restructuring, Insolvency

Jurisdiction overview

Germany is governed federally, divided into 16 states which are run almost completely autonomously. Under the country’s constitution and its primary legislation, the Basic Law, each state decrees its own laws and forms its own parliament and government. All states can influence federal law through the upper house of its parliament.  

As a consequence of federalisation, Germany has a network of 28 regional bars. These bodies, which are mostly responsible for accrediting new lawyers and handling misconduct and professional matters, are overseen by the federal bar, BRAK (Bundesrechtsanwaltskammer). As a central, independent regulator, BRAK ensures the profession remains impartial from the organs of the state. Both lawyers and law firms must be registered with a local bar.   

German regulation takes a fairly liberal approach to the practice of foreign lawyers on its soil. Those from EU and EFTA states and Switzerland, can provide legal assistance in German, foreign and international law. Lawyers from member state of the WTO or GATS (General Agreement on Trade in Services) who have positions akin to a German Rechtsanwalt (a qualified lawyer) in their own country, may practice their jurisdictions’, or international, law in Germany. 

Establishing a foreign firm in Germany is beset by few hurdles. With authorisation from a local bar, an EU firm can open in the relevant state. If an EU firm takes a corporate or LLC form, the business must also be registered with a local court. Firms from outside the trading bloc can also launch in the country with bar approval, but only as a partnership or as a sole practitioner.

Given the relative ease with which a firm can set up in Germany, and the size and sophistication of the economy, it is not surprising to note that the country’s legal market for transactional financial and corporate work is saturated by international firms.  So much so, that in the context of the high-end, larger deals, only a few national firms commonly feature. 

Of these domestic advisors, Hengeler Mueller, which is, even in the wider market, one of the leading firms in the country, is undeniably the strongest. Almost an anomaly in Germany, the firm is full service, has no offices outside the country’s borders, and is involved in a good proportion of the country’s most complex deals. In the corporate area, especially M&A and private equity, Gleiss Lutz has an excellent practice, exceeding most of its foreign competitors in quality and activity. A third worth noting is Noerr, another local firm with a regional network and a good reputation for corporate transactional advice to mid-sized German businesses. While Hengeler is the finished article, the latter two firms are still developing their finance offerings, but both are growing steadily in terms of coverage and revenue.      

Considering the breadth and depth of foreign firm’s practices, the four of the five magic circle firms present in Germany dominate the upper end of the market. US firms are well represented too, with more than a third of the State’s white shoe firms having, at the very least, one office in Germany and, in some cases, as many as five. However, barring a few exceptions, US firms generally have a more focussed approach to those heralding from the UK, concentrating on core specialisms rather than all services. 

The exceptions - those US firms that have committed more to Germany - have had mixed success. Some that, in the past, had larger, more diverse offerings, do not today. Take Shearman & Sterling, for example. At one time, the firm had three German branches and a large team. Today, it has one in Frankfurt, with only five permanent German partners. Others US firms with large German networks to cut back recently, include Orrick, which condensed from four offices to two, and White & Case, which closed its branch in Munich. Sidley Austin, meanwhile, has shut down entirely. 

This trend of scaling back in Germany is not exclusive to US firms. Clifford Chance began restructuring its team in the country in 2014, and now has significantly less German partners. Freshfields has consolidated too, merging its offices in Düsseldorf and Cologne in late 2015.   

Foreign firms retrenching in Germany is not indicative of work drying up, evidenced by the fact that new international firms continue to arrive in the stead of those leaving and others, which already have a presence in the country, are still expanding. In 2013, Morrison Foerster took over Hogan Lovells office in Berlin and Herbert Smith Freehills also launched in the capital and, around the same time, in Frankfurt. In 2014, Field Fisher opened in Düsseldorf and, this year, Greenberg Traurig picked up Olswang’s former team to open in Berlin, Reed Smith moved into Frankfurt, and Goodwin Procter launched its first office in the country in Munich, with Ashurst hires. 

One explanation behind the fluctuating nature of international firms’ German networks, and to a lesser extent, teams, is the country’s federal constitution, which has engendered a country where industry is decentralised. The Rhine-Rhur region is the home of German manufacturing. Bavaria’s capital, Munich, where the country’s main IP court is located, historically has a strong stall of technology businesses. Berlin houses the government, is where most German real estate companies are based and has become a home for start-ups, thanks to its cheap rents and general appeal to employees. Hamburg, meanwhile, has the country’s main ports and Frankfurt is the centre of finance. 

In trying to cover all these diverse markets, some international firms have spread themselves too thin. They create high overheads by having four or five offices and struggle to generate enough work to maintain all the branches. For traditionally high-earning firms from the US and the UK, an additional challenge is managing German clients’ lower fee expectations.

Without a doubt, M&A is the most commonly practiced area of law among the market’s foreign contingent. Banking and finance represents another large portion of work, although bank side work can be a difficult area to penetrate because of the long-standing relationships that exist. Most firms do some capital markets work and private equity clients generate mandates for the host of buy-out practices. As restructuring has developed as an area of law and, subsequently, as a practice, the number of firms in Germany with dedicated teams, or at least specialists, has grown significantly. Insolvency administration, however, is the realm of domestic boutiques concentrating on this practice. In recent years, as the economy improved and the level of new cases dropped, some of these have sought to expand the focus of their practices, employing lawyers who can provide ancillary services such as finance.  

Ben Naylor - EMEA Editor 

Financial and corporate
Kirkland & Ellis

US firm Kirkland & Ellis established an office in Germany in Munich – its second branch in Europe – in 2005. 

Founded in 1909 in Chicago, Kirkland & Ellis is a leading US and international firm with a network of 15 offices spanning three continents.

 

Focusses / specialisms

In Germany, like the firm as a whole, the team has a focus on serving the needs of financial sponsors, and does this well. However the firm’s restructuring team is its – and one of the market’s – best in Germany. 

In lending and borrowing work the firm is specialises in advising sponsors in LBO transactions and exclusively works for borrowers.

The firm’s work in the capital markets area is typically bond issues and also focused around private equity transactions. It represents sponsors on bond issues to finance acquisitions or refinance portfolio businesses, or on exits through an IPO. 

The firm’s transactional private equity team is large and experienced and is generally seen on a share of what large primary or secondary transactions there are in Germany annually. It more often works for US based funds.  

The restructuring practice is known for working for creditors (often funds) on large cases with a complex debt element, and in the recent past has been involved in a good share of large German or European cases. 

 

Key clients

Advent, Apax, Bain, Cinven, and Lonestar are a few of the firm’s key private equity clients.  

 

Research period review: 30th edition (2019/2020)

During the research period the firm was active in borrowing, debt capital markets, M&A and restructuring.

The firm’s borrowing work was either new money financing for acquisitions or advice around debt restructuring for its private equity clients or their portfolio companies.

In the capital markets space the firm advised sponsors as issuers on block trades of shares in portfolio companies and bond issues in the context of debt restructurings.

In M&A and transactional private equity the firm was most notably active on a number of high profile primary deals advising leading private equity houses as buyers where German businesses were the targets. The deals included public M&A.

In restructuring work the firm secured roles on high profile restructurings by German businesses on the side of the creditors and did work on the debtor side for sponsors and their portfolio companies in debt restructurings.

 

Deal highlights: 30th edition (2019/2020)

Advent / Cinven / RAG-Stiftung acquisition of thyssenkrupp elevator division

Air Berlin insolvency

Bain Capital / Carlyle takeover of OSRAM

Bartec restructuring

Global Commerce takeover of METRO

Techem Verwaltungsgesellschaft 675 €3.4 billion debt restructuring

 

Client feedback: 30th edition (2019/2020)

Banking

“Very responsive, up to date with newest market standards, very high attention to detail, strong distressed knowledge.”

 

Private equity

“Competent, quality service, responsive.”