JUVE Law Firm of the year

Corporate

More joint ventures, more public takeovers

With a booming M&A market, the work of corporate lawyers has shifted heavily towards transactional work. In recent years this has even moved toward D&O liability and compliance – which are now considered key corporate disciplines.

Healthy capital markets and favorable financing conditions have given rise to ambitious company strategies and put public takeovers back on the agenda. Not since 2007, in the market before the crash, have private equity investors reached so deep into their pockets for listed companies.

The takeover battle for control of pharma manufacturer Stada with two different consortia of bidders was the highlight of the year. The fact, however, that the takeover ran into difficulties with not enough shareholders tendering their shares, showed merely that such transactions are not a forgone conclusion. Often described as the flagship discipline of corporate, the rise in public takeovers is a clear trend. It is thus no accident that US firms in particular, such as Gibson Dunn & Crutcher and Latham & Watkins, are beefing up their teams in this field.

Brexit stokes hope of more advisory work in Frankfurt

The health of the German economy is leading to other interesting work for those lawyers who are not primarily involved in transactional work. The announcement of the UK’s departure from the EU has led to a massive increase in work for a number of industries, in particular banks. With banks having to plan ahead for 2019 and a large number of them having to consider moving all or part of their operations to continental Europe (with Frankfurt in pole position to gain the lion’s share), corporate lawyers have much to do with bank regulatory lawyers regarding the complex restructuring of the Continent’s banking industry.

The acceleration of the pace of change in the digitalization of almost every possible sector is also throwing up new challenges. Few companies have the capacity to build up resources themselves at sufficient speed, and thus a lot of firms have reported a large increase in joint ventures between traditional industry and the IT sector, or between competitors seeking to explore the opportunities in digitalization. The auto industry is just one prominent example, with the joint venture between BMW, Audi and Daimler in digital mobility technology.

Latham banks on corporate lawyers

The role of corporate lawyers, how they react to market changes and how they are organized in practice groups within law firms have become key strategic questions – with as many different answers as there are law firms. Gleiss Lutz and CMS Hasche Sigle, for example, have over the past few years allowed (or required) their lawyers to specialize, and thus transaction lawyers are organized into one group, the corporate lawyers in another.

Other firms at the upper end of the market such as Linklaters and Hengeler Mueller obviously have partners who will tend to have less transactional work, but for the most part it is expected of the partners that M&A is one of the disciplines which corporate lawyers should have at their disposal: building relationships to boardrooms for the significant events in a company’s life might include complex corporation law work as well as transactions. As laterals such specialists are extremely sought after. The arrival last year of Dr. Rainer Traugott at Latham & Watkins was an important development in building the US firm’s connections to Siemens.

Probably the most important move this year came in the summer of 2017 when Dr. Nikolaos Paschos made the same move to Latham & Watkins in Düsseldorf – like Traugott, he also came from Linklaters and has a long history of advising major corporates such as Bayer. The importance of such lawyers was demonstrated by Kirkland & Ellis last year. The arrival of Hengeler partner Dr. Achim Herfs led directly to the firm being able to work for core client Bain Capital on its public takeover bid for Stada.

Experienced partners find success in small outfits

Many were surprised by Allen & Overy’s most experienced corporation lawyer, Dr. Hans-Christoph Ihrig, leaving the firm and setting up his own boutique in his home town of Mannheim (Ihrig & Anderson). The business case for such boutiques offering high-end corporate advice has already been made: the spinoff from Gleiss Lutz in Düsseldorf, Mutter & Kruchen, was highly successful in its first year. There is a large group of listed companies beyond the DAX30 that are more than happy to take advantage of lower costs in an area that is becoming more sensitive for executive and supervisory boards.

Another reason for this is the increasing activity of international hedge funds in Germany. Firms such as Broich had cornered the market, offering a combination of high-end corporate and international contacts. But it was also significant that larger firms were beginning to undertake this work as well, e.g. Mayer Brown acting for the institutional activist shareholder AOC on the Stada transaction.

Big Four lawyers are catching up

Other new players in the market were also emerging: the legal arms of the Big Four accounting companies have long been heavily involved in advising on restructuring in conjunction with the tax and business consultants of the same organization. But the lawyers have always maintained that their role was more of a support to their colleagues and not the primary legal role.

There were, however, signs that partners at the Big Four firms are becoming more prominent in this work, with the help of renowned laterals – taking the principal role in work that would have formerly been taken by their competitors. KPMG Law and PricewaterhouseCoopers Legal were particularly active here. If this trend continues, it could have a major effect on the market.

International Mittelstand advisors

Advice at Mittelstand firms is not clearly defined. It is rarely the case that such firms are renowned for public takeovers (one exception is Fieldfisher, which advised GfK on the takeover by KKR). This is not the case, however, when it comes to German and international joint ventures – provided their dimensions do not exceed the capacities of smaller teams – because partners at Mittelstand outfits have been vigorously working on their international setups in recent years. Examples here include Brandi, Brödermann Jahn, Kapellmann und Partner and GSK Stockmann. This development goes hand in hand with the increasing international activities among the Mittelstand clients themselves.

Conversely, it is remarkable how well some of these firms have positioned themselves for the increase in investments from China, whether it be joint ventures, founding subsidiaries or smaller acquisitions. Mittelstand-oriented firms such as Hoffmann Liebs Fritsch & Partner in Düsseldorf, Rittershaus in Mannheim and Görg in Munich, for example, all have active Chinese practices. Graf von Westphalen even has an established office of its own in Shanghai.

Regional niche for stock corporation advice

The fields of corporate compliance and D&O liability, on the other hand, have yet to really bear fruit at Mittelstand firms. One reason for this is that only a small proportion of their clients are listed companies. Nevertheless, there are some midsized stock corporations that are not always willing to pay the fees of top firms, and in every region there are one or two firms who have managed to find a profitable niche here over the past five years, for example LLR Legerlotz Laschet und Partner, Hoffmann Liebs Fritsch & Partner, and even international Mittelstand advisors such as Pinsent Masons.

 

The following chapter deals with those firms that operate at the top end of the market, where they have gained a national or international reputation. This chapter spans advice to large companies and corporate groups, including stock corporations and their management/supervisory boards, on restructuring, corporate contracts, control agreements, amendments to articles of association, mergers and spinoffs, as well as takeovers according to the German Securities Acquisition and Takeover Act. Legal advice on acquisitions is covered in the ?M&A chapter. This practice area is also closely connected to ?insolvency and restructuring, ?compliance audits and investigations. Corporate litigation is discussed in the chapter on ?dispute resolution.


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