Legal market overview
In 2014, Germany’s M&A market achieved the highest transactional values since Lehman Brothers folded and the momentum continued into 2015 with high-end deals occasionally reaching double-digit billions of euros. The mid-market segment also thrived and was marked by M&A in regulated industries, particularly in the energy sector. Foreign investors have recognised opportunities in Germany and this has been reflected in the rising number of inbound deals, with the weak euro attracting US investors in particular, facilitated by an attractive climate for financing and adequate market liquidity.
The banking and finance sector yet again saw dynamic developments: the implementation of the Alternative Investment Fund Managers Directive (AIFMD) generated substantial work for fund practices and prompted questions surrounding the Capital Investment Code (Kapitalanlagegesetzbuch, KAGB). A move towards more flexible alternative investments has fostered a better climate for lending, including through sources such as crowd funding, loan originating funds and capital markets instruments. US-style financing is playing an increasing role in European transactions and, for example, there has been a growing demand for covenant-lite loans as an alternative to high-yield bonds for borrowers and investors and unitranche lending is becoming a more prominent alternative to more traditional bank finance. Generally, law firms report a continued demand for refinancings, active acquisition finance practices and a growing complexity of transactions brought on by the diversification of streams of finance. Alternative types of financing and a larger variety of investor groups, particularly including an enhanced role for institutional investors, are also shaping the project finance area. Regulatory advice is an increasing and integral part of firms’ banking practices as a result of the European Central Bank’s new responsibility to supervise euro area banks.
In capital markets, the window for IPOs reopened with prominent IPOs, including some of the largest in Germany over the past decade. Firms note a stronger link between debt and equity and increased debt-equity swaps, as well as a particular interest in hybrid bonds and an upswing in equity-linked transactions. With German companies seeking opportunities in the US, advice on so-called Yankee bonds has been common.
Other notable changes included transformation of the energy sector caused by changes in the regulatory framework and turnaround in energy policy. Claims for damages due to the closure of nuclear plants and disputes arising from the expansion of the offshore wind farm sector and grid connections have been prominent.
The transformation of analogue business models, creation of innovative digital products and technical developments in almost all industries is increasingly moving IT practices into the spotlight; digitalisation is another key theme for media lawyers. Data protection in turn permeates a range of practices.
A noteworthy mention also goes to Germany’s thriving start-up scene and, in this context, Berlin’s venture capital scene. High potential in the sector has led to firms actively seeking to build market share. Founders are receiving series A funding that was inconceivable a few years ago.
Legislative amendments combined with stricter and faster prosecution by tax authorities has prompted a large rise in the number of voluntary declarations and law firms have been particularly involved advising clients on questions of compliance and criminal tax matters.
The legal market is populated by a mix of high-quality German law firms and many international firms, particularly US or UK originated entities. The following text is a condensed translation and update of research from the German-language edition, The Legal 500 Deutschland (full German version available online at www.legal500.de).
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