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Overview
Though the Japanese economy proved more robust in the latter stages of 2008 than some of those in the West, the country’s legal market has not remained entirely unaffected by the global credit crisis. Firms saw renewed activity for insolvency practices that were just beginning to see the tail off of work from the restructuring boom of the ‘lost decade’, while structured finance practices saw a decline in instructions.
Most notably, offshore M&A activity was a huge driver for transactional practices heading into 2009. Japanese corporates and funds set about acquiring foreign assets and companies, particularly those based in the US. Mitsubishi UFJ Financial Group’s acquisition of a 20% stake in Morgan Stanley is a deal emblematic of the ambitions of cash-rich Japanese companies to take advantage of the circumstances in order to expand. Meanwhile, interest in emerging markets has also soared, fuelling the need for innovative financing techniques to fund companies’ forays into the energy and technology spaces of these jurisdictions.
Domestic M&A has also flourished, but it is the roles on big-ticket cross-border deals that have been the most sought after by both local and foreign counsel. As such, a glance at the recent achievements of the largest law firms in Japan reveals a shift in balance toward these outbound transactions across the board.
The local market remains dominated by the Big Four firms: Anderson Mori & Tomotsune, Mori Hamada & Matsumoto, Nagashima Ohno & Tsunematsu and Nishimura & Asahi. Such is the dominance of these four firms that there is a very tangible feeling in the market that, in order to compete on a level footing, the future for smaller firms is to set up a merger or alliance with offshore firms or seek a merger with a larger local outfit. That said, after a flurry of such mergers and alliances in recent years, 2008/09 saw very few.
Despite the confluence of the Japanese legal market, there are still sufficient differences to justify the existence of two separate tables within our editorial, reflecting the reality that, for the most part, purely domestic work is handled by the independent firms, while the international elements of cross-border transactions are taken care of by the foreign firms. These lines continue to blur, however, and the extent to which foreign companies feel able to give domestic law firms roles that were once exclusively the remit of foreign firms continues to have an impact on the legal landscape of the Tokyo market.