Legal Market Overview
Two developments may lead to a possible decline in the stability which transactions currently enjoy in Germany, according to market observers: takeovers from non-EU countries, particularly China, are increasingly controlled and partially prevented by the German federal government. Following the example of the US, protectionism may be scaled up in the future. Additionally activist investors – those who try to influence companies’ strategies via their participation – are increasingly turning against the management. These trends may dampen investment enthusiasm in Germany, nevertheless interest in the market remains high especially from US and Asian investors. The limited number of targets and the attractive loan capital ensures consistently high prices – and therefore the German M&A market, as in previous years, continues to be a sellers’ market.
Simultaneously the German financial market remains a borrowers’ market. In bidding processes, investors’ steadily rising pressure to invest manifests itself in fierce competition, which provides firms with numerous mandates and also entails plenty of work for private equity teams besides finance practices. Firms that traditionally advise on the lender side are increasingly expanding their practice on the borrower side. Additionally, financial regulatory teams continue to see a steady flow of work, not least due to MiFID II and PSD 2 coming into force in January 2018, but also with regard to newly emerging financial services and business models.
With the GDPR entering into force, data protection practices were booming in the lead-up to May 2018 and continue to be highly active. There’s a growing effort by many firms to build up more substantial data protection practices as the demand for advice in this field is expected to rise in the coming years. Data protection is now a topic at CEO level and the relevance of data as assets is taken incrasingly seriously. High-end matters are still handled by the most reputable data protection lawyers, who largely remain where they have built up their practices, with the exception of one prominent coup: Tim Wybitul who left Hogan Lovells International LLP for Latham & Watkins LLP.
Digitalisation remains another hot topic and is driving not only IT and media practices but also employment law practices and industry focus groups such as those focusing on the healthcare sector, among others. Terms like fintech, medtech and insurtech are no longer exotic concepts requiring niche expertise, with digital innovation impacting a vast range of industries and legal practices accordingly.
Alongside this, firms can no longer avoid talking and thinking about LegalTech and are very much positioning themselves in two camps: those at the forefront of LegalTech innovation (those who develop their own LegalTech solutions) and those with a more conservative “wait-and-see” approach (those that adopt systems that have already been proven to work).
An awareness that functioning compliance systems are a must has filtered down to the German mid-sized market and there’s high demand for preventative advice and the implementation of such systems. Clients’ need for a full range of services under one roof has led commercial criminal law boutiques to expand into providing compliance advice and larger (international) firms to increasingly offer criminal defence advice.
Lastly (and inevitably) Brexit has led to demand for advice in Germany too, as companies are taking the country into consideration for any potential relocation plans.
In general, the firm landscape is still seeing successful spin-offs and the formation of boutiques, including most recently Freshfields Bruckhaus Deringer’s environment, planning and regulatory teams spinning-off to create POSSER SPIETH WOLFERS & PARTNERS and smaller commercial criminal law unit Rosinus Partner emerging out of AC Tischendorf Rechtsanwälte. Several larger international firms newer to the German market are also managing to leave their mark and have seen the entry of a new player with Covington opening an office in Frankfurt in April 2018. The legal arms of accountancy firms such as Deloitte Legal Rechtsanwaltsgesellschaft mbH and KPMG Law Germany are also continuing their efforts to capture a part of the market.