Research Trends and Conclusions: Insolvency & Restructuring 2011
With the benefit of over 14 years of research and tens of thousands of votes from clients and private practitioners, Who’s Who Legal takes a closer look at developing trends in the insolvency & restructuring legal marketplace worldwide.
The global financial crisis (GFC) has taken a heavy toll on the level of corporate and financial transactions undertaken by the world’s leading lawyers, and has also driven, to a certain extent, a corresponding increase in insolvency work. In the eye of the storm, bankruptcy lawyers were experiencing levels of work “far beyond anything we’ve ever seen before” – in the words of one interviewee in our 2009 research – both in terms of number of cases and in their sheer size. It may be no exaggeration to say that the Lehman Brothers insolvency of 2008 has produced – and continues to produce – more work for the lawyers we list than any other single event in any of the practice area publications we cover. The ongoing fears relating to defaults in Greece, Ireland and Portugal demonstrate that there may still be more activity to come in this sector.
However, three years on from the GFC, the situation is slightly more complex for insolvency lawyers. While levels of work are still high, the feedback we received in our conversations with private practitioners and corporate clients in the course of this edition reflects a marketplace that has evolved since the frenzied conditions of the past few years.
Our findings over the last four editions reflect the number of private practitioners who, as a result of our research, can be said to be internationally recognised as world-leading insolvency and restructuring practitioners. The number and location of these successful nominees reflects some of the issues reflecting the global legal market in this sector.
Leading up to the 2009 edition, the overall number of individuals selected for inclusion remained fairly static, and the number of firms represented actually fell away slightly as fewer firms looked to focus in this sector. The picture changes in the 2010 edition with the number of lawyers and firms jumping to unprecedented heights. This was also the case in terms of the number of countries featured, as demand for local experts led to a 13 per cent increase as the higher levels of work allowed lawyers to earn recognition in more countries than ever before.
The research for this edition tells a slightly calmer story, with levels of lawyers, firms and countries featured dropping down to a level that, while lower than last year, is still significantly elevated from pre-GFC levels.
To a certain extent, the number of nominees in our research for insolvency and restructuring lawyers reflects the pattern from our banking editions, which might be considered “the other side of the coin” in terms of corporate activity. The number of internationally recognised banking specialists rose steadily year-on-year during the GFC, before stabilising in 2010. Our insolvency listings saw a much sharper increase as the effects of the financial crisis hit home, but these levels have not been sustained and there has been a noticeable reduction in the number of lawyers earning sufficient recognition to be selected in this sector in the wake of the crisis.
The numbers from United States – always the largest single country in our research with the most developed bankruptcy bar in the world – follow the same pattern and reflect the first slow and cautious steps towards previous prosperity of the wider US economy. In contrast, the number of nominees from those economies that are currently thriving remain low – only two lawyers from Brazil were picked out for their bankruptcy work in this area, compared to 16 of their compatriots in our recent M&A edition, reflecting the nature and amount of work that law firms are currently undertaking.
This is born out by statistics. According to the American Bankruptcy Institute, business filings in the US for the three-month period to the end of March 2011 totalled 12,376, a 15 per cent decrease from the corresponding period in 2010 and a 5 per cent decrease compared with the fourth quarter of last year. The drop-off in the UK is even more pronounced: bankruptcies fell by 31 per cent in the first quarter of 2011 compared with the corresponding period in 2010, according to a report from the Insolvency Service.
That said, the relationship between the health of the economy and the amount of resulting insolvency and restructuring legal work is not completely clear-cut. In the words of one interviewee, “there are always waves of work in this sector; this is not as counter-cyclical a practice area as people would like to believe”. Time and again in our interviews we heard of clients looking to avoid costly litigation and focusing instead on negotiation, tasking outside counsel with keeping them away from the courts.
Taken together, these statistics match the findings of our research and the feedback of our interviewees: while 2010 was a banner year in terms of work for insolvency and restructuring practitioners the levels of work have not been maintained in recent months, although overall activity continues to remain at pre-crash levels.
Weil Gotshal & Manges has consistently been the leading firm in our research for this type of work in recent years, and its strength in this sector was demonstrated in the recent Who’s Who Legal Awards where both the firm and chair of the business finance and restructuring department Marcia Goldstein were recognised. Indeed, Goldstein has received the award in each of the past six years, garnering more votes than any other practitioner worldwide and demonstrating a pre-eminent expertise in this field. The firm’s presence grows to eight featured lawyers in this edition, its largest ever showing.
Latham & Watkins has also been consistently strong in this area, with an internationally renowned US capability complemented by leading expertise in Hong Kong. Jones Day and Sidley Austin both combine first-rate levels of expertise in England and the US into world-class bankruptcy practices, and Bingham McCutchen has also repeatedly performed well in England, the US and Asia. Hogan Lovells’ acknowledged strength in London has been complemented in recent years by the inclusion of a nominee in Hong Kong, reflecting a geographical breadth of top-tier expertise that all the leading firms demonstrate to varying extents. This is also evident in the performance of Freshfields Bruckhaus Deringer, which shares the relatively unusual distinction with Weil of increasing its presence from last year’s edition. Again, a very strong London practice underpins a breadth of expertise that extends across Europe with nominees in Germany and Italy.