When I was asked some time age to write an editorial for CEE Legal Matters on the Slovak legal market I thought it would be a nice opportunity to review my last 20 years, approaching the end of another very successful financial year.
But since then, due to COVID-19, many things have changed, including the legal market, where we see the impact both on client needs and on daily law firm management, figuring out how, efficiently, to work with teams remotely while remaining able to handle matters that can only be done in the office.
Thus, I want to share some observations – from me, an M&A lawyer who has been active in Slovakia and CEE for more than 20 years, on the new situation with COVID-19.
Since the latest financial crisis in 2008, Slovakia, as a country excellently positioned in the middle of Europe, has strengthened its strategic position. Thanks to this it established its position as a hub for both the automotive industry and for global logistic companies, as well as for other bigger players from various sectors. In recent years, not that many global transactions have taken place without Slovakia taking part. It was exciting to see how specialization due to globalization caused significant growth of law firm revenues in Slovakia – including ours, where revenues since 2010 have almost doubled.
Our most recent financial year, which closed just some days ago, was again very successful. Even though M&A business – on an international level - was slightly down, nevertheless the slow-down complained of by our colleagues in the UK, post-Brexit, or in Germany, due to the recession, has not yet been felt in Slovakia. At least not by us, as a global law firm. Our lawyers worked on multi-jurisdictional reorganization projects for global clients wanting to consolidate their businesses in order to strengthen their liquidity, i.e., to focus on core businesses and divest non-core businesses.
Suddenly, in that heavily transactional atmosphere, COVID-19 appeared, and quickly became the predominant topic. With the complete lock-down in Slovakia and the close of the borders everything changed from one day to the other – including the legal market, as our clients found themselves facing a whole range of new issues, requiring the consideration of significant legal consequences and implications. Pending deals had to be closed as fast as possible in order to avoid insecurities and price discussions. Interestingly, and maybe as a result of experience we gained from a cyber-attack that hit DLA Piper in 2017, it turned out that DLA Piper was well-prepared and able to handle M&A deals effectively, even in a situation where most of us are working at home. Apart from the pressure to close transactional work as fast as possible, the vast majority of the work we have done in the last couple of weeks for our clients has been related to immediate HR issues, within reorganization processes. Here it is a significant advantage that Slovak lawyers are “general specialist” lawyers, traditionally able to deal with whatever legal issues may arise.
We will see what impact COVID-19 will ultimately have. It may be expected, on the one hand, that foreign investment by US or Chinese clients will decrease in our region. On the other hand, more than ever the focus on core business will be important for global players. In my view, more European funds and PE houses will discover interesting targets in CEE. Distressed M&A will therefore be interesting for our law firm and others in the market and we believe that international law firms may be able to match with the new situation quicker and easier than others.
For my part, I see a realistic opportunity for Slovakia to overcome this challenging situation as it did the financial crisis of 2008. There is no doubt there will be new opportunities for lawyers in this market – but only if the various jurisdictions in Europe open their markets now, quickly, to prevent global players from getting into financial trouble, which would have a negative impact on suppliers and sub-suppliers in CEE and around the world.
By Michaela Stessl, Country Managing Partner, DLA Piper Slovakia
This Article was originally published in Issue 7.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.