Madrid Annual Report
The fight intensifies
Is the crisis over? Yes, say
some lawyers who point to an
increase in foreign investment
in Spain and more M&A activity
as evidence of an economy in
recovery. Indeed, it is true that
more money is being ploughed
into Spain – for example,
statistics show that Spain´s
retail investment market grew
almost three-fold in 2013.
But this is only half the story. Some analysts
argue that Spain is witnessing a “jobless
recovery”. That is, though the economy
may be improving, the unemployment rate
remains high – the fact that unemployment
in Spain stands at 27 percent (and as high as
55 percent among young people) suggests
that this analysis is correct. So where does
the current economic situation leave
Madrid´s law firms?
Deal volume is on the rise, and for the
big ticket transactions, clients are still
willing to pay significant fees. Meanwhile,
as activity increases, firms are showing an
increasing willingness to promote more
lawyers to partner level, whereas in the
past, with the economic outlook more
uncertain, some firms had kept partner
promotions to a minimum.
However, while fees for major deals
may be holding up, an increasing amount
of work is becoming commoditised, with
the result that some instructions only
generate around a quarter of the amount
of money they may have brought in a
few years ago. Spanish firms are facing
increased competition from the major
auditing firms as well as the Anglo-Saxon
law firms, with some managing partners
of the belief that with foreign investment
increasing in Spain, it is UK and US firms
that have an advantage when it comes to
winning instructions.
Pedro Pérez-Llorca, managing partner
of Pérez-Llorca, says lawyers are “no
longer operating in a crisis market”. He
adds: “If you work in an area where there
is investment, you can do well, there´s
a lot of volume and a lot of deals to be
done.” However, he adds that the legal
www.iberianlawyer.com
fees are not always as high as law
firms would like.
According to Manuel Martín,
managing partner at GómezAcebo & Pombo, while there
continues to be pressure on
fees for commoditised work,
fees for high value work are
holding up.
But as one
managing
partner
points out, the
problem is that
there are some
huge firms in the Madrid
market that are struggling because they
have lawyers who are under-occupied, and
therefore such firms are left with no choice
but to take commoditised work.
The managing partner adds that an
increasing amount of work that previously
was not commoditised is now becoming
so – this includes capital markets, M&A and
financing work. The source says that fees for
some work in these areas have dropped a
massive 75 percent in the last few years.
Litigation is the foundation on which many
law firm´s practices are built, according to one
market source, with most top firms relying on
this area of practice for around 50 percent of
their revenues. “Everyone talks about deals
and transactions, but litigation is always very
important – you often don´t hear about it
because much of it is confidential.”
Eduardo Gracia, managing partner of
Ashurst´s Madrid office foresees “another
year of good opportunities ahead”. He adds
that in the last 12 months, it was mainly
the biggest companies that benefitted from
foreign investment, but, in the coming year he
expects a second wave of investment focused
on mid-sized companies in Spain, with the
real estate sector in particular offering “good
opportu