Why CC, Salans and Camerons are piling into Eastern Europe

Bulgaria and Romania are to join the EU on 1 January 2007. On the horizon Croatia, Turkey and Macedonia are lobbying for accession and could join at some point in the next few years.

EU membership will mean that these Central and Eastern Europe (CEE) countries will have to bring themselves in line with EU standards of governance, regulation and competition.

For the legal community it is a widening of the net and a simplification of the processes that will allow global firms to spread their networks to tap the emerging markets. Already there is a small but growing number of UK firms doing their best to make inroads into the developing markets.

These days Austria all but counts as Western Europe, and Poland and the Czech Republic are mature markets compared with their Eastern European neighbours. Any firm serious about making the most of the CEE region is in two, if not all three, of their capital cities. But in the race to tap in to the newest emerging markets, Romania is shaping up as a crucial, and relatively lucrative, battleground.

It is the real estate sector leading the charge, which has grown in importance exponentially over the past few years. With the rocketing growth in prices in the UK, investment banks and private equity houses – not to mention developers – are increasingly looking to the CEE for opportunities. And there is money to be had.

Clifford Chance moved to capitalise on the real estate market when it dipped into the Warsaw office of CMS Cameron McKenna to hire real estate rainmaker Pawel Debowski and his team. His billings are believed to have accounted for some 25 per cent of Camerons’ Warsaw turnover, and his real estate expertise has been a shot in the arm for Clifford Chance’s entire CEE practice. Regional managing partner Michael Cuthbert says the Romanian association, launched in July, is “way ahead of budget” and he makes no secret that real estate is a key factor behind that.

Salans made a similar strike back in 2004 when it hired real estate partner Eric Rosedale from Weil Gotshal & Manges, where he was co-head of the European property and finance group. He now divides his time between London and Warsaw as co-global managing partner of real estate. The link between Salans ramping up its real estate expertise in the CEE and its overall success in the region, to the point where magic circle firms now list it as a regional competitor, cannot be overstated.

Salans keeps an extensive network across the CEE. The firm has been in the Romania market since 1997 and is one of the few firms to already have a flag raised in Istanbul.

Firms across the region, including the entire magic circle, plus Poland operations for Dewey Ballantine and Weil, as well as an extensive local network for DLA Piper, tend to deploy primarily local lawyers. It is an interesting strategy, but not one everyone agrees with.

Clifford Chance’s Cuthbert says: “We’re moving towards a lot more English law execution within the region. In our particular case we’re focusing on spreading more English lawyers across the region. Romania in particular is an office we’ll look to staff up significantly over the next six months or so.”

The CMS network has long been regarded for its CEE expertise, and the firm keeps offices in Bulgaria, the Czech Republic, Hungary, Slovakia and Romania, although sceptics remain unconvinced about the success of its merger with 40-lawyer CEE specialist Hayhurst Robinson.

In October Camerons acted for Erste Bank, with regional corporate head Helen Rodwell leading the advice, on its ?3.75bn (£2.53bn) acquisition of 62 per cent of shares in Banca Comerciala Romana. The deal was Romania’s largest acquisition to date.

In the same month Salans and Linklaters advised on the IPO of A&D Pharma, which listed 30 per cent of its shares on the London Stock Exchange in the form of global depository receipts. Linklaters advised ING Bank, while Salans advised the company on English and Romanian law.

It is a growing trend and shows that the big deals are out there for those prepared to be on the ground. Partners on the ground are unanimous in their analysis that capital markets are developing.

The economic growth in Romania is providing lucrative pickings for some firms. It will not be long before the heavyweights start to eye the horizon again, and they will certainly be keeping a close eye on the developments in both Croatia and Turkey.