Switzerland Special Report: Crisis? What crisis?
1 December 2008
18 January 2007
22 January 2007
22 February 2010
11 September 2000
21 May 2001
Speak to many lawyers in Switzerland and you’ll be left wondering what all the fuss is about elsewhere. This small, wealthy and famously neutral country has plenty of lawyers doing plenty of work, with much of it expected to continue well into the coming year.
Swiss lawyers are used to adapting to whatever comes their way, and the cries of economic doomsayers heard from their European neighbours are being lost among the mountain of instructions keeping Swiss lawyers burning the midnight oil.
Daniel Daeniker, co-head of the corporate M&A practice group at Homburger, has been working on some of the biggest deals to come through the country over the past 12 months, including BASF’s acquisition of sia Abrasives for CHF350m (£192.61m), the $11bn (£7.17bn) sale of Nestlé’s eyecare business Alcon to Novartis, and the acquisition of a large stake in German financial services company MLP by life insurer Swiss Life.
One other major deal that has been keeping the Homburger M&A team up all night – apart from a CHF2.45bn (£1.35bn) acquisition of Jet Aviation by General Dynamics – is the ongoing transfer of $60bn (£39.4bn) illiquid securities and other assets from a UBS balance sheet to a separate special purchase vehicle.
Daeniker, who led the team, says the complex de-risking “has everything” and is an example of the continuing work available to Swiss law firms. “We haven’t really seen much of a slump compared to our US colleagues and this is down to a number of factors,” he says. “If the really big law firms are busy then the mid-sized firms get a lot of work. Also, we are not as prominent in private equity and focus more on industrial markets. Lastly, restructuring like we have seen with the UBS work includes many complex tools and huge due diligence.”
Daeniker says he expects the UBS work to continue long after the news has left the pages of the Financial Times, and that the team will most likely still be working on it in the first quarter of 2009. It may be after that, he adds, that the economic slump hits.
But for now, says Patrick Sommer, the managing partner at CMS von Erlach Henrici, it’s business as usual.
“We haven’t yet seen the impact of the credit crunch,” says Sommer, who oversees the work of 50 fee-earners and 18 partners in offices across Europe from the firm’s headquarters in Zurich. “Smaller and mid-market firms are very busy. I assume M&A work will decrease and litigation work will increase, but as yet this hasn’t happened.”
Sommer says he is keeping abreast of macroeconomic events, and having a Europe-wide footprint gives the firm “an edge” over its rivals, with the partners spending part of a recent firmwide video conference discussing the market.
Sommer admits that much of what happens on the European and world stage is out his firm’s hands. As result, expansion plans such as a long-term interest in opening an office in Geneva are on hold for now.
“We have to get some creative ideas about coping with the situation, but I’m not sure how proactive you can be at the moment,” says Sommer. “An office in Geneva is something that’s always on our radar screens, but it has a different culture, different rates … I’m not in a hurry to open up a new space.”
Robert Furter, managing partner of 100 fee-earner firm Pestalozzi Lachenal Patry, agrees – saying he will keep expansion plans under wraps until the market stabilises.
“We were expecting a downturn, but the big Swiss firms have all been busy,” he adds. “I think everyone is cautious about next year.”
Furter believes there is less transactional work as a whole, but sees positives to be gained from a certain number of strategic investors looking to take advantage of the financial environment.
Nor does he expect to see aggressive hiring or layoffs among Swiss law firms, because – as with many continental European markets – its financial market was much less volatile than that of the UK.
“We’re all expecting harder months to come,” says Furter. “Nobody is in an expansion mood. Who can predict what the market will do? It’s stagnant – that’s a fact – and it will become harder and harder to find work over this year compared to last. What seems unclear is how long it will go on for.”
For his part, Homburger’s Daeniker expects the future market to shape up like that of 2002-03. “There will be a few rescue deals, a few insolvency deals and some transactions from people taking advantage of the situation. The difference is that a shoot-from-the-hip deal in a boom time is replaced by heavy due diligence in a downturn, meaning heavy billable hours.”
The small size of the Swiss legal market is also an advantage. Lawyers are trained to be multi-skilled and encouraged to work on many fronts at the same time, meaning that partners can easily deploy them to different practice areas and there is no twiddling of thumbs by out-of-work real estate or private equity specialists.
The impressive collection of deals that Swiss firms have been involved in show that they are more than capable of finding work when the going gets tough. Many of the country’s firms are looking to strengthen their lawyer base ready for the markets to return to normal in two or three years’ time – or “hiring like hell”, as Daeniker puts it.