Revenues flow back

Despite poor M&A results in 2010 Dutch lawyers believe private equity and refinancing will keep them afloat, says James Swift

Things looked bleak for a while in Holland. After a dizzying 2007 when, according to figures from Thomson Reuters, there were around 618 M&A deals totalling more than $210bn (£132.8bn) – a hefty chunk of which was, of course, down to RBS’s e71bn (£60.5bn) takeover of ABN Amro Group – the following, more subdued years gave firms pause for thought.

“At some stage I remember thinking, ’Jesus, what’s happening to the market? Will there even be a pipeline next year?’” says Linklaters corporate partner Pieter Riemer.

2009 was the low point. That year there were only 528 deals amounting to little over $49bn, compared with $72bn the previous year.

This year hardly seems better, with 323 deals adding up to $15.4bn so far, but most lawyers in the market seem optimistic and point to the return of private equity, increasing interest from Asia and an expected wave of refinancing.

The common line is that the Netherlands got off lightly, and firms had enough refinancing and restructuring work to last them through the deal drought.

“Overall, the Dutch economy has not been impacted too badly,” says Ferdinand Mason, head of corporate at Boekel de Nerée. “Unemployment is only around 5.2 per cent, and although we were hit like everyone else, [the Netherlands] has a lot of corporates such as Shell, Philips and ING paying a lot of tax. It also helps that the Dutch have been looking outside their own economy for past 300 years.”

Published turnover figures largely support Mason’s assertion of a mild recession: turnover at Loyens & Loeff, the highest grossing firm in the Netherlands, fell by 4.7 per cent, while NautaDutilh and Stibbe experienced a 4 per cent drop. Boekel de Nerée’s turnover dropped by only 1 per cent.

Speculation among the Dutch firms is that the magic circle firms, which focused primarily on top-end corporate and financing deals, were hit the hardest by the downturn. Allen & Overy is, however, mentioned as a possible exception due to its broader practice.

Not that Dutch firms emerged entirely unscathed. NautaDutilh, for example, removed the free soft drink machines from its offices, saving around e20,000 and probably a few teeth as well. More seriously, some firms were reported to have experienced falls in turnover of 20 per cent and there were hiring freezes. Some also cut staff numbers, undoubtedly on a smaller scale than in the UK, although the precise extent is difficult to judge.

“We see that firms in the Netherlands are streamlining,” says Houthoff Buruma managing partner Eddie Meijer, “but it’s different from in the UK where the managing partner will tell people to leave. In Holland it usually boils down to people deciding that a firm is not an environment they want to be part of for rest of their life. It’s different from the rest of the EU.”

“There have been layoffs in Dutch market too but this was done in quiet way. All the firms have suffered and there have been hiring freezes at some firms,” says Linklaters corporate partner Pieter Riemer. “We have been lucky because we have done a lot of restructuring work for RBS and we did the takeover of Intertrust, which was owned by Fortis Bank and [in September 2009] taken over by Dutch private equity group Waterland.

“We also advised Amlin on its [e350m] acquisition of Fortis Insurance and Vattenfall on its [e10.3bn] acquisition of Nuon PLB Holding. But now things are picking up and we have inward investment from China and India, so there are things going on.”

Necessity seems to be driving a number of deals. Last year ABN Amro Bank was forced to sell subsidiary HBU to Deutsche Bank as a condition to its merger with Fortis Bank, and this year ING is expected to sell its insurance business valued at around e16bn, while delivery group TNT has said it will split its mail and express units next year.

Equally, finance and capital markets work looks like it may be slowly coming out of its slumber.

“Companies are going to have to refinance extensively next year and you get the sense they won’t be able to do it themselves so the capital markets will have to be tapped to get debt or equity,” says Allard Metzelaar, Stibbe’s head of M&A, who adds that the firm is seeing increasing interest from Asian buyers, drawn to Holland’s tax-efficient NV and cooperative structures.

In particular, the large number of bullet loans (loans that require a large payment on expiry) that are set to expire over the next couple of years are expected to start yielding work for lawyers.
“Everybody is expecting the ’wall of debt’ to hit maybe next year or in 2012, and what we have seen already is corporates trying to reinforce in an effort to reduce their level of debt,” says Metzelaar. “Bankers are telling clients that it will be more difficult to refinance in two years’ time and saying ’Why not do it now?’

“We are also seeing more high yield bond issuances and loans defaulting. And we expect that when more debt matures there will be more defaults.”