Northern Ireland: Striking distance

The economic fundamentals have not been kind to Northern Ireland and local law firms have had to look further afield for the big wins

Northern Ireland has had a hard time of it over the past few years. While the UK as a whole has seen limited growth, Ulster has had even less.

Unemployment is higher than the average elsewhere in the UK too, and the province has not managed to grapple with its huge public sector workforce and the resulting costs.

The G8 summit last week has provided welcome exposure, but may not provide much lasting economic benefit. Consequently, the environment for law firms is tough, and many are finding that their horizons are expanding in an effort to keep busy.

Tughans managing partner Ian Coulter describes the current market for business in Northern Ireland as “schizophrenic” in the way it is so up and down.

“We don’t anticipate seeing growth in the Northern Irish economy before at the earliest 2014. How we get it slowly building again is the question,” he says.

Carson McDowell managing partner Michael Johnston paints a similar picture of the economy. He says the market is “probably not going to get much worse or much better”.

Surprisingly good

Despite the lack of economic growth, 2012 was a surprisingly good year for corporate work in Northern Ireland. A report by Experian Corpfin shows a 36.7 per cent increase in deal volume between 2011 and 2012, as the number of deals rose from 38 to 52. Total deal value soared from £384m to £1.1bn, driven by the number of large deals rising from one to four.

While Northern Ireland remains by far the UK’s smallest corporate market, growth here outstripped that of all other regions. Indeed, Scotland and the South West were the only other regions to see any growth in deal volume between 2011 and 2012.

But the corporate market is characterised by a heavy emphasis on cross-regional and cross-border work. In Experian’s legal adviser league tables, which take into account deals of over £500,000 in value, the only firm in the top 10 by value or volume that is present on the ground in Northern Ireland is A&L Goodbody. Another Irish firm, Mason Hayes & Curran, also features in the volume table but most firms are UK or US-headquartered or, in the case of Mourant Ozannes, offshore.

“We’re definitely seeing an upturn in corporate instructions and the corporate pipeline over the past six months. There’s a much bigger pipeline now than there has been for the past couple of years,” reports Johnston, backing up the data.

Coulter adds: “There’s still a fair bit of good legal work out there despite the economic challenges.”

Mark Thompson

A&L Goodbody Belfast corporate head Mark Thompson says there is activity across a range of sectors.

“The energy sector’s absolutely mad, there are a lot of transactions active. Agri-food’s been very busy and remains so. There’s a lot of work in the technology sector but there’s a real shortage of professionals in that area,” he says.

But, as is clear from the league tables, many of the transactions involve foreign investment or investment from elsewhere in the UK.

The biggest deal in 2012 was the £317m acquisition of electronics and engineering company Schrader International by US private equity house Madison Dearborn. Schrader has two significant plants in Northern Ireland as well as a presence elsewhere in the UK and around the world. Latham & Watkins represented Schrader while Kirkland acted for the private equity firm.

Private equity was also behind a number of the other biggest deals, and only a handful of smaller transactions involved a Northern Irish company buying another Northern Irish company.

Good local value

Lawyers in Belfast say this is due to investors being able to find good value in the local market.

“We’re doing a lot of work for Invest Northern Ireland,” says Coulter. “They’ve been very successful in bringing some new US foreign direct investment companies in.”

Pinsent Masons Belfast managing partner Paul McBride adds: “The market here simply isn’t capable of developing and sustaining business as it was five years ago.”

Johnston agrees: “The companies that are doing very well in Northern Ireland tend to be the ones that are doing business outside Northern Ireland.”

International plan

Examples of such international or UK-wide work include the launch of a new bus plant in County Antrim, where Wright Bus will build new London buses, or the possibility that gas supplier Phoenix will buy assets from Bord Gáis Éireann, the Republic of Ireland’s state-owned energy company.

The bankruptcy of businessman Seán Quinn and the company he once owned, Northern Irish-headquartered Quinn Group, has also created a lot of activity.

Thompson says: “While these are local assets they’re not really local transactions any more. We’re finding that we’re doing a lot of work on local projects where the clients aren’t local so the international aspect has increased significantly.” 

Alan Taylor

Arthur Cox Belfast managing partner Alan Taylor says the province has attractions for investors. 

“We speak English, we have a good education system and we have quality people who are willing to work,” Taylor says. He believes there remains enough work to go around: “There’s still enough coming in and what I’m told is that people still get good value here.”

The Quinn administration is representative of another trend in the market, that of restructuring. Firms all say their insolvency departments are busy in Belfast and litigation is also flying.

Michael Neill

“There is a lot more contentious work,” says A&L Goodbody Belfast head Michael Neill. “We’ve noticed a great upturn in that this year. We’ve been involved in more trials in the first five months of 2013 than in the whole of 2012.”

External strength

A&L Goodbody, Arthur Cox and Pinsent Masons, which are all present outside Northern Ireland as well, say the fact their firms have an international focus is serving them well. Pinsent entered the Belfast market through its merger last year with McGrigors, the Scottish firm having itself come in through a 2009 merger with Northern Irish firm L’Estrange & Brett.

McBride says the Belfast office is currently doing a “very exciting blend of local Northern Irish work and national UK work”. He points to a number of English and Scottish transactions led out of Belfast.

He admits that cost has something to do with the fact that Belfast is the relationship office for clients like London councils, adding: “I think they also appreciate the attentiveness of the service, so we work very hard at developing and maintaining it.”

According to McBride, the Pinsent merger has brought a greater international scope to the work of the Northern Irish team. He says local lawyers do a lot of work with overseas offices such as Munich, and there is a growing amount of work coming through China.

“We’re keeping an eye on the opportunities within the Pinsent Masons organisation itself and what it brings to us,” he says.

Neill says A&L Goodbody’s all-Ireland presence has helped it pick up work, notably on some of the restructuring, although Taylor at Arthur Cox has a different story.

“Most of our work would be very little to do with the Irish firm or the Dublin office in particular,” he says, explaining that many instructions are actually standalone referrals from the firm’s London office.

Unlike in mainland UK, where the difficult economy has led to a significant number of regional mergers, Northern Ireland seems to have avoided consolidation within the legal market. Save for the Pinsent Masons merger and its legacy mergers, there have been no significant takeovers in recent years. There has also been very little lateral hiring, although Carson McDowell picked up a pair of partners from Pinsent earlier this year.

“There’s still room for firms to amalgamate,” says Johnston. He reveals that his firm has been approached for merger talks, but adds: “We’ve seen nothing that we particularly want to take further.”

Tughans’ Coulter says the lack of mergers has surprised him: “I would have expected to see more. There have been a few people moving around firms but compared to the English market it’s been very low key.”

Neill at A&L Goodbody thinks any mergers will happen at the mid-market level. “Inevitably within a recession corporate and financial institutions tend to move towards brand and towards quality,” he points out.

Growing organic

Firms are planning mainly for organic growth, with Arthur Cox’s Taylor asserting that consolidation is not necessary.

A&L Goodbody is bringing seven trainees on board in September, adding to the six who joined in September 2012. Neill says he wants to bring young lawyers through the ranks and continue to develop the firm’s capabilities across all areas.

In the difficult economic climate that Northern Ireland finds itself in, law firms are in reasonably buoyant mood about the future. The fact that successful local companies are looking for opportunities overseas, and that foreign investors seem to be interested in opportunities in the region, is encouraging.

Nevertheless, Northern Ireland still has a long way to go before it can reinvent itself and catch up with the rest of the UK. An economic package for the province, unveiled on 14 June, is intended to create private sector jobs and include regeneration projects.

First Minister Peter Robinson told the BBC: “What we’re attempting to do is to put in place the kind of measures and economic and fiscal issues that will assist us in getting growth in our economy over that period of time and to close the gap between our divided communities.”

If the project works, the future for Northern Ireland could be much brighter than some currently see it.


Key figures

GDP (£, 2011): 29.87bn

Annual inflation (April 2013, UK-wide): 2.4%

Population (2011): 1,810,863

Life expectancy at birth (UK-wide): 81

Unemployment rate (March 2013): 8%

Source: World Bank, Office of National Statistics, Northern Ireland Statistics & Research Agency, Department of Trade & Enterprise Northern Ireland