As a relatively small country, and one which is heavily dependent on inward investment, Ireland has always been affected by outside economic influences, and the IT sector is already feeling the effects of the downturn in the US economy.
For instance, Ebeon, a technology firm based in Dublin, was recently forced to cease trading, making 170 staff redundant in the process.
Andrew Doyle, a partner at Dublin firm Matheson Ormsby Prentice, says: “The nature of IT work is changing. The last few years has seen a huge increase in private equity and venture capital activity in Ireland; but the last quarter has seen a dip in venture capital activity, which has been more than replaced by M&A and consolidation activity. Many IPOs [initial public offerings] thought to have been on the cards for the next few months have been slowed down, and any IPO is now a rarity.”
Datalex, which floated last November, was the last Irish IT company to do so, and many others have been forced to alter their plans because of a lack of investor appetite.
Ronan Maloney, managing partner of McCann FitzGerald, says: “We've seen significant impact on the technology sector. Intel has already announced that they're deferring their planned expansion, and this is coupled with the growing indigenous sector, which is much less buzzy overall. It's much less lively than it was six months ago.”
Some, however, remain optimistic about the future of the IT industry. Frank O'Riordan, managing partner of A&L Goodbody, says: “There's sectoral nervousness, and a lot of high-tech companies have deferred second-round funding. But by their very nature, these companies require the same expertise across a range of areas, and we continue to advise on the normal things like joint ventures, acquisitions, banking and employment issues.”
While any slowdown in the economy is bad news for some sectors, insolvency practitioners are inevitably experiencing a boom period.
Declan Black, an insolvency partner at Mason Hayes & Curran, says: “In the last six months, there's been a marked increase in insolvency work. Two factors have contributed to this: first, more economic activity – the more activity you have in a market, the more failures you have; second, a slowdown in growth – deal flow has tightened up, and venture capitalists are not providing money for e-businesses, which are now failing to gain sufficient funding.”
All the main firms seem set to expand their insolvency departments as demand for advice continues to grow. Lateral hires are obviously being considered, but moving between firms, both north and south of the border, is still a rare occurrence.
Head of insolvency at Matheson Ormsby Rod Ensor says: “We're currently looking for lawyers in the corporate recovery and insolvency department of the firm. We're anxious to have the ability to service the big jobs when they come in.”
But any serious slowdown is yet to materialise. Ensor says: “There's definite concern that there may be a slight slowdown. This is because Ireland's economy is now heavily dependent on the US economy, and the US economy is currently experiencing difficulties. However, many commentators believe the worst that will happen in Ireland will be a levelling off to less substantial growth. Indigenous business is still doing well in Ireland, and our economy is still strong at present.”
When Fianna Fáil, the largest political party in Ireland, came to government, there was a determination to bring about a series of privatisations, including Aer Lingus, the government banks, Aer Rianta and Ireland's equivalent of British Rail, CIE (Córas Iompair Éireann). The privatisations, while clearly still on the cards, are nevertheless experiencing problems. Maloney at McCann FtizGerald says: “It's still on the agenda, but the pace has definitely slowed. They don't have the strong capital market in which to launch, and they don't want Joe Public buying shares that go on to collapse in value. It would be a political headache.” A headache that the government does not need as it edges ever closer to a general election.
The problem affecting any privatisation in the market is the current crisis of confidence. O'Riordan at A&L Goodbody says: “The high confidence levels of a year ago aren't here. We're not going around saying it's the end of the world as we know it, but as a result of eircom [Ireland's state-owned telecoms company] and the state of the market generally, they're probably slightly nervous and as a result are slowing.”
But although some high-profile privatisations, such as those of Electricity Supply Board (ESB) and Agricultural Credit Corporation (ACC) look, at least in the short term, to be off the cards, others are still coming through. The privatisation of Industrial Credit Corporation (ICC) was completed just weeks ago, and while the privatisation of Aer Lingus has been delayed by a series of industrial relations problems, there is a confidence that it will still go ahead by the end of the year or early in 2002. The sale of the state's oil refining and oil storage assets (owned by the Irish National Petroleum Company) is at the preferred bidder stage; and the reorganisation of Voluntary Health Insurance (VHI), the Irish equivalent of Bupa, is underway.
But there are no firm commitments to a privatisation strategy in the republic. Eugene McCague, managing partner of Arthur Cox, says: “Privatisation isn't ideologically based here like it is in the UK, and the government here has tended to do it on a case-to-case basis. It will continue to work on this basis, though market conditions may have the power to dictate the pace.”
Despite the economic uncertainty and the slowdown in many sectors, public-private partnerships (PPPs) continue to gather pace, with a number of significant projects underway in the education, roads, waste, water and rail sectors. Maloney says: “It's definitely busy, and there are still more projects out there. What we're seeing now is only the beginning. It's a very strong sector and the projects themselves, from planning to implementation, have quite a long time in them.”
More and more practices now have the ability to put a lot of resources into these larger issues, with most leading firms on both sides of the border enjoying significant growth over the last five years.
The last three years in particular have witnessed L'Estrange & Brett taking over from Cleaver Fulton Rankin as the largest firm in Northern Ireland. In Dublin there has been an even more distinctive change, with the big four, the Irish equivalent of the UK's magic circle firms, now becoming the big five: Matheson Ormsby has joined the more established firms of McCann FitzGerald, A&L Goodbody, Arthur Cox and William Fry. Other firms, such as Mason Hayes, also seem capable of emulating Matheson Ormsby's success in the coming years.
Mason Hayes managing partner Declan Moylan says: “We're smaller, but we see that as a higher mountain to climb. The ethic here among our lawyers is that it's part of their job to develop the practice. Other solicitors' firms are not so interested in that – they've reached the top of the tree. It's only natural that those just outside the top ranking aspire to get there.”
Moylan remembers clearly a time when McCann Fitzgerald was the same size as his firm, and to him it does not seem like an enormous mountain to climb so long as everyone involved concentrates on quality.
Donal Roche, managing partner at Matheson Ormsby, says: “While growth has been strong in the last five or six years, the biggest increase has occurred in the last two. We're satisfied that this will continue. We have the youngest team in town, they're all in their mid-30s, and they have lots of energy and drive. It's a continual process of changing and growing in Matheson Ormsby. We're constantly looking at how to improve and we're not afraid of the effects of a slowdown.”
A&L Goodbody, meanwhile, has just launched a new consultancy practice. It is called A&L Goodbody Consulting, and offers consulting services in government and public affairs, EU and regulatory issues and PPPs.
But regardless of the quality of any firm, marketing is a new tool to which many firms in Northern Ireland are only just catching on. David Jameson, a partner at Carson McDowell, says: “We're beginning to take it seriously here in the North, although we're nowhere near the level of activity as in Great Britain, where marketing is part of the ethos. There's still a feeling here among a lot of senior partners that marketing is something that lawyers just don't do. But interest from Dublin firms, partnerships and the arrival of McGrigor Donald has brought it more to the fore.”
Despite most enjoying growth, firms in Northern Ireland are still small, even by Dublin standards. The arrival of Scottish firm McGrigor Donald consequently poses a real threat, even though it currently only employs three assistants, two associates and one partner in the province.
Richard Masters, corporate partner at McGrigor Donald, says: “In the market competing with us, even the largest are very small by McGrigor standards. But what is core is not just a question of size, but the resources and investment size gives us.”
But Harry Coll, managing partner at Belfast firm Elliott Duffy Garrett, believes that the firms in the North have grown as much as they are going to in the short term. He says: “Only a group of 6-10 firms had considerable growth. All seem to be at their optimum at the moment and I can't see the market driving the situation.”