IFLR 1000
The Guide to the World's Leading Financial Law Firms

It goes without saying that things could be better for France's banking lawyers: in 2008 acquisition financing took a huge hit and tensions ran high in deals that few believed would see completion. But as financial institutions and the law firms that depended upon them felt the full, crushing impact of the downturn in countries all around France, it was clear that things could have been a lot worse....

It goes without saying that things could be better for France's banking lawyers: in 2008 acquisition financing took a huge hit and tensions ran high in deals that few believed would see completion. But as financial institutions and the law firms that depended upon them felt the full, crushing impact of the downturn in countries all around France, it was clear that things could have been a lot worse.

Some banking practitioners are even looking at the positives, seeing the change as a coup for quality. "Towards the end of the bubble, life was getting uncomfortable for us because quality was less recognised," says one banking partner. "Now people are waking up to the quality of documents and people are making deals more lender protective."

Throughout the downturn there are still new-money deals being done – even the occasional big-ticket transaction like the work provided by EDF's takeover of British energy. Yet, predictably, most deals now take place on a more conservative basis. Also, regulatory work, according to one partner, has "increased dramatically".

But it is debt restructuring that has been the driving force of the market and the firms on the high-profile deals have seen their stocks soar among clients and competitors.

Some partners, however, see the influx of restructuring as a shift towards a more Anglo-Saxon way of working, which is not something all the profession are keen to see – not least because it was French lawyers' characteristic versatility that saved a lot of jobs.

"Those lawyers involved in this work were more interested in the litigation aspects than the contractual, so now we are seeing more of an Anglo-Saxon model of semi-consensual restructuring trying to keep parties away from court procedures," says a partner. "And people are very conscious of moving towards an Anglo-Saxon market, which requires quite a different animal from a lawyer like what you have seen."

Though the turmoil in the markets has made IPOs virtually impossible, equity capital markets lawyers are still the busiest lawyers in an otherwise sluggish environment, as companies look to minimise their debt with large rights issuances. "It is more than public knowledge that people want to finance themselves by any means possible because bank lending has dried up," says one partner....

Though the turmoil in the markets has made IPOs virtually impossible, equity capital markets lawyers are still the busiest lawyers in an otherwise sluggish environment, as companies look to minimise their debt with large rights issuances.

"It is more than public knowledge that people want to finance themselves by any means possible because bank lending has dried up," says one partner.

Only the most trusted companies can afford to go to the market, however, and for capital markets lawyers the downturn has presented them with a challenge.

"It's a worrying change that we are seeing clients disappear off the face of the earth," says one partner. "But it's been fascinating in terms of having to change and adapt and go with the flow."

But things did pick up towards the end of the first quarter of 2009 and lawyers sought innovative ways to accommodate clients. Hybrids and convertibles became more attractive, and the state of flux in the market ensured a ready supply of regulatory work.

Preference shares are also witnessing a resurgence and Linklaters was the obvious choice for Société Générale's €1.7 billion issue, as partner Gilles Endréo chaired the preferred shares committee that made suggestions on the new law enacted in November 2008.

Flexibility and balance are a firm's greatest asset in the depressed market, as the near total disappearance of the leveraged buyout market has meant that practices concentrated on private equity, especially those focused on the top end of the market, have borne the brunt of the downturn. "Everyone is, on the private-equity side, suffering from the downturn, and those who will suffer more are those with a very narrow practice limited to private equity eg Latham & Watkins, Ashurst, Linklaters, Allen & Overy and Mayor Brown," says one corporate partner at a leading firm....

Flexibility and balance are a firm's greatest asset in the depressed market, as the near total disappearance of the leveraged buyout market has meant that practices concentrated on private equity, especially those focused on the top end of the market, have borne the brunt of the downturn.

"Everyone is, on the private-equity side, suffering from the downturn, and those who will suffer more are those with a very narrow practice limited to private equity eg Latham & Watkins, Ashurst, Linklaters, Allen & Overy and Mayor Brown," says one corporate partner at a leading firm.

M&A has also been bleak, but less so. Though transactions have slowed to a "surreal pace", according to one partner, and mostly been restricted to mid-sized deals, large transactions do still exist. EDF's acquisition of British energy in September provided one example.

And according to one partner the absence of large funds generating activity has even benefitted some clients, as he explains: "Because there is no private equity, industrial clients are getting more done as they don't have to worry about PE houses putting down a lot of money. Whereas before industrial clients would never get the deal at Dutch auctions, now they are."

But overall the market has been frustrating, with financing hard to come by, many enquiries coming to nothing and deals being pushed right to the end before being abandoned because of one party's ill feeling.

"To be very reactive is [the] most important point for a client," says one M&A partner. "It's like being a good doctor – when something is wrong [you] need to be in contact with the doctor immediately because in a few days you are either feeling better or you are dead."

The French government's enthusiasm for public-private partnerships has ensured that the situation for project finance lawyers in the country has not been too dire."The way the market is going is better than I thought it would be a few months ago," says one partner at a leading firm....

The French government's enthusiasm for public-private partnerships has ensured that the situation for project finance lawyers in the country has not been too dire.

"The way the market is going is better than I thought it would be a few months ago," says one partner at a leading firm. "A number of the large domestic rail and road infrastructure projects that were launched were kept on the back burner for a while because of liquidity problems, but the government has launched a programme to put in guarantees – so in the last few months things have taken on a new momentum."

Renewable energy has also retained its appeal, though the downturn has still caused problems and many deals, although still active, have slowed to a crawl. Sponsors, in lieu of taking on added risk, are looking to put deals on hold and lenders have become more conservative, insisting on more thorough due diligence and refusing to rely on warranties as they might have done previously.

Africa, the focus of many French firms, has also been affected. "Everybody said that these [African] markets wouldn't be affected by the crisis because the banks are doing well, but most projects were being financed by western banks. Very rarely will their own banks put money into these projects," explains one partner.

Consequently, it's been the domestic public-private partnership market that has made all the difference. "The year has been peculiar in that some of the larger programmes went to sleep in a way," says a partner. "So it's difficult to say, but the top firms have one thing in common in that they are all busy on the domestic infrastructure side."

Towards the end of 2008, after Lehman filed for bankruptcy and the global downturn bit hard, restructuring activity soared in France."It's a very active area right now," says a partner....

Towards the end of 2008, after Lehman filed for bankruptcy and the global downturn bit hard, restructuring activity soared in France.

"It's a very active area right now," says a partner. "What we have seen in Paris is a sudden flow of deals in the fourth quarter of 2008. We had a rush of clients coming to us because they had seen that their profits were limited. We were very surprised by how suddenly this tsunami happened. It was brutal."

It also gave France the opportunity to stretch the legs of its 2006 Insolvency Act. But take-up of the legislation's procedures was low and in February 2009 the legislature enacted a new ordinance designed to make the sauvegarde (or safeguard) procedures more attractive.

And, according to commentators, the numbers show that it worked. "We have a lot of out-of-court [procedures] and conciliation now, and we will start to see more. In the future, I think we are going to see failed conciliation that will turn into sauvegarde or liquidation," says one partner.