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There is a general feeling in Israel that the economy is in a slowdown not a crisis. Although investment from Europe and more significantly from the US has dropped off, the country's conservatism – particularly in the banking sector – has kept things relatively stable....

There is a general feeling in Israel that the economy is in a slowdown not a crisis. Although investment from Europe and more significantly from the US has dropped off, the country's conservatism – particularly in the banking sector – has kept things relatively stable. "At the end of the day, relative to other economies, the Israel banks coped quite well over the crisis – there are no rumours about banks collapsing," says one partner.

Israel's equity capital markets have remained slow in the last 12 months, with IPO work almost non-existent. "IPOs are very low, very low," says a partner. One new source of work has come in the form of shelf prospectuses. "In Israel a shelf prospectus is something new," says one practitioner: "It gives companies the option to raise money without filing a prospectus; this started a year and a half ago."

Firms have also been active in debt raising, particularly from institutional investors. "Companies need funds and the initial stages were through existing shareholders, but it seems there was a lot of money stored with the institutional investors," says a lawyer. "We've seen a change in trend as companies are looking at raising money again," agrees another, "hopefully this will continue."

In the banking sector, as has been seen in many other jurisdictions, there has been a reduction in new lending and an increase in restructuring and refinancing work. "We see a lot of refinancing work with the banks," says one partner, "the banks are willing to re-finance a lot of creditor loans."

There has also been the inevitable impact of the collapse of Lehman Brothers. "Most of the banks invested in Lehman, so we have had a lot of work related to that," says a commentator. There has also been a clear reduction in work coming from foreign banks. "Before, foreign banks were looking to go into Israel," recalls one partner, "that's something that we haven't seen at all in the last year."

Another agrees: "Foreign banks were quite quiet in terms of lending to Israeli companies." Domestic banking work is also slow however firms are optimistic about a swift recovery. The conservatism of the Israeli banks combined with a smaller fund pool meant that they did stretch their investments like many global competitors, leaving them in a relatively healthy position when the crisis hit. "The banks in Israel have a lot less money than other areas of the world; this has actually helped in the crisis," says one partner. "There's an anticipation that something is going to happen," says another.

In corporate and M&A areas deal flow was also sluggish, owing to a combination of liquidity issues and a reluctance from companies to sell at the bottom of the market. "As long as they [sellers] had any cash in their tills, the valuations were far from what the buyers expected," says a lawyer. This price discrepancy has caused delays in many transactions but there is new work coming from distressed deals. "People are looking at the recession but seeing ... opportunities," says one partner, adding: "People are going back to the big deals."

In terms of new investment, the growth sector is clean technology and renewable energy – which is unsurprising given the country's expertise in this area. "It's become a really fashionable thing – clean tech and alternative energy," says one partner, while another echoes: "Clean tech is a sexy word."

Of all the practice areas, project finance has been affected the least by the slowdown. Israel is close to using fully its current capacity in both water and power, so – recession or no recession – these projects need to be done. As a finance partner comments: "We are desperately in need of water and this is where the projects are."

Power generation could potentially come from offshore gas after a discovery last year in Israeli waters. Interest in renewables has also increased and in the past year new regulations have been put in place in this sector.

Another interesting development is the new regulations regarding power plant ownership. With private investors now able to enter this sector, it could prove to be a growth area for projects teams in coming years.