The CEE markets continue to suffer from conflict-driven instabilities in the region, with sanctions still impacting most industries and European companies remaining cautious with their regional activities. In the face of these ongoing difficulties, law firms benefited from an uptick in restructuring and insolvency mandates. Simultaneously, new investment incentives do exist. For example, the Three Seas Initiative, a platform that brings together 12 EU member states, is contributing to the acceleration of infrastructure investment in the region.
‘In general, the market in the CEE region was relatively robust,’ says Martin Brodey, managing partner and head of private M&A at DORDA. ‘Due to various developments, financing has often become a challenge, which is why large transactions tended to decline.’
Poland is no exception to the trends seen across the CEE region. Law firms report some hesitation among international investors, who adopted a more cautious approach when investing into Poland following the outbreak of war in Ukraine, although European investors continue to be interested in the Polish market. While 2023 saw less activity in M&A and capital markets with interest rates soaring, the managing partner of Rymarz Zdort Maruta’s Warsaw office, Paweł Zdort, predicts that ‘the availability of financing will continue to grow’ and he therefore envisages a rise in these mandates throughout 2024, in addition to an increased number of restructuring mandates – with an absence of post-Covid state assistance, some companies will be unable to sustain themselves.
Law firms in Poland have also witnessed a thrust towards ESG initiatives and green energy, with the country’s aim to move away from a traditionally coal-based energy system seen through the continued financing and construction of offshore wind farms in the Baltic Sea. Another sector of interest in the M&A space is technology, as witnessed across the region, while the real estate sector saw a slowdown of activity with fewer financings and transactions completed in this space.
There is a strong mixture of international and top-tier independent firms in Poland, with Clyde & Co entering the Polish market for the first time at the beginning of 2024. Polish-based firms are thriving, and the market witnessed the merger of Rymarz Zdort and Maruta Wachta at the beginning of 2023.
For Hungary, lending activity slowed in the first half of the year. As seen across the region, the energy sector has been a focus for many Hungarian law firms throughout 2023. In an effort to reduce its reliance on Russian fossil fuels and to push its green transition, the Hungarian government is focusing on reforms to remove regulatory restrictions and increase investment in the renewable energy sector. Firms noted an uptick in advice on the investment in, and financing of, solar power park developments. Hungary still benefits from foreign investment, and several law firms cited Asian investment as a trend in 2023, particularly in the battery manufacturing and e-mobility spaces.
Firms in the Czech Republic have noted that the local market is still recovering from the effects of the pandemic. In the corporate and financial spheres, the war in Ukraine has meant that access to money is harder, with many Western companies adopting a cautious approach regarding investing in the CEE region. However, projects within the technology and life sciences sectors are gaining traction, with strategic and inbound investors also remaining optimistic about the future. Among family-run businesses, who appear resistant to adverse market conditions, there has been an increase in local capital to invest, while there has similarly been an uptick in outbound investments in the US and western Europe. The real estate market is experiencing a slump, particularly within the retail and residential spaces, largely due to expensive financing and high interest rates. However, certain local industries have been thriving, namely within the logistics and warehousing sectors, thanks to the popularity of e-commerce transactions. Firms are also noting an increase in solar and photovoltaic projects.
On a positive note, the TMT and IP industries are experiencing a boom. With the technology, gaming, and software licensing sectors experiencing significant popularity, there is no slowdown in sight for projects here. For IP, local firms have observed a rise in trade mark and patent cases, mostly relating to technology and software. Looking ahead, the implementation of the EU AI Act is expected to create more work in the generative AI field across the CEE region.
In Romania, Bryan Jardine at Wolf Theiss notes that while its economy ‘remains vulnerable to external macroeconomic shocks’, and the country witnessed an increase in inflation driven by rising energy and food prices, ‘the local legal market grew considerably in 2023 and at Wolf Theiss we witnessed the development of an increasingly dynamic and sophisticated flow of transactions, which we anticipate will grow even more over the coming years.’ In terms of sector activity, investors are increasingly interested in a range of industries, with ‘technology, energy – especially renewables – manufacturing and infrastructure in general, being among the most significant.’
Not exempt from the difficult economic circumstances in Europe, the financial year in Austria was certainly challenging and characterised by a slowdown in financing and private equity transactions, with a particularly weak real estate sector. At the same time the strategic M&A business remained stable, and firms reported a steady stream of instructions from the IT sector, as well as an increase in litigation and arbitration work. The country continues to participate in the global trend of soaring demand for ESG advice, which has now become, and will remain, part of lawyers’ everyday work.
‘Despite the increased cost of living and interest rates, clients are longing for professional advice – in the last year this has also been seen especially in the areas of restructurings and insolvencies.’ Martin Brodey, DORDA
‘Despite the increased cost of living and interest rates, clients are longing for professional advice – in the last year this has also been seen especially in the areas of restructurings and insolvencies,’ says Brodey.
The law-firm setting in Austria has been stable for years and remains that way. Several full-service firms dominate the market, followed by a range of mid-size firms and a limited presence of large international law firms. For 2024, lawyers expect a recovery of M&A activity, and at the same time a further increase in restructurings as an aftermath of the current economic situation. Internally and with clients, they will continue to work on the challenges and opportunities that come with the rapid technological progression. Alexander Popp – managing partner at Schoenherr – says: ‘Technology will substantially change our business and the way we do business, those firms who are focusing on this topic and adapt smartly will be successful in the future.’
While countries situated across the CEE all faced similar obstacles throughout the course of 2023 because of post-pandemic issues, neighbouring conflicts, and the related energy crisis and rising interest rates, the overall feeling from firms was that of optimism for the coming year. Jardine aptly summarises the situation: ‘I remain optimistic about the growth of the Romanian business environment in 2024 – because the fundamentals remain strong and there are many opportunities in this market.’ LB