As a nation well versed in referenda, Ireland is in tune with the times. Since 1937 and the creation of Bunreacht na hÉireann as the fundamental law of Ireland, there have been 35 referenda on everything from a change in the country’s single transferable vote system to the controversial right to life of the unborn.
Ireland has had its own problems with votes on the European Union (EU), throwing Europe into chaos when the country held a referendum on the Lisbon Treaty in 2008 and it was rejected by 53% of voters. A vote was held again in 2009, and the Irish had a change of heart – the treaty was then backed by 67% of the population.
‘Any member state voting to leave has much wider implications and puts the question mark over the future direction of the EU.’
David Phelan, Hayes
Ironically though, the referendum that is likely to have the biggest impact on Ireland’s legal services market is the decision made by Britain on 23 June to leave the EU.
Writing in The Guardian, a few days before the referendum, Ireland’s Taoiseach Enda Kenny urged the UK electorate to vote Remain, arguing that Ireland had ‘a unique perspective on the outcome of the referendum, given the close and multi-layered nature of our relationship with the UK’.
‘It is a more significant referendum result than any of the ones we’ve had,’ reflects David Phelan, managing partner at Hayes Solicitors.
‘Firstly this is a very big step away from the EU as a project. The very fact of any member state voting to leave just has much wider implications and puts the question mark over what is the future direction of the EU.’
The Brexit vote certainly has the potential to hurt the overall Irish economy, which has close trade links with the UK, particularly in the food, agriculture, tourism and manufacturing businesses, which may suffer from a weaker sterling and potential tariffs between the UK and Ireland. At the moment, the economy is one of the fastest growing in Europe, enjoying unprecedented increase in GDP of 26.3% in 2015, according to the latest figures from the Central Statistics Office (the results are partly a statistical quirk, but no one doubts the national economy is growing robustly).
Keeping calm: latest moves in the Irish legal market
‘The legal sector in Ireland has been relatively stable in recent years, with little change in the main firms,’ reflects David Widger, head of corporate at A&L Goodbody.
Unlike the relative turbulence seen in the UK legal market post-Lehman, which experienced plenty of stress-driven M&A activity among law firms, particularly in the mid-tier, the Irish legal sector has remained stable in its pecking order.
And post-crisis, plenty of areas are proving lucrative for firms, including commercial property and construction as office space is at a premium; venture capital funds; investment funds and more sophisticated loan agreements. However, some firms are reporting a lull in the more significant transactional activity which Ireland has been famous for in the last couple of years, with more mid-market deals on the table instead of big-ticket M&A.
Over the last year there was no notable consolidation in the Irish market, with the larger firms, including Arthur Cox, A&L Goodbody, McCann FitzGerald, Matheson, and William Fry, continuing to dominate (see box, ‘Irish firms in the top 25 of the Euro Elite 100’).
‘It is interesting that we went through such a tough economic recession and yet there were very few mergers and very few collapses even though there would be law firms who are absolutely on their knees,’ says one Irish law firm leader. For the moment, however, it is the lateral hire market in Ireland that has been particularly busy over the last year. The standout move came in the form of M&A star Cian McCourt, who Arthur Cox hired from rival A&L Goodbody in April.
‘Cian is a phenomenal operator and one of the top M&A partners in Ireland,’ says Arthur Cox managing partner Brian O’Gorman. ‘He has an incredible reputation in New York and London.’
Additionally, McCann FitzGerald recruited corporate partner Gary McSharry from Arthur Cox last August to head the launch of its New York office, which the firm opened this February. Managing partner Barry Devereux says the office, which focuses on Irish law in corporate and finance transactions, was driven by client demand. ‘We have a number of US clients who will benefit a lot from an on-the-ground presence and the inversion market was and remains buoyant.’
In May, McCann announced the hire of tax partner Alan Heuston, who was director of tax at Irish betting company Paddy Power Betfair, while in June the firm launched its data investigations group, which encompasses around 45 barristers and law graduates focusing on high-volume legal processing work.
‘They do things like discovery on litigation, due diligence on M&A deals and real estate loan book transactions,’ says Devereux.
William Fry also made some notable hires this year, including John O’Connor, who joined the firm from Matheson in June, where he led the technology law and data protection practices, and Derek Hegarty into its litigation and dispute resolution department in January. Hegarty spent four years at Allied Irish Banks where he led the banking inquiry unit, the enforcement legal team and the business banking legal team.
In July, Eversheds announced it was launching its consulting business in Dublin to take advantage of Ireland’s continued EU membership after the firm lost a piece of work for a European client in the wake of the Brexit vote. Dublin managing partner Alan Murphy says extending the offering was something that was under discussion before the referendum took place.
‘It makes sense absent or with Brexit,’ says Murphy. ‘We knew there is quite a substantial market for consulting here, particularly in financial services.’
According to Murphy, there is a possibility that Eversheds may extend additional services from its alternative legal offering into Dublin, including Agile, the firm’s contract lawyer business and Ignite, its legal outsourcing business.
Such a huge increase can be attributed to new factors incorporated into the data, including the rise in the number of new airport imports into Ireland for international leasing activities and corporate restructuring both through imports of individual assets and also reclassifications of entire balance sheets in 2015 – increasing the level of capital assets dramatically from 2014. Additionally, the European Commission called Ireland’s growth over the past two years ‘a remarkable economic rebound’ after being one of the countries experiencing the most severe effects of the financial crisis, predicting that the Irish economy will grow by 4.9% in 2016.
‘There is a lot going on here – obviously Brexit has had a dampening effect, but I don’t think it is going to knock us off our feet.’
Barry Devereux, McCann FitzGerald
Although the impact of the Brexit vote on the Irish legal market has still to be determined, this has not stopped firms from exploring the new opportunities available to them. Says one Irish managing partner: ‘I have been hearing rumours around the place since Brexit has been mooted – people being seen going in and out of other people’s offices.
We know that people have landed into Dublin and are doing the two-day tour and are speaking to lots of different firms to get a sense of the Irish market.’
However, according to Emmet Scully, head of corporate and commercial at LK Shields, any negative effect on the economy will ultimately feed into the legal sector.
‘Professional services follow the health of the economy and while there may be opportunities, I am afraid Brexit has the potential to be far worse for Ireland than better in terms of just the effect on the overall economy.’
Fragile no more
Although there are contrary opinions from law firm leaders on whether activity in Ireland has returned to pre-crisis levels, there are plenty of growth areas, particularly in healthcare and technology, with a growing domestic economy and good availability of capital resulting in sustained activity from domestic and international buyers.
Staying in the EU: Irish Bar admissions soar
Perhaps an unexpected side-effect of the Brexit vote has been the record number of UK solicitors admitted to practise law in Ireland in the first eight months of 2016. According to the Law Society of Ireland, there have been a total of 319 admissions in 2016, an increase from the number of 186, which was released before the referendum on 20 June.
That number is more than three times the amount for the whole of 2015, when the total number of UK solicitors that transferred to Ireland was 101. In 2014, that number was 51. According to the Law Society there were 15,196 solicitors on the roll in Ireland at the end of 2015.
Additionally, since the referendum, the Irish Law Society has received approximately 30 initial queries per day from UK solicitors.
Says Brian O’Gorman, managing partner at Arthur Cox: ‘The Law Society has over 300 UK lawyers registered, approximately 130 from Freshfields [Bruckhaus Deringer] and 100 from Eversheds. And the other 80 or 90 are from a smattering of different firms.’
Other firms reported to have registered lawyers in Ireland include Magic Circle firms Slaughter and May, Clifford Chance and Linklaters, as well as Herbert Smith Freehills, Hogan Lovells, Berwin Leighton Paisner, DLA Piper, Simmons & Simmons and Norton Rose Fulbright.
In a statement in June, Irish Law Society director general Ken Murphy said: ‘This is by far the largest number of transfers of solicitors from the UK in any given year, and we’re only halfway through the year. Of the EU member states, Ireland is the legal jurisdiction most equivalent to the UK. We are both English-speaking, both common law jurisdictions and our legal institutions are much the same.’
There is a consensus among Irish law firm leaders that the increase in admissions is down to UK lawyers who mostly specialise in EU and competition law worried about losing their rights to legal professional privilege, rather than a desire to establish a greenfield offering in Dublin. The right to argue before EU tribunals such as the Court of Justice of the European Union is only afforded to lawyers qualified in an EU member state.
Says O’Gorman: ‘If you look at the lawyers these firms are registering, it’s all their antitrust teams, their global investigations teams – it’s not the sort of people they would be sending to Dublin anyway. It is a separate phenomenon.’
Adds Eversheds managing partner Alan Murphy: ‘It is very easy to be admitted to practise in Ireland. You just need a certificate of admission. The majority of lawyers that are doing that are looking to safeguard their right to appear and represent clients in front of EU institutions rather than wanting to practise in Ireland.’
Other significant deals for William Fry this year included advising the Hammerson/Allianz joint venture in the purchase of Dundrum Town Centre and the Dublin Central Scheme in Ireland’s largest-ever real estate transaction with a deal value in excess of €1.85bn. The firm also advised King Digital Entertainment, the company behind mobile game Candy Crush, on its €5.9bn acquisition by Activision Blizzard in the largest acquisition in the global computer gaming industry in almost ten years.
‘There are a lot of rumours about who might be looking for space in Dublin. It is one jurisdiction that the UK firms have always felt they didn’t need to be in.’
Bryan Bourke, William Fry
‘Last year was incredibly strong,’ says William Fry’s managing partner Bryan Bourke. ‘Unsustainably strong in terms of levels of activity and growth in activity. Areas like investment funds, which trundled on through the crisis continue to perform well; we continue to see lots of opportunity and growth in that area.
‘We’ve come through the worst financial crisis in living memory,’ says Barry Devereux, managing partner of McCann FitzGerald. ‘The rate of growth is steady and is particularly good relative to other big European economies. There is a lot going on here – obviously Brexit has had a dampening effect, but I don’t think it is going to knock us off our feet.
Of course the fundamentals of the Irish economy are strong, but as an open economy a lot depends on what happens in some of the major economies of the world. What happens in the US and the UK has a big impact here.’
‘The short answer is transactional activity is back to pre-crisis levels,’ says Phelan. ‘A lot of that was still international, based where Ireland had a role or significance, but even in the context of domestic Irish clients and small and medium enterprises [SMEs] it has picked up.
‘Back to good-time work’: Irish deal market remains agile
Despite dire warnings from some commentators on how new US Treasury rules are likely to put the brake on Ireland’s flourishing inversion deals market, significant M&A transactions continued in Ireland over the last year.
According to Mergermarket data, in the first half of 2016 deal value has been higher than for the whole of 2015 – standing at almost €18bn compared to the figure of just over €16bn for 2015 – although this was inflated by January’s $15bn Johnson Controls-Tyco merger where Arthur Cox acted for Tyco, while A&L Goodbody advised Johnson Controls. The number of total deals in 2015 was 124, compared to 58 in the first seven months of 2016, five more than the same period last year.
However, William Fry’s annual M&A report, which references key trends in Irish M&A activity, said that the leisure sector, which performed well in H1 2015, has yet to register any new deals this year. Pharmaceuticals, medical and biotech, which in recent years dominated the M&A landscape (certainly in terms of value), has also seen the value of deals tumble.
Despite Arthur Cox and A&L Goodbody – Ireland’s strongest corporate firms – engaging in a healthy amount of M&A activity, the largest Irish transaction over the last year, Teva’s acquisition of Allergan, was carried out exclusively by US firms. The $40bn generic drug buy saw Latham & Watkins act for Dublin-headquartered Allergan, while Sullivan & Cromwell advised Teva on the purchase. Weil, Gotshal & Manges and Cleary Gottlieb Steen & Hamilton assisted on competition issues.
Arthur Cox did act on another sizeable pharma deal, advising Shire on its $32bn takeover of Baxalta alongside Slaughter and May in 2015. Other standout deals for Arthur Cox include the well-publicised £7bn merger last August of Paddy Power and Betfair, which created one of the world’s largest online gambling businesses, as well acting as lead counsel alongside Freshfields Bruckhaus Deringer and Cleary Gottlieb on the acquisition by Irish building materials group CRH of €6.5bn in assets from Lafarge and Holcim in February last year, which was the largest ever acquisition by an indigenous Irish company.
Managing partner Brian O’Gorman comments: ‘There was a deal frenzy in Ireland across private equity, across inversions, across our domestic plc market. That had to end at some point with the laws of economic activity. You layer into that Brexit and the political instability within Europe, as well as the US situation and the uncertainty of that – that all points to a quieter year. But our corporate teams are still busy – there is a lot of mid-market M&A, a lot of reorganisations, a lot of advisory work.’
And, although Irish inversions are inevitably tied up with the US market, O’Gorman points out that the firm is seeing quite a few inversions from Europe into Ireland. ‘We’ve done a Swedish inversion into Ireland, we’ve done a France into Ireland deal – we are working confidentially on a couple of other mergers or inversions into Ireland from the EU. This is a burgeoning trend.’
Aside from transactional activity, McCann FitzGerald secured a number of significant mandates for the financial services sector last year, including advising Allied Irish Banks on its capital reorganisation transaction in December 2015 comprising the conversion of €3.5bn of preference shares held by the Irish government into AIB ordinary shares as well as acting for Bank of Scotland on the sale of loans secured on over 3,000 properties, valued at €3.6bn.
‘In the last year or so the market has certainly stabilised,’ adds McCann FitzGerald managing partner Barry Devereux. ‘We are back to what I would call good-time work. The crisis-period loan book sales are diminishing as banks have shed most of the loans and what we are seeing now is a new round of loan sales where the buyers of those loans – essentially hedge funds and private equity firms from the US – look to enforce security and get control or sell on their loans. That area is very busy for us.’
As a result of the continued uncertainty over Britain’s future relationship with the EU, financial services work will be profitable for Irish firms, in the short term at least.
‘Financial services will be the area we expect will look to acquire most work, in the area of our investment management funds group, in the area of insurance, the groups that look after credit institutions and other licensed firms,’ adds Devereux. ‘Funds is the most portable area, the most mobile and Ireland has a very strong global reputation. We have $3trn of funds domiciled in Ireland. We have a proven track record in this space and it’s easy to relocate here, so that is the one with most opportunities for us.’
‘Commercial litigation and regulatory work has been busy and continues to be busy, and there is more banking and finance work than there would have been even a year ago – and certainly two years ago.’
Ireland’s open, business-friendly environment continues to provide an active setting for significant legal work and foreign investment.
‘We have seen reports about large banks looking to move teams outside London to potential locations including Dublin.’
Catherine Guy, ByrneWallace
Inversion deals are an obvious result of Ireland’s favourable corporate tax structure, but William Fry has also recently been involved in a landmark appeal between Microsoft and the US government in a case which raised important questions regarding the power of US authorities to issue warrants for extraterritorial search and seizure.
William Fry provided Irish counsel for Microsoft, which was challenging a warrant by the US government on disclosure of customer data stored on a server in Dublin.
The US Court of Appeals for the Second Circuit upheld Microsoft’s challenge in July, which was believed to be the first case of a US company challenging a domestic search warrant seeking data held outside the country.
‘Transactions are quieter, but they haven’t fallen off a cliff.’
However, according to Shane O’Donnell, head of corporate and M&A at William Fry, deal activity has been more muted in the first half of 2016 due to a number of macroeconomic factors, including a slowdown in the Chinese economy and volatility in the commodity markets. ‘That said, there have been some significant transactions and we believe that deal activity is likely to improve in the second half of 2016.’ (See box, ‘Back to good-time work’.)
Dublin, Paris, Frankfurt
Yet despite a less buoyant transactional market, there is still plenty of interest around Dublin as a legal services hub, with some law firm leaders commenting that the feeling around the country is similar to the mood ten years ago, when the country was still enjoying the benefits of the economic boom, which lasted from the mid-1990s to the mid-2000s. The sector that is most likely to benefit from a Brexit-related boost is financial services, including investment management funds, insurance and general advisory work as businesses look at contingency planning.
Irish firms in the top 25 of the Euro Elite 100
Irish firms in the top 25 of the Euro Elite 100
| Rank | Firm | Size rank | The Legal 500 rank | Lawyers | Partners | Last annual partner promotions | Offices | Revenue |
| 14 | Arthur Cox | 12 | 29 | 347 | 87 | 3 | 5 | €155m* |
| 16 | A&L Goodbody | 15 | 30 | 322 | 85 | 4 | 6 | €135m* |
| 19 | Matheson | 18 | 31 | 319 | 74 | 6 | 4 | €135m* |
| 20 | William Fry | 17 | 33 | 320 | 79 | 4 | 5 | €103m* |
| 22 | McCann FitzGerald | 16 | 38 | 322 | 70 | 4 | 4 | €145m* |
Source: The Legal Business Euro Elite. See the June edition of Legal Business for full rankings and methodology.
*Market estimate, financial information not provided by firm
And according to Garry Ferguson, managing partner of Walkers’ Ireland office, financial services regulation will be particularly lucrative. ‘You would be hard pressed to find anyone in business or in law practising in Ireland who would have wanted Brexit to happen, but if one was searching for an opportunity within this unfortunate event, financial services regulation is probably it. If you look at businesses, as in regulated financial service providers currently located in the UK, it makes perfect sense for some of them to start planning now for Brexit. Those global institutions that do use the UK purely for passporting services – Brexit, if it’s a hard Brexit, will have a massive impact on their business.’
And Dublin has emerged, alongside the other European capitals of Paris and Frankfurt, as a favourite location for businesses, particularly in financial services, who want to retain a significant presence in the EU.
‘There is a pharmaceutical business looking for space in Dublin and hedging their bets on relocating some of their London staff here.’
Says Graeme Bell, Mason Hayes & Curran’s new London managing partner: ‘The large financial services institutions have been looking at Dublin and certainly thinking about Dublin. Most of them are there already and have some sort of footprint. I know people that have been given the option of: “do you want to go to Dublin, Paris or Frankfurt?”, which seem to be the three options which frequently have been given to people.’
‘I don’t think there is going to be a new London tomorrow, but there will be bundles of activities which will need to be relocated in the short term.’
Liam Quirke, Matheson
‘This is happening on a contingency basis only,’ adds Catherine Guy, managing partner of ByrneWallace. ‘We have seen reports about large banks and large financial institutions looking to move very significant teams outside London and looking at different potential locations, including Dublin.’
However, one Irish law firm leader admits a financial services client has already made a Brexit-related decision to increase resources in Dublin, while another management figure adds: ‘There is a pharmaceutical business that is looking for space in Dublin and they are hedging their bets on relocating some of their London staff here.’
And Dublin is an attractive spot, maintains Peter Stapleton, an investment funds partner at Maples and Calder: ‘Irish lawyers have a strong set of legal skills suited to advising non-EU entities on using Ireland as a gateway to the EU markets. There is a wealth of knowhow and expertise built up on advising US multinationals and global financial services entities on the legal, regulatory and tax issues that arise in this context, which cannot be adopted by other legal hubs overnight.
In a Brexit context, if UK firms do need to look for an alternative legal hub, Ireland has further key advantages in a shared timezone, language and, most importantly, a shared common law legal system.’
‘If you just establish an office by sending someone over, they don’t have that local knowledge or recognition.’
Alan Murphy, Eversheds
But despite a property boom during the Celtic Tiger years, Dublin doesn’t have the infrastructure of Paris or Frankfurt and is a relatively small city by comparison. Office space is at a premium, and although there is currently a rapid progression of construction planned for the next two years, in the short term this could act as a deterrent for any business looking to move larger numbers of staff.
And according to Damien Barnaville, a partner in the financial services group at LK Shields, Ireland will also need to look at its income taxes if it wants to compete with other European capitals.
‘If Ireland wants to compete with France or other jurisdictions it will possibly have to do something around its income taxes, because one of our downsides is that we are relatively high on the tax scale whereas France is talking about bringing in special tax breaks. We will have our budget in October where the tax policy will be rolled out. We don’t have that long to find out whether the government will bring in a short-term policy initiative.’
Nevertheless, the post-euro development of Europe’s leading professional services centres has seen Frankfurt and Paris continually under-shoot expectations, while Dublin has steadily gained ground, in part thanks to strong transatlantic positioning with the US, UK and mainland Europe. It was notable, in Legal Business‘ 2016 Euro Elite report, which charted the top 100 independent practices in the European region, that Dublin’s leading law firms were so strongly represented. Five of Dublin’s leading firms, were in the top 25 firms, while Ireland’s market leaders are among the most profitable law firms across the region.
‘If Ireland wants to compete with other jurisdictions it will possibly have to do something around its income taxes.’
Damien Barnaville, LK Shields
Dublin has also regained a prominent position as a global financial services hub since the banking crisis, as noted in the closely-watched Global Financial Centres Index, in 2016 ranking Dublin at 39th place out of 86 financial centres, a rise of seven places and not far behind Paris in 32nd place. PwC’s financial services attractiveness indicator, which was published in August, ranked Dublin as the second-most attractive European finance hub behind London thanks to strong legal rights, ease of doing business and the local talent pool. PwC concluded Dublin was strongly placed to secure investment post-Brexit from the financial services industry.
Says Liam Quirke, chair of Matheson and the firm’s head of Brexit: ‘I don’t think there is going to be a new London tomorrow, but there will be bundles of activities which will need to be relocated to Europe in the short term. There are not necessarily opportunities, but there will be winners and losers.’
Moving in
But it is not just big business that is taking a closer look at Dublin, with plenty of rumours of UK and international law firms considering their options in the Irish capital.
Says Bourke: ‘There are a lot of rumours about who might be looking for space in Dublin. It is really hard to call it at this point. It is one jurisdiction that the UK firms have always felt they didn’t need to be in.’
‘UK firms either won’t come or they will set up a greenfield operation and send a few partners over, probably in funds or financial services.’
Brian O’Gorman, Arthur Cox
Yet there are some UK law firms in Dublin, most notably Eversheds, which re-branded local practice O’Donnell Sweeney in 2011 and is Ireland’s only full-service international law firm. DWF and DAC Beachcroft also have greenfield sites in the city, although for now these are largely insurance-focused practices. DWF, which recently recruited corporate partner Ross Little from William Fry, is looking to bulk up in the City, exploring opportunities across sectors including financial services, food and hospitality.
Says one managing partner: ‘It is inevitable that there will be some entrants to the Irish market. I would be fairly certain some mid-tier firms will set up in Dublin.’
Although Pinsent Masons is one firm long known to be looking at a Dublin base, which would complement its existing office in Belfast and provide a full UK/Ireland offering, Irish managing partners are divided as to whether a greenfield site, a full merger or a formal strategic alliance is the most likely option for UK firms.
‘If I were a betting man, I would say UK firms either won’t come or they will do it by setting up a greenfield operation and they will send a few partners over, probably in the area of funds or financial services,’ says Arthur Cox managing partner Brian O’Gorman.
For Alan Murphy, managing partner of Eversheds’ Dublin office, the best option for UK firms is to make sure local talent is on board: ‘The huge advantage of our model is that an associate from the very beginning will have a high-quality local practice with an indigenous client base. Whereas if you just establish an office by sending someone over, they don’t have that local knowledge or that local recognition.’
John White, managing partner at Beauchamps, argues that strategic alliances are more likely. ‘Law firms are well used to using vereins and structures where you don’t have a full merger but you have got a family of firms that all adhere to single policies and service delivery and styles, and share clients on a mutually beneficial basis. I would have thought that would be a method employed in Dublin.’
‘Law firms are used to structures where you don’t have a full merger but you have a family of firms that adhere to single policies.’
John White, Beauchamps
This is an unlikely route for top Dublin firms, however, which will be reluctant to cut off lucrative referral networks to do business with just one firm.
Says a partner at a leading Irish independent: ‘We aim to be best friends with all of the top London and New York firms. If we were to tie up with a Linklaters or a Freshfields, we would be getting more instructions from them but ruling out an enormous amount of instructions from other firms. I can’t see a leading Dublin firm willing to tie itself to a strategic alliance.’
It may be difficult to predict the true impact of Brexit on the Irish legal market when the nature of Britain’s relationship with its European neighbours remains undecided. More certain is that Ireland’s economy, finally flourishing and no longer in a fragile recovery phase, will likely take a hit as a result of the UK’s decision, particularly in the export market and the SME sector, which has much greater exposure to the UK market than the larger corporates.
Irish law firms – specifically the larger ones – are well-placed to benefit from the short-term uncertainty caused by Brexit, specifically in the advisory space and the area of financial services and funds work. Longer term, the picture is less clear.
O’Gorman remains optimistic for now. ‘Dublin as a financial centre will inevitably gain from Brexit – the extent to which it gains is hard to tell, but undoubtedly there will be some level of exodus from the City of London. We have fantastic people, we provide a great service, we have very strong relationships with our clients and we operate in a jurisdiction that is open and business-friendly. That gives us a very strong platform.’ LB
kathryn.mccann@legalease.co.uk
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