If for companies the financial turbulences have brought about a compression of business, business lawyers say they have a work front, reveals George Stoica in Saptamana Financiara.

Law firms, considered among the finest sensors with which it is possible to measure up performance in the business environment, state that the effects of the international crisis, devastating on external markets, are only felt in Romania under the form of a more cautious attitude of investors, and not of stagnation or suspension of projects. The market manifests a slowdown in real estate transactions, shares issuance and project finance, but in the fields “Mergers and acquisitions”, “Corporate”, “Litigation” and “Energy”, the activity does not seem to be affected at all.

Even though in the last four months not too many new transactions were carried out, in comparison with the situation presented by Saptamâna Financiara at the end of the first semester of 2008, lawyers are optimistic. The explanation is simple: the economy was insignificantly affected by the external crisis, the only visible effects being only the postponement of certain projects as a result of “a rise in the price of money” for investments and the prudence of investors. “Small investors (or speculators) have almost disappeared completely, and the players who are left have become much more cautious, which led to a diversification and rise in the degree of complexity of the legal services”, maintained Cosmin Vasile, a Partner in Zamfirescu Racoti Predoiu.

Obviously, the most tried domains were real estate and finance. “In real estate, banks and investors become more selective, the negotiation position between financing parties/investors is re-balanced, transactions last more and are more expensive. In general, one can notice a higher degree of caution of the ones who bring the finance. Money have become very expensive now”, added Daniel Badea, Managing Partner at the law firm Badea Clifford Chance. This idea is also supported by the representatives of the Bucharest office of the global law firm Salans, who have mentioned for SFin that “a slowdown in real estate transactions and, especially the transactions involving the acquisition of immovable assets is being felt”.

But even here things should be further analyzed. On the one hand, there are projects that go ahead, new ones are being announced, lands are being bought all over the country. One of the clients advised by the law firm Voicu & Filipescu is undergoing this stage and contemplates a new land purchase. The lawyers from Biris Goran also state that the demands in the real estate field have not dropped. “We have new transactions, mandates of high values. We notice though delays in finalizations because of the difficulty in obtaining financing”, explained Gabriel Biris, the coordinator of the law firm. On the other hand, there are many projects on sale and already investments projects have appeared which are interested in purchasing full portfolios. “In the last three weeks we met with several investments funds interested in purchasing the portfolios of certain companies facing difficulties. Realtors facing problems will have the obligation to sell, probably for a lower price, and transactions will have a lower magnitude”, added Gabriel Zbârcea, Managing Partner of law firm Ţuca Zbârcea & Asociatii.

Transactions placed in “stand by”

Almost all law firms interviewed by SFin have admitted that there are projects commenced before the start of the financial crisis, that have “frozen” once the crisis has taken proportions. Certain transactions have been placed in stand by, others have been simply abandoned, although big amounts of money are involved. “Certain real estate projects have «frozen» because they are simply not feasible anymore on account of the high financing costs. Also, in the field of M&A, many pre-agreed conditions between the parties must be re-negotiated because of the crisis”, stated Markus Piuk, equity partner with the regional firm Schoenherr. “We have delayed/frozen transactions because, for instance, the buyer (an investment fund) failed to deposit the advance money requested for the commencement of the due diligence procedure, because, in its turn, the fund has postponed the listing of another already acquired company due to payment conditions. We also have a transaction in which we have conducted the due diligence procedure and the purchaser has withdrawn because the financing bank (a foreign bank) has frozen its financing”, attorney Gabriel Biris also admitted.

Such transactions with extremely high values were also in the portfolio of the law firm Voicu & Filipescu. “We have represented the Purchaser in an M&A transaction (mergers and acquisitions – editor’s note) with a value exceeding 100 million Euros which was started-off in the first part of this year and put on hold in the last”, added Mugur Filipescu, Managing Partner at Voicu & Filipescu.

For Badea Clifford Chance, the first serious signs of the crisis have appeared on international markets more than one year ago and certain transactions which were more sensitive on international markets have been put “on hold”. There are also several IPOs and big real estate projects which, most likely, will not be taken to fruition in the next 12 months. “In general, companies are facing difficulties in obtaining financing from banks for their new projects or for continuing existing ones, and in these situations they may either opt for freezing the respective projects for a while, or look for alternative sources of financing such as private equity, joint-ventures, mezzanine finance, but at the same time, these financing alternatives are ever more difficult to access”, explained lawyer Daniel Badea.

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