The business law market, where large and medium-sized companies cumulate receipts of around EUR150 million annually, stagnated at best last year, according to the lawyer, who does not rule out a possible overall decline.
The ten largest firms, which generate over half of the EUR150 million, managed to maintain their receipts or even grow as they succeeded in adjusting to changes.
“It takes adaptability more than anything else. Legal practice is anti-cyclical. If funding decreases, conflicts are on the rise, if litigations decline, transactions go up. Hence, irrespective of the environment, lawyers survive anyway, but it is not the same ones that do. It takes adaptability to respond to emerging changes in due time,” Florian Nitu told ZF.
In the past five years, law firms have felt systemic shocks of the Romanian economy somewhat later. The main challenges lawyers have coped with came from the halted real estate boom registered until 2008, followed by the rise and fall of renewable energy projects. Investors have turned cautious, no new money has entered the market and conflicts turned into litigations have replaced investment projects.
According to Nitu, contrary to the general view, the real estate project area generates more money with fewer deals. In the past, in 2007-2008, liquidity was high and risks were lower, meaning it took less expertise from lawyers for the respective deals. Now, liquidity is very low and risks are higher, hence lawyers’ work increases and costs are bigger.
“Litigations and arbitrage cases have and will offset for lawyers the low number of projects in the M&A area, as well as the shortage of new capital on the market, but they alone cannot bring growth at market level,” said the lawyer.
In the current context of transformation, large firms grew during the crisis as well. However, market trends hurt firms with a low number of clients, which were unable to adapt, says Nitu.
His firm posted figures similar to those of 2012. Meanwhile, the market contracted further, a tendency that started in 2009. In 2011, Popovici Nitu & Asociatii reached revenue of EUR12.8 million, followed, in 2012, by a 10% increase, according to previous information held by ZF.
The improvement came on costs optimization and client retention. Outsourcing was the main move.
Pressure on fees, where competition is most strongly felt by law firms, pushed for certain changes in the law firm’s tariff policy as well. “There are moments when cash is dwindling, pushing us sometimes to accept temporary cuts in receipts from clients”.
Florian Nitu was involved in some of the biggest privatization projects in Romania and participated in the drawing up of several important laws for the current economic environment.
The firm he runs together with Ernest Popovici, a lawyer part of the group that set up business law in Romania starting the ‘90s, currently has 70 lawyers, including 10 partners.
(English version by Catalina Apostoiu)