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Russia is continuing to prove a challenging location for U.K. law firms struggling to occupy lawyers against the backdrop of an M&A market that has seen deal volumes nearly halve over the last year.
After Simmons & Simmons last month became the first major international firm to pull out of the market altogether following a partnership vote, partners at other firms have admitted that cracking Moscow is proving more difficult than many would have thought.
Simmons' decision to close the office and lay off staff two years after entering the market was attributed by the firm to the drop in structured finance activity, which the office had initially been built around.
Despite the closure coming as a surprise to many in Moscow, Simmons' position is indicative of the problems that many firms have faced, with Clifford Chance, Allen & Overy, White & Case and Denton Wilde Sapte among those reducing headcount in the region over the last year.
Figures compiled by Mergermarket for Legal Week highlight the Russian M&A drought, with just 227 deals with a total value of 22.2 billion euros ($33 billion) in the year from Nov. 1 2008 to Oct. 31, 2009. This compares with almost twice as many deals -- 419, worth a total of 80.7 billion euros ($119.8 billion) -- the previous year.
One Moscow-based partner at a top 10 U.K. law firm commented: "I have a lot of respect for Simmons, but it is getting harder and harder to break into the Moscow market."
Lovells Moscow managing partner Oxana Balayan said: "The market is really picking up, but with a lot of pressure on pricing it may be difficult for some law firms' Moscow operations to remain profitable."
Herbert Smith Moscow managing partner Allen Hanen said: "There was a time over the summer when things seemed slower, but that has changed in the last weeks. We are beginning to see new activity and new mandates coming into the market."
Separately, a group of local independent firms in the CIS, led by Russia's Egorov Puginsky Afanasiev & Partners, are teaming up to take on international firms in the region.
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