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Eighteen months ago, Dublin law firms were swamped with business. Young recruits were in demand. Salaries soared. Deal lawyers were lucky to get home before dawn. “We were maniacally busy,” says Brendan Cahill, a partner at Dublin’s William Fry. Things haven’t been quite the same since the global slowdown struck this tiny country. Of 40 initial public offerings predicted for 2001, not a single one transpired. Ambitious firms that swelled with the tide have had to scale back. Associate compensation is being frozen. Hiring is on hold. And, Cahill notes, “there are certainly fewer cars in the car park in the evenings.” It’s been quite a comedown for a legal market that underwent extraordinary changes as the Irish economy progressed through the 1990s. Once dependent on heavy industry and agriculture, Ireland was known as the “poor man of Europe,” whose major export was labor. By the 1990s, the country had transformed itself into the darling of the EU. It benefited from generous subsidies, which it used to kick-start education and the development of infrastructure. It also attracted record volumes of U.S. investment. Hardware manufacturers and software developers such as Compaq Computer Corp., Intel Corp. and Microsoft Corp. were lured by Ireland’s corporate tax rate — the lowest in Europe. As these companies headquartered their European operations in Dublin, property prices soared, and the retail sector took off. The country spawned its own IT sector, leading to the creation — and Nasdaq listing of — companies like the online education resource provider Riverdeep Group plc and the software developer IONA Technologies PLC. Throughout the boom, Ireland’s law firms kept pace with the political and commercial establishment. This country of only 3 million people is home to some 6,500 lawyers. During the last five years, the top five Dublin-based firms — A&L Goodbody; Arthur Cox; Matheson Ormsby Prentice; McCann FitzGerald; and William Fry — all approached or broke the 150-lawyer mark. With their greater capacity, these firms are usually tapped to work on the largest transactions. Still, a strong second rung of firms — including Beauchamps; Dillon Eustace; Eugene F. Collins; and Mason Hayes & Curran — compete for domestic and international work. The top Irish firms are well organized and cosmopolitan — many partners have worked at New York or London law firms. With the revitalization of the Irish market so dependent on American investment, courting U.S. counterparts and clients became standard practice for the managing partners of Dublin firms. Several of them opened branches in the United States. A&L Goodbody has offices in New York and Boston; McCann FitzGerald and Arthur Cox have set up in New York; Matheson Ormsby is on the ground in Palo Alto, Calif. As the Dublin firms became desperate for talent during the 1990s, they signed on lawyers as fast as those lawyers could graduate. Partner-poaching and lateral hiring, almost unknown previously, became regular facts of life. The firms of all sizes that were stretched to capacity in 2000 have more time on their hands now. But they insist there is still plenty of work. While U.S. investment and a rich lode of dual listings on the Irish and New York Stock Exchanges have fueled record recruitment, salaries and partner profits, they have never been the only sources of business. Transactions have proceeded, though on a more modest scale. In addition, businesses are restructuring their commercial practices and safeguarding intellectual property. And the government’s commitment to infrastructure improvement has continued to create legal and business opportunities. So, despite the prospect of recession, many lawyers claim to be far from despondent. “We’ve come an incredibly long way in the past 30 years,” says Declan Moylan, managing partner of Mason Hayes & Curran. “We’re never, never, going back to how things were then.” One benefit of the slowdown has been an easing up on human resources. At the height of Ireland’s success, it had lost its once-substantial pool of well-educated workers. “We’d effectively reached saturation point,” says Moylan. “Companies would come to Ireland, attracted by the promise of a highly skilled workforce, but there was no one left to hire.” That shortage extended to the legal market. The practice area taking the greatest hit has been equity-driven capital markets. “There have been no domestic or U.S. listings of Irish companies for some time,” says William Fry partner Cahill. In fact, the last IPO in Ireland, for software provider Datalex plc, took place in October 2000. “Even that was tough to get closed,” says William Fry partner Myra Garrett. Other corporate areas, like mergers and acquisitions, have slowed but hardly ground to a halt. “It’s true that there have been no IPOs in 2001,” says Andrew Doyle, head of private equity at Matheson Ormsby Prentice. “But on the M&A side, there have been some substantial deals. … “The big stuff has actually been pretty consistent,” says Doyle. Still, the nature of many deals has changed. “There is a different type of activity,” says Moylan of Mason Hayes. “We see a greater volume of smaller-value transactions and few larger-ticket transactions.” These include private deals like CR2 Ltd.’s $12.9 million acquisition of Interlink in June 2000. And lately, some other trends have emerged. “We’ve seen a number of joint ventures and strategic alliances,” says William Fry’s Garrett, citing Riverdeep’s strategic alliance with online resource supplier Harcourt General Inc., in October, among others. “These are the first strategic alliances we’ve handled in years.” Work for technology clients is also evolving. “These companies have lots of compliance issues and day-to-day legal requirements,” says Garrett. While just as many startups are looking for funding, the money is not flowing as freely — though it has not dried up completely. In June 2001, for instance, software maker Cape Clear Inc. won $16 million in a round of financing led by California’s Accel Partners, and Benchmark Capital invested $20 million in Openet Telecom in November 2001. Nevertheless, the focus of many potential funders has shifted. “The venture capital firms already have huge portfolios of investments that they haven’t been able to off-load, either through trade sale or through IPOs,” says Garrett. “The tenor of the work for the VCs has substantially changed. They’re looking at putting anti-dilution measures in place, and, generally, following the money they’ve already spent.” While clients have needed advice on outsourcing and downsizing, no law firms have yet laid off any lawyers themselves. Moylan of Mason Hayes doesn’t expect firings at his firm or others. “We’d anticipate lighter hiring patterns, a reduction of starting salary levels and slower rates of pay increase,” he says. Some firms have already taken protective measures. “We’re recruiting less,” Arthur Cox managing partner Eugene McCague admits. “The priority now is to look after the lawyers we have.” While the pain has been widespread, the downturn has not had an equal impact. The 38-lawyer firm Dillon Eustace, which specializes in investment fund management, claims to be almost immune to the economic vicissitudes affecting others. “We don’t have the same kinds of exposure as the rest of the market,” says partner Andrew Bates. Dillon Eustace is ranked by the financial data publisher Fitzrovia International plc as the top adviser to Dublin investment fund managers. The firm’s other areas of concentration include insurance litigation, securitization and financial services. And while there are U.S. elements to these areas, most of the firm’s work for clients outside of Dublin comes from Europe and the Far East. Andrew Doyle of Matheson Ormsby also predicts growth for his firm in a number of areas. Doyle says his firm’s investment funds and financial services practices, like those of Dillon Eustace, were busier in fall 2001 than they were in the year before. Securitization and debt repackaging are also increasing in volume. And the government’s commitment to infrastructure improvements, such as the construction of a ring road around Dublin and a light-rail project to ease congestion in the capital, are “a given, irrespective of the state of the economy,” says Matheson partner Tim Scanlon. Insolvency practitioners, of course, are positioned to do well in the near future — although as of December few major Irish companies had filed for bankruptcy protection. In addition, U.S. clients with plants in the Republic, such as Intel, Microsoft, 3Com Corp. and Dell Computer Corp., have not made significant reductions in their workforces. Gateway Inc., on the other hand, has closed its Irish operation. “Companies are inevitably looking at their employment arrangements,” says Edward Evans, managing partner of the Dublin office of Landwell. “There are workforce reductions and, inevitably, disputes [around labor issues] are bound to arise.” The change in Ireland’s fortunes is not likely to compel many newcomers to enter the market. Even when the economy was at its healthiest, and international law firms were at their most expansionist, few were eager to establish a full-time presence in Dublin. The U.K. construction firm Masons has a two-partner office in Dublin and is well situated to pick up work arising from the government’s infrastructure development. Cleveland’s Squire, Sanders & Dempsey has a joint venture with Brian O’Donnell & Partners, a small offshoot of William Fry. Dublin firms are used to dealing with the major U.S. and U.K. firms, and outsiders regularly appear in Irish corporate league tables. “Pick any one of the top 20 U.S. firms, and we’ll have worked with them in the past year,” says A&L Goodbody partner Michael Greene. According to Mergermarket tables for 2000 and for the first three quarters of 2001, several U.S. firms have advised on the largest Irish M&A transactions. Those firms include Brobeck, Phleger & Harrison; Hale and Dorr; Cahill Gordon & Reindel; Cleary Gottlieb Steen & Hamilton; Cravath, Swaine & Moore; Davis Polk & Wardwell; Shearman & Sterling; Skadden, Arps, Slate, Meagher & Flom; and Sullivan & Cromwell. So far, none of the U.S. firms have seen any logic in opening in Ireland. Only Sullivan & Cromwell, Cahill, and Shearman advised on more than a single transaction each during the given time period. Still, there were rumors around Dublin in December that one U.S. law firm was on the prowl for an Irish partner. Such news doesn’t particularly thrill members of the local market. “I personally would not like my firm to become a ‘badged’ affiliate of a U.S. law firm,” says one Dublin managing partner. “At the moment, our work comes from too many different sources to make any kind of exclusivity seem like a worthwhile option.” A more real threat to the status quo is, perhaps, the prospect of accounting firm affiliates. Currently, only one is up and running: PricewaterhouseCoopers opened a law firm, now called Landwell, in Dublin in early 1999. With only 27 lawyers, managing partner Evans admits that it has some way to go before being regarded as a major transactional player. But he insists that membership of a global organization affords the office access to a nexus of international clients. (Irish regulations forbid the establishment of multidisciplinary partnerships.) But for the meantime, law firms of all sizes are moving as cautiously as their clients are. When the global economy (and, most importantly, America’s fiscal health) improves, Ireland’s legal profession is poised to respond. The country’s stunning growth in the past decade has built a steep learning curve for lawyers. So, in its own way, will the downturn. Related Chart: Biggest Irish Firms

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