While volatility on the world's share markets has had an impact on the banking and finance practices at law firms, there are still opportunities for work. Justin Whealing reports.

Banking and finance lawyers are a pragmatic lot.

Having technical skills comes with the territory of operating in a legal area where you spend as much time looking at balance sheets as you do time sheets.

However, the suite of skills a banking and finance lawyer utilises is also dictated by circumstance. When the economy is humming, everyone wants to be a capital markets lawyer. When the economy is down, the insolvency and restructuring practice groups kick into gear, as Henry Davis York can attest to.

So, with a buoyant M&A market for most of this year (which is worryingly starting to show signs of a slump), a capital market that is more bear than bull and the eurozone debt crisis, which is starting to spark up at a time when the balance sheet repair work that kept lawyers busy during and after the GFC is starting to come to a close, where are the finance and banking lawyers to be found?

"The current balance of my practice is still roughly split between 50 per cent of my time on equity capital markets work (ECM) and 50 per cent on M&A," says Tony Sparks, an ECM partner with Allen & Overy in Sydney. "In this market, that is more than I would have expected on the ECM side."

The even split between Sparks' M&A and ECM practice is interesting given his former colleague at Freehills, the firm's ECM co-head Philippa Stone, told Lawyers Weekly a few weeks ago that she is doing more M&A work, compared with two years ago, due to the state of the market. Sparks says despite the ECM market being sluggish, there are still signs of life that are keeping ECM lawyers looking at a glass half-full rather than half empty.

"I have one IPO on, two underwriter roles, a related party underwriting and a cornerstone investment," he says. "That is the suite of work that would be similar to Freehills, but what is different is that much of it is coming offshore."

Sparks adds that while the ASX is not seeing the volume of large IPOs that were being predicted this time 12 months ago, recent floats such as the $300 million Trade Me IPO is keeping investor interest burning, although it might be a dull flame.

"The Trade Me float clearly illustrates that even in difficult circumstances there is investor interest on the right sort of float," he says. "There are certainly potential issuers that will need to come to the market at some point soon because there are regulatory requirements for them to do so, and there are a number of private equity funds that haven't been able to exit their investments because the markets haven't been in the right space for them to exit."

While banking and finance lawyers are hoping for those big ticket IPOs to come to the market, in their absence they must expand their skill-sets to get work and keep the billable hours ticking over.

"There is renewed interest in hybrids and convertibles, which is an area where both corporate ECM lawyers and banking lawyers have skills that are relevant," says Sparks. "To the extent to which we do see capital raising in that area, that will keep ECM lawyers busy."

However, at a time when gambling has become a political issue, Sparks wouldn't bet the house on capital markets turning around any time soon.

"If equity remains expensive and bank debt is hard to come by, then issuers will need to look at other alternatives," he says.

It's not just about the banks

While this area of the law is viewed as being fairly staid, with deep relationships between the big financial institutions and their preferred law firms being well entrenched, a partner at Johnson, Winter & Slattery (JWS) is trying to forge new connections.

Matthew Allchurch was a partner at top-tier law firms for 19 years, having been a partner at Clayton Utz for nine years and a partner at Allens Arthur Robinson for ten.

In May this year Lawyers Weekly announced he was leaving Allens to join JWS and that he wouldn't be taking his big banking clients, such as the Commonwealth Bank, Deutsche Bank, ANZ and the Macquarie Group, with him.

"My focus now is a very different focus to what I had at Allens," says Allchurch. "For me, I am building something that will hopefully be an important part of the firm."

What Allchurch is trying to do is build a top-end debt finance practice that acts for borrowers, meaning he will need to forge a new client base that eschews his previous connections with banks and financial institutions.

"I could see a gap in the market for a firm that was focused on acting for borrowers and JWS was the standout firm for me to join," he says.

Couldn't you do that at Allens, Matt?

"Not really, no," he says. "Allens' banking practice has tremendous relationships with banks and financial institutions operating in Australia, so the focus of that practice will be on acting for banks."

It is a brave move for Allchurch and JWS to take a punt on a new strategy in a time of market uncertainty.

In October Ernst & Young released its Global Confidence Barometer Report, which surveyed 1000 corporate executives - 110 of which came from Australasia.

According to the report, corporate Australia is battening down the hatches, not loosening the purse strings. Only 14 per cent of Australasian respondents felt positive about growth prospects in the global economy - well down from the global response of 44 per cent. Nearly one third of Australasian respondents also said they were focused on preserving capital.

Despite a general feeling of doom and gloom, Allchurch says he is confident that clients will come through the door.

"They find it appealing [prospective clients] and they understand that the firm has a different business model to the major firms," he says.

Allchurch is banking on the fact that there is as much money to be made, and work to be had, by sitting on the other side of the deal table.