The interview with Patricia Gannon was originally published as part of the article Meeting of Minds: The 2015 CEE Legal Matters Expert Summit in CEE Legal Matters January 2016 Special Issue
CEELM: Last year the subject of Chinese investment was raised, and it was considered that maybe it was perhaps more theoretical than actual, with the exception of a few specific deals. But what about this year? Are you all seeing more Chinese investment?
Patricia Gannon: We've seen some on the power plants and the infrastructure side and the large state-owned companies, but we haven't seen anything beyond that. We've heard in Croatia and maybe in Slovenia there's interest in boutique vineyards and hotels, but that's about it. Certainly not the vast hordes we were expecting. That was the view on the ground, that there was going to be the great invasion, but we haven't seen it.
CEELM: Patricia, I know your firm is strong in the former Yugoslavia and the Balkans. How are things going for you in Bosnia or Croatia, for instance?
Patricia Gannon: Well, Bosnia is not doing too well to be honest. It's dysfunctional and very difficult to do business there with the entities and local power organized as it is. We're in both parts of the state with offices in Sarajevo and Banja Luka, so we've managed to balance it out a bit. We've not grown in size last year, but we've done some interesting deals, mainly in the Federation, while the year before it was mainly in Republika Srpska, so it depends very much from year to year, depending on the type of investor that comes in. So we're maintaining our position, but not growing much.
Croatia is growing nicely, but the big hit for us in terms of expansion is Slovenia this year. We opened our office there about 10 months ago, and it's a hot market – probably hotter than any other market we work in right now and we have a great team so its doing better than expected.
Denise Hamer: What sort of matters are you working on in Bosnia and Serbia and Kosovo?
Patricia Gannon: In Serbia last year we worked on Mid-Europa's acquisition of SBB, and SBB consolidated the cable market in Bosnia, so that meant another 20 perimeter acquisitions, so that kept us busy in the Federation. Last year we worked on the financing of a thermal power plant in Srpska. They're not mega markets, to be honest, and I don't see them growing very fast, given the instability, but when you have not a huge amount of competition, and you do have clients interested, it's clearly an opportunity for a regionally integrated firm like ours. What we do see across the board is a huge amount of regulatory work. There's not a day goes by that we're not asked to do regulatory work for multiple markets. It may not be high value transactions but it's bread and butter, and for local markets like ours that's good, stable work.
In Kosovo we've seen privatizations, we've seen large RE investments, we've seen disputes between companies from Serbia going into the local courts. We've been welcomed there, from the political side, the bar association, other lawyers; because there are so few practitioners down there it legitimizes the market when you've got reputable practitioners coming into it. It's still early stage of rule of law, and in every sense, and I think the opportunities are still limited, so it's not without risk, but I don't think there's a market here today that doesn't have risks of various sorts. It's about finding the clients who are comfortable with that.
CEELM: Simon, you have an interesting perspective on the region because you're based outside of it, in London. What are the main markets here, from your perspective?
Patricia Gannon: I think the challenge is that our markets are just too small, and the returns are too small at the moment. There's loads of money in the world – the world is full of cash – but it's just too complex and cumbersome doing the deals in our markets, so what we saw in particular is consolidation of businesses, cross-border, at least in the former Yugoslavia, absolutely makes sense. Each of those markets are too small on their own, but put them together in a decent business, with a private equity buyer, you can flip that for very nice money, which we saw with the Mid Europa story.
In the second part of our conversation, we turned to the subjects of law firm management and the changing nature of CEE's legal markets.