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Market Analysis: Insolvency & Restructuring


With the onset of the GFC a couple of years ago, there were hopes in the insolvency and restructuring area of a major upturn in work. As it happened, this has not transpired as predicted. There has been a steady stream of work in the space, and certainly it's been a more profitable area than many commercial and property practices over the past few years, however there has not been the spike in work that many were expecting. Banks have been generally reluctant to liquidate assets because of concerns about their underlying value, and for at least a couple of years there, the ATO allowed leeway for a number of businesses on the brink. This has all resulted in less legal work in the field than expected.

There has been the usual merry dance around panel appointments, and some movements resulting from the desire of law firms to get on, or retain, certain panels. None of this is new, just more of what we've seen over the last few years. There continues to be a tension between lawyers needing some bank relationships to ensure a constant flow of secured creditor work, as well as being able to offer work back to insolvency practitioners, however on the other side being conflicted out of taking big jobs for insolvency practitioners when one of your panel banks may be involved on the other side.

This has caused some movement of debtor-based insolvency practices over the last 12 months. Partners being increasingly conflicted out of major insolvencies has led to some heading over to firms who are not on these major bank panels.

For top tier - now international - firms there has been a need to balance incoming international restructuring / insolvency from the global network, while losing out to the mid-tier firms on more and more of the secured enforcement work. This is particularly the case with the big retail banks, who see more value in moving towards the flexible charge-out structures and lower rates of national firms.

We will likely continue to see a deepening rift between practices focused on large scale restructuring and cross-jurisdictional insolvency matters, and those focused on secured creditor enforcement and local insolvency practitioner business, largely in the mid-tier. Movement of partners over the next few years will reflect this split.