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Will demand for corporate law expertise grow, decline or simply stay the same in 2023?

The ³ÉÈËÓ°Òô GLP Index pulls together the latest datapoints to provide some powerful predictions on the future of corporate law.

The huge surge in demand for corporate lawyers fell off a cliff in 2022 - but it's predicted to rebound over time, remaining relatively stable until at least Q1 2024.

That's according to the latest GLP Index, which pulls from hundreds of datapoints to predict demand for legal expertise across multiple practice areas.

The GLP Index makes clear that demand for corporate law has been in steady demand since 2016, with a noticeable spike in Q3 2017 and again in Q3 of 2021. The latter surge in demand can be attributed to pent up demand from the pandemic, which brought most corporate law activity to a grinding halt. Inward mergers and acquisitions (M&As) went up 60% from 2020 to 2021, for example, while outward M&As rose 49%. The number of IPOs also skyrocketed from 2020 to 2021.

Interestingly, the index predicts that, despite the current challenges facing corporate law, demand for the practice area will increase organically in the years ahead, reaching the same level of stability seen in pre-pandemic times.

When looking at growth on a year-on-year basis, corporate law grew by 120% in 2021 when compared against a lacklustre 2020. By looking at historic data alone, our GLP Index predicts corporate law to experience -22% growth in demand in 2022 when compared against 2021. In 2023, this dip in demand is expected to stabilise, with a predicted 1% growth.

Scroll down for in-depth research and analysis on the key trends driving change across corporate law.

Corporate law is predicted to generate 16% more work in 2022 than in 2021

M&A activity involving UK companies played a crucial role in our GLP Index for corporate law.

Data provided by the Office of National Statistics (ONS), which fed into our index, shows M&A activity dipped during the height of the pandemic then continued to climb upwards in a similar fashion seen in previous years.

ONS data recorded 789 inward M&A transactions, more than three times the number seen during 2016. The cumulative value of inward M&A transactions rose significantly, reaching £76.7 bn after a comparatively poor 2019 (£55.6 bn) and 2020 (£19.2 bn). However, this is a stark contrast from the numbers we saw in 2016, at nearly £190 bn.

ONS data for 2021 also reveals that the number of outward M&As reached its highest point in the last six years, at 311. After continued growth between 2016 and 2018, outward M&A transactions decreased in 2019 and 2020. ONS estimates the value of these deals reached £45.9 bn in 2021, nearly three times the growth we saw in 2020.

2022 is proving to be a different story. Various macro-economic issues, such as the inflationary pressures stoked by the Ukraine situation and central banks’ tightening of monetary policy have combined to impact equity and debt markets across the globe and this has had an impact on corporate transactions, including M&A, as in any recessionary scenario.

Despite the economic difficulties on the horizon, there is a quantum of available cash and many long-term structural reasons why transactions will continue even if there is a dip in activity while the recessionary stage of the cycle plays out.

While higher interest rates and the risk of a recession may dampen activity, it may also create opportunities for some. With listed companies’ share prices being depressed and a weakened sterling, this may present opportunities for cash rich overseas buyers.

Private equity has had an important impact on M&A transactions in recent years. There is some speculation that rising interest rates will make private equity less competitive when bidding for assets given the tendency for such deals to be financed by debt.

This may account for the decline in public to private transactions in H1 2022, as reported in the Market Tracker trend report: H1 2022 public M&A trend report.

However, it's worth pointing out that private equity funds have record levels of capital to deploy and with continued competition for high quality, undervalued assets, P2P transactions are likely to remain a significant feature of the public M&A landscape.

M&A activity generated a huge amount of work for corporate lawyers in 2021

Read more in-depth insights on M&A activity

After a subdued 2019 and 2020 - largely due to uncertainty over Brexit and the COVID-19 pandemic, 2021 saw strong growth for IPOs in London. This resurgence of activity was driven by a pipeline of new issuers and stored up demand from investors. Despite 2021 starting with a third national lockdown in England, optimism over the vaccine roll-out helped confidence return to the markets.

The number of IPOs and New Issues in 2021 sat at 86 for Main Market and 87 for AIM, compared to 2020's 54 for Main Market and 32 for AIM.

When looking solely at IPOs, there were 124 in total in 2021 compared to only 49 in 2020 and 36 in 2019. The momentum seen at the end of 2020 (when 33 IPOs completed in Q4) continued into 2021 which saw the greatest IPO deal volumes in the UK since 2014.

AIM had the greater share of deals in 2021: 66 AIM IPOs completed compared to 58 Main Market IPOs reversing the trend from the last couple of years which has seen AIM IPO activity significantly lag behind the Main Market.

The number of IPOs skyrocketed as a part of the post-lockdown boom

Private equity (PE) fundraising grew by 22% throughout 2021, according to data from McKinsey's Global Private Markets Review.

Since 2016 PE fundraising has increased steadily, experiencing a slight dip in 2020, but rising again in 2021.

Buyouts and venture capital funds tend to be affected by similar factors as parties involved in private M&A transactions, and as such, experience similar trends in behaviour.

You find a lot of the factors which affect parties who are involved in private M&A transactions are similar to the factors affecting parties involved in buyout, development and venture capital transactions.

If there's pent up demand, there's capital that has been left on the table that's ready to deploy, which will help guide the market.

Venture capital and development capital investments appear to be ongoing. There may have been some reluctance for funds to deploy capital for new investments at the start of the pandemic due to concerns about how the pandemic would progress and ongoing uncertainty relating to Brexit. However, since then it appears that investment activity has picked up.

Aside from the macro-economic factors at play in 2022 and the emerging recessionary landscape, there is also the story of the UK's business landscape in the wake of both Brexit and the COVID-19 pandemic.

Post-Brexit, the last eighteen months have seen somewhat competing forces shaping how attractive the UK is for foreign investors.

On one hand, the UK Listings Review is a good example of the government seeking to push through reforms of capital markets processes to make the UK more open for foreign issuers and investors. In particular, there has been a desire to attract more tech companies to list in London by relaxing some of the more stringent listing requirements.

At the same time, the government has introduced various measures to protect the integrity of UK investment and corporate governance regimes. One of the biggest changes has been the foreign direct investment (FDI) regime brought in by the National Security and Investment Act 2021. This regime gives the government new powers to intervene in investments and acquisitions in certain sectors where the UK’s national security may be impacted.

Other reforms, such as that of the audit market in the wake of various scandals and measures concerning corporate transparency, are aimed at strengthening the UK’s reputation for corporate governance requirements, especially in the wake of the Ukraine situation. See for example the new register of overseas entities that hold UK property.

Is the UK becoming a more attractive place to invest? Read our UK Listing Review guidance

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In today's environmentally-conscious business landscape, a company's ESG policies have become so important they potentially have a direct impact on the valuation of a company.

Carrying out due diligence around a company's ESG initiatives to identify any sort of issues that could affect brand reputation post-acquisition is now commonplace. ESG is a hot topic at the moment and it will only continue to escalate in importance going forwards.

Investors in IPOs are particularly interested in ESG disclosures and prospectuses. Company lawyers are likely to have to advise IPO issuers on whether the company is getting its ESG story right for the IPO.

There is also increasing regulation around climate-related and sustainability reporting. The 2022 financial reporting season saw premium listed companies make mandatory climate-related disclosures aligned with the recommendations of the . 2023 will see these requirements extended to standard listed companies and similar reporting requirements applied to AIM companies, large private companies and LLPs, including many of the UK’s largest law firms. The UK government previously committed to enhance these reporting requirements as part of its Green Finance Strategy and it will be interesting to see how these proposals develop.

All this can place a lot of pressure on companies. Aside from the substantial challenges in genuinely making quantifiable and qualitative progress in relation to many ESG targets and policies, companies are also expected to coherently and regularly report on the ever-increasing portfolio of risks and threats to their business model. Climate and sustainability generally attract all the attention, but modern risk assessment and mitigation is now expected to tackle complex issues related to diversity and inclusion, modern slavery, bribery and corruption, cyber security and geopolitical risk.

Is your ESG strategy up to scratch? Read the ³ÉÈËÓ°Òô and Lawyers for Net Zero report

Brexit, COVID-19 and political instability such as the war in Ukraine have all impacted corporate activity. Corporate governance is also being influenced by hybrid working, diversity on boards (including both gender diversity and ethnic diversity) and many other factors which all come with their own set of legal considerations.

Also on the horizon for corporate lawyers are the changes that Companies House is committed to implementing over the next few years.

There appears to be a determined regulatory ambition to significantly enhance the identification and verification processes and standards which underpin many of our corporate compliance regimes.

Ultimately, this will mean more rules and procedures which are likely to place a disproportionate burden on smaller, generalist legal practices and those in-house lawyers in less-resourced organisations.

These generalist practitioners will increasingly be looking for legal know-how that is accessible and easy to use or convert. The challenge for the successful future delivery of practical legal guidance is to anticipate these regulatory and compliance pressures before they arise and create innovative content and powerful tools to ease the burden for the modern company lawyer.

Find out more about ³ÉÈËÓ°Òô for corporate lawyers.

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