Boutique firms have vital role advising clients investing in highly regulated sectors – Esquivel Advogados

With banks having stricter lending requirements, clients need specialist lawyers who advise them on all stages of a project, including advice on how public bodies will react

Boutique law firms are playing an increasingly important role in helping companies invest in heavily regulated sectors in Portugal, as it is crucial that clients are informed about all the possible outcomes of each stage of a project in order to satisfy the requirements of lenders, says José Luís Esquivel, managing partner at Esquivel Advogados in Lisbon.
“In contrast to a few years ago, Portuguese banks are now more conservative, selective and restrictive [with regard to providing finance]” he says. “It used to be only necessary to have a project, but now there is only money available if you can present a real project with a guarantee that profit will come.” Esquivel continues: “This makes a huge difference when you’re conducting any kind of business development or investment. The banks just aren’t so open to financing projects with an element of risk.”
Esquivel attributes this new approach to Portuguese banks’ lack of finance as well as the fact that ownership of the country’s banking sector is increasingly passing into foreign hands. “Not only are public banks having problems in terms of their financing capacity and having to wait for financial help from the state,” he explains. “But for the first time in banking history, there are no private banks in Portugal with real capacity – we’re now facing the prospect of them all belonging to foreign banks outside of Iberia.”
Banks less competitive
As a result, Portuguese banks that previously would have gone to corporate clients to show them potential business opportunities are now passive as they do not have the money to finance projects, says Esquivel. “In contrast to other countries with investments abroad, Portugal’s banking sector has currently lost its competitive edge, which isn’t good as it means we can’t do business,” he adds. Furthermore, those local companies that would have traditionally sought investment from Portuguese banks are now having to develop projects that long-term, have an international and European perspective, Esquivel says. “Foreign investors are unlikely to be open to financing something local – they will only invest in Portugal if it’s attractive to their business,” he explains.  
So, with Portuguese banks becoming ever more risk-averse and foreign investors mainly seeking out international opportunities, it is now crucial for clients that want financial investment to identify all the various steps that need to be taken to complete a project, and all the possible outcomes that each step may be. “This means banks want to know everything before and everything after, so it’s about knowing the critical elements of each transaction and all the possible outcomes,” says Esquivel. He adds that even when a project is up and running, companies need to regularly check the details of any elements that may be in doubt in order to be prepared in case something goes wrong. “Imagine if you are investing in an energy plant in Portugal, you don’t just want to know all the regulatory frameworks,” explains Esquivel, by way of example. “You want to know what the real critical steps are, what the conduct of the public administration will be through the preparatory phase and then the execution of the phase – clients need to think of what comes next at every stage of the project.”

Boutiques ‘well placed’
As a firm that advises international and national clients that want to invest in regulated sectors – such as transport, the environment and industry – within Portugal, Esquivel says its work is now more focused and intense, as “companies are hiring us to consider every part of the transaction and check everything in greater detail”. He believes that boutique firms are well placed to give the level of support now required, because in order to give specialist advice and facilitate the transaction, “you need to have a full understanding of the business and how the sector is going to evolve going forward, and we continually pay attention”, he says. “At the end of the day, it is more demanding, but when clients hire us and then go on to do the business, they tend to stick with us so we can give that specialist advice throughout the life of the project.”