The start of the year might have been a bit slow in Hungary as well, but things have shifted towards a more positive outlook for the legal industry in the country, according to Lakatos, Koves and Partners Managing Partner Peter Lakatos.
“In general, there was a kind of a slowdown at the beginning of the year, with activity levels being a bit lower when compared to recent years, but things have since started to pick up across all sectors,” Lakatos begins. “The intensity of the activities is going up and this trend is likely to continue for the immediate future.” According to him, the general areas that generate work for lawyers are cross-border M&A, real estate, finance, regulatory matters, and dispute resolution. “Following a tumultuous 2022 on account of the shock following the start of the war in Ukraine, real estate, for example, has picked up and is slowly but surely returning to its former strength,” Lakatos says.
Additionally, healthy levels of cross-border M&A activity and associated movement mark Hungarian markets. “There are quite a few projects of note in the pipeline across many sectors, in particular concerning renewables (solar and geothermal) and with developments anticipated concerning wind power,” Lakatos says. Among the spearheads of activity “we see the automotive industry, in the widest sense, including EV/battery or logistics related investments, creating a lot of work,” Lakatos continues. “In the automotive sector, and more widely, Hungary continues to benefit from supply chain restructuring, remaining an attractive location for both manufacturing, R&D, and SSCs. While there are no specific drivers per se, we see continued exits taking place in multiple sectors with new investors seeking to fill out the gaps,” he explains.
Focusing on M&A, Lakatos reports there are important legislative movements for cross-border transactions. “The new FDI control mechanism and associated regulatory framework are in a constant state of flux and change, and both M&A and financing transactions have been feeling this legislative evolution quite a bit,” he reports. “With the framework evolving frequently, and changes being introduced often, businesses are becoming more cautious when navigating their course.” Other continuing trends in transactional activity are succession sales and intra-regional transactions, “with a notable pick-up in activity involving the Baltics – investment in IT and software companies – and the continuing expansion of companies closely aligned with the governing party, e.g., the acquisition by 4iG of Vodafone Hungary,” Lakatos reports.
Finally, assessing the current status of the Hungarian economy, Lakatos reports several trends of note. “I keep hearing from clients and financial experts that, while inflation is still a large issue and therefore interest rates have been on a constant rise, there is also a lot of hot money in the market being placed into high interest-earning government bond-type lucrative investments,” he explains. “Therefore, the forint is still quite stable at the moment, but there is reason to believe that this may quickly change once the prime interest rate of the National Bank of Hungary is lowered.”
Lakatos stresses that, while this current status quo might be affecting the export sector in an adverse fashion, it has not had the same impact on other areas: “for example, the actual cost in forints of energy imports. Making predictions as to how the year will pan out from a national economic perspective is an arduous task, but I suspect that there will be room for glad tidings as the year progresses,” he concludes. “If peace and stability could be restored in Ukraine, that would, while drawing investment away from the rest of the region, offer significant opportunities for involvement in reconstruction.”
