NORDIC REGION. 74 Legal Business April Photograph GETTY IMAGES

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1 74 Legal Business April 2009 Photograph GETTY IMAGES

2 The economies of the Nordic region have not escaped the global downturn, but their law firms are better protected than their UK and US counterparts. Legal Business assesses their survival strategies ANTHONY NOTARAS In October 2008, as the credit crunch descended into outright global financial crisis, the Finnish Prime Minister, Matti Vanhanen, confidently declared that: Finland is far from the eye of the storm. How far exactly was never fully determined, but experienced Nordic lawyers, be they from Finland, Norway, Denmark or Sweden, would all have predicted about six months. In other words, not far enough. It is the same rule of thumb that dictates that the British economy is roughly half a year behind the US. As such, most Nordic lawyers are now starting to get their first taste of financial turmoil, but at least most of them saw it coming, unlike Vanhanen. It is too early to say what the medium- to long-term effect will be. The majority feel that they will avoid the pitfalls of their American and British counterparts. That means no downsizing and no layoffs, at least for now. One must realise that there is a difference in the business model if you compare a tier-one Nordic firm with a City firm, says Mats Anderson, a former Linklaters partner in Sweden who now runs clear blue water, a strategic consultancy for professional services firms. They are perhaps not as vulnerable to a drop in turnover as many UK firms because they have a healthy profit margin, from 45% to 55%, which is in line with or better than where most of the Magic Circle firms are. They have a much lower gearing than the UK firms and are not as specialised. They are not as vulnerable if they take a hit on the turnover. Having said that, M&A is going down very dramatically. Indeed, for most firms in Sweden, while 2008 was a record year, the drop off in transactional activity since the New Year has been huge. The problem is more after 2009, what will happen then, says Peder Hammarskiöld, senior partner at Sweden s Hammarskiöld & Co, which saw turnover rise by u April 2009 Legal Business 75

3 LEGAL ADVISERS TO NORDIC M&A: VALUE 2008 ranking Company name Value Deal count (2007 ranking) 1 (1) Vinge 32.4bn 80 2 (3) Linklaters 26.55bn 39 3 (44) Kromann Reumert 22.57bn 18 4 (15) Roschier 20.09bn 30 5 (13) Allen & Overy 18.55bn 17 6 (48) Hammarskiöld & Co 16.2bn 5 7 (11) Freshfields Bruckhaus Deringer 15.81bn 14 8 (71) Matheson Ormsby Prentice 15.67bn 2 9 (9) Plesner 14.36bn (5) Clifford Chance 14.15bn (143) Norton Rose 13.61bn 6 12 (18) Ashurst 13.49bn 4 13 (70) Arthur Cox 13.05bn 3 14 (199) A&L Goodbody 13.01bn 1 15 (36) Gorrissen Federspiel Kierkegaard 12.39bn 14 Source: mergermarket LEGAL ADVISERS TO SWEDISH M&A: VALUE 2008 ranking Company name Value Deal count (2007 ranking) 1 (1 ) Vinge 16.58bn 74 2 (19) Gernandt & Danielsson 11.47bn 18 3 (4) Mannheimer Swartling 9.97bn 72 4 (6) White & Case 9.14bn 25 5 (8) Clifford Chance 8.95bn 13 6 (2) Linklaters 8bn 26 7 (163) Dechert 6.38bn 3 8 (3) Cederquist 5.93bn 19 9 (16) Roschier 5.79bn (124) Gide Loyrette Nouel 5.7bn 3 11 (10) Davis Polk & Wardwell 5.65bn 2 12 (153) Sorainen 5.63bn 2 =13 (-) Debevoise & Plimpton 5.63bn 1 =13 (113) Lett Advokatfirma 5.63bn 1 =13 (173) Macfarlanes 5.63bn 1 =13 (-) McDermott Will & Emery 5.63bn 1 Source: mergermarket belong to two practice groups, says Owe Hjelmqvist, the Stockholm managing partner of Swedish firm Setterwalls. There you already have some kind of flexibility. There is a great challenge for the future to be able to reallocate people to other practices where work needs to be done. The only major exception has been in Linklaters Stockholm office, which has downsized significantly since its takeover of Lagerlöf & Leman in 2001, dropping from 35 partners to its current headcount of 14. Much of that can be attributed to a firmwide strategy that gave the business a sharper focus, allowing it to fit more easily into the Linklaters mould. For the rest of the market, however, the chances of reducing lawyer numbers are slim. We re not expecting to make layoffs at the moment, says Michael Wigge, the managing partner of Vinge, one of Sweden s largest law firms. It s important to recruit, but not to the extent that we did last year. We had 16 associates come in this year. As well as the new associates, in January the firm recruited arbitration partners Johan Gernandt and Jonas Eklund from Gernandt & Danielsson, where Gernandt was a founding partner. A similar approach is taken in Finland and Norway. We are u u 20% last year. If this is like a normal recession, there will be a downturn in work towards the end of it when most of the emergency work has finished and activity remains at a low level. The hope is that activity levels will resume quickly after that. FLEXIBLE FRIENDS Even in the Baltic States, where the high-flying economies crashed back down to Earth last year, law firms are still managing to avoid redundancies. The main reason for this is that they are small, robust and flexible. None of the leading firms have outwardly reduced staff, says Raimonds Slaidins, name partner of 34-lawyer Latvian firm Klavins & Slaidins LAWIN. Certainly nobody is hiring right now. Other firms are probably doing what we are doing, which is internally having people man the areas where we are busy. Fortunately, the situation in Latvia is that we aren t that specialised. Most of our attorneys have no real problems switching practice groups. The same can also be said for the more sophisticated Nordic legal markets to the West. We have as a main rule that our associates Brocker: referrals market reduced 76 Legal Business April 2009

4 LEGAL ADVISERS TO NORDIC M&A: VOLUME 2008 ranking Company name Value Deal count (2007 ranking) 1 (2) Vinge 32.4bn 80 2 (1) Mannheimer Swartling 11.01bn 75 3 (4) Thommessen 6.45bn 46 4 (3) Linklaters 26.55bn 39 5 (10) White & Case 12.25bn 35 6 (11) Wiersholm 9.23bn 33 7 (8) Roschier 20.09bn 30 8 (24) Bugge Arentz-Hansen and Rasmussen 4.59bn 28 9 (12) Lindahl 1.88bn (25) DLA Piper 0.46bn (5) Plesner 14.36bn (9) Selmer 1.57bn (15) Hannes Snellman 2.54bn (31) Wistrand Advokatbyra 1.15bn (6) Cederquist 6.03bn 20 u recruiting less than a year ago and we have fewer trainees than we used to, but we haven t even considered redundancies, says Tomas Lindholm, senior partner of Finland s Roschier. We think it is very good for people to have a more generalist approach than perhaps one would normally have. You can switch your practice focus to a certain extent. The fact that the Nordic markets are relatively small also means that firms would put their Source: mergermarket LEGAL ADVISERS TO SWEDISH M&A: VOLUME 2008 ranking Company name Value Deal count (2007 ranking) 1 (2) Vinge 16.58bn 74 2 (1) Mannheimer Swartling 9.97bn 72 3 (5) Lindahl 1.88bn 28 4 (4) Linklaters 8bn 26 5 (7) White & Case 9.14bn 25 6 (3) Cederquist 5.93bn 19 7 (12) Wistrand Advokatbyra 1.1bn 19 8 (6) Gernandt & Danielsson 11.47bn 18 9 (10) Delphi & Co 0.35bn (9) Roschier 5.79bn (14) Setterwalls 0.35bn (28) DLA Piper 0.08bn (13) Clifford Chance 8.95bn (21) Allen & Overy 3.8bn 8 15 (16) Freshfields Bruckhaus Deringer 1.1bn 8 The Scandinavian countries are more different than international firms appreciate. Mikkel Vislie, Haavind Source: mergermarket Tähtinen: Finns are pulling together reputations at risk if they started making cuts. We are still recruiting, adds Mikkel Vislie, a partner at Norway s Haavind, which has 107 lawyers. The threshold for layoffs in Norway is very high. In the recession that followed the dotcom boom, there was only one firm that had layoffs, and the market became very aware of it. People still remember it. It is very rare for a firm in Oslo to do something in that respect. We are extremely cautious and are willing to reduce our profits to keep people employed. Jyrki Tähtinen, senior partner of Finland s Borenius & Kemppinen, takes a similar view. There really is no history of Finnish law firms laying off a big number of lawyers, he says. It would be very interesting to see if any of the big firms were actually to resort to that. Finns are pretty good at pulling together when things are tough. I expect that partners will say: This year we will have smaller partner benefits. Otherwise, their reputation as an employer might get shot. There might be unwanted repercussions if you go down that route. GROWTH INVESTORS Rather than downsizing, the highest-profile developments in the Nordic market over the past six months have actually come u 78 Legal Business April 2009

5 NUMBER OF INTRA-NORDIC DEALS NORWAY 197 SWEDEN 154 FINLAND Wigge: layoffs aren t currently expected u through expansion and consolidation. The most significant example of this was the recent merger between two Swedish firms, Lindahl and RydinCarlsten, on 1 February. The new entity, Lindahl, has more than 200 lawyers and a turnover of 39m, making it Sweden s third-largest firm behind Mannheimer Swartling and Vinge. We saw with the merger that we could establish ourselves as a challenger, says Jonas Westerberg, legacy managing partner of RydinCarlsten, who is jointly running the Stockholm office with Lindahl s Staffan Eklöw. Otherwise, it hasn t been happening that much in the Swedish market. There have been London firms coming here and the Finns, but there hasn t been much consolidation among the Swedish firms to pick up the race with the two big ones. Mannheimer Swartling s and Vinge s domination of the Swedish market has never been easy to crack, and this is the first major attempt by a domestic firm. Some might question the timing, but most of the upper mid-tier firms in countries like Sweden and Finland see this as a good opportunity to challenge the market leaders. The recruitment market was pretty difficult for all of 2007 and the beginning of 2008, and we 70 DENMARK weren t able to get all the people we wanted, says Tähtinen, whose firm took over the leading Finnish maritime and transport boutique, Aminoff & Weissenberg, at the beginning of the year. We have made the decision, based on previous ups and downs, that this time around we will continue to hire a limited number of good people if opportunities arise, even if we have some unused capacity in the short term. Lindahl aside, it is Finnish firms that have had the most Source: clear blue water adventurous expansion strategies. The Nordic region saw the arrival in Stockholm of Finland s largest firms, Roschier and Hannes Snellman, in 2005 and 2008 respectively. Each move has been backed up by several impressive lateral hires from local rivals. Hannes Snellman s launch in September 2008 included Vinge corporate partner Fredrik von Baumgarten, who heads the nascent office, Linklaters Stockholm litigation and arbitration head Martin Wallin, and three more corporate and 80 Legal Business April 2009

6 capital markets partners from Setterwalls. Earlier in 2008, Roschier added to its ranks by recruiting Mannheimer Swartling s experienced arbitration partner Claes Lundblad, adding to a team that included several former Linklaters and Mannheimer partners. The message from both firms is clear: they have come to compete on even terms. The new arrivals have had an immediate impact on both the Swedish and the Finnish legal markets, not least on the cosy referral relationships that had previously seen a good portion of the Swedish work go to Roschier and Hannes Snellman. The only thing we knew for sure when we decided to open was that we We are recruiting less than a year ago and we have fewer trainees than we used to, but we haven t even considered redundancies. Tomas Lindholm, Roschier would lose overnight all the referral work from Sweden. That was obvious, reflects Roschier s Lindholm. The assessment we made was the loss of referrals would be made up for by the business we would be able to make for ourselves in Sweden. Johan Aalto, Hannes Snellman s managing partner, takes a similar view. It has impacted on the willingness of Swedish firms to send referrals to us, but we saw that a lot of the work Swedish firms do in Stockholm was Finnish as well, he says. The value of the lost referrals is less than we anticipated. Being able to do things now on the spot makes the balance fairly decent. In Roschier s case, the Stockholm office has 55 lawyers and accounts for over 25% of the firm s 53m u A keen eye for your business needs.

7 u turnover. Since Hannes Snellman has only been in Sweden for just over six months, it is perhaps too early to measure its success. However, recent high-profile instructions, such as advising Porsche on its 2.4bn mandatory public offer for the remaining shares in Swedish truck manufacturer Scania, and advising the lenders on the 7.4bn Nord Stream pipeline project, which will transport gas from Russia into the EU, suggest that the lawyers have hit the ground running. That hasn t stopped rival firms from questioning Hannes Snellman s timing. Aalto, however, maintains a positive outlook. Needless to say, there is turmoil in the legal sector, he says. It might take a long time to get back to the profitability that the legal sector had before, but for us it s very encouraging to take new initiatives as we did in Sweden. We ve been able to recruit very good and positive people without paying high fees or signing-on bonuses. People say it s good that someone is creating something new. In that sense, I m much more optimistic than I was one and a half years ago. REDISTRIBUTED WEALTH The response from most of the Swedish firms has generally been positive, even from those who lost partners to their new rivals. In all fairness, they are good law firms and very competitive 82 Legal Business April 2009

8 and talented, Vinge s Wigge says. We haven t had the biggest problem with their arrival. It is the mid-size firms that have actually struggled and been hit by the increased competition from them, as they have been able to take some very good assignments. Adopting a note of caution, however, Wigge warns: It could be quite a good idea to be aggressive in a downturn market, but if it continues to go on for a long time, they will need to have deep pockets. For the mid-sized firms in Finland, Roschier and Hannes Snellman s move into Sweden has presented quite an opportunity. For us, this has been a very good development, because sympathies in Oslo, Stockholm and Copenhagen are being redistributed, says Jan Waselius, founding partner of Waselius & Wist. They have redistributed their referral system to the benefit of other firms in Finland. For Pekka Jaatinen, chairman of Finland s third-largest firm, Castrén & Snellman, the temptation to follow his nearest rivals into Sweden has yet to stir. Our Swedish relationships have very long roots, he says. We ve been very carefully looking at the Scandinavian market. We keep our eyes open, but at the moment there is no need for us to have our own presence in Stockholm. The firm does, however, have offices in St Petersburg and Moscow, much like Hannes Snellman, illustrating the balance that Finnish firms are trying to reach between their homeland s physical and historical links with both the East and the West. Firms such as Borenius & Kemppinen and Roschier (through its RoschierRaidla alliance) also have u Needless to say, there is turmoil in the legal business. It might take a long time to get back to the profitability that it had before. Johan Aalto, Hannes Snellman Overall Law Firm of the Year The international business magazine ACQ has ranked advisers in company transactions worldwide. In the assessment of Swedish advisors, Delphi has been appointed Overall Law Firm of the Year. The appointment is based on the fact that Delphi has taken part in a number of large and interesting international transactions. Delphi is one of the leading Swedish law firms with offices in Stockholm, Göteborg, Malmö, Linköping and Norrköping. April 2009 Legal Business 83

9 u associated offices throughout the Baltic States. It is this geographical position that has led Hannes Snellman to take both a Nordic and a Russian strategic direction. We are building two home markets, one is in Scandinavia, the other is in Russia, says Aalto, who has also openly discussed the possibility of establishing offices in Norway and Denmark. We are analysing the other countries. We think a Nordic concept makes sense, but how we do that is too early to say. The Finnish market is fairly small. If you want to expand, you need to do that abroad. For our part, we see very clear synergies between the Nordic and Russian jurisdictions. One of the biggest links, at least with Stockholm, is in arbitration, with the Arbitration Institute for the Stockholm Chamber of Commerce the favoured venue for disputes emanating from Russia, the CIS and much of eastern Europe. BORDER CROSSINGS Whether Hannes Snellman s Nordic strategy takes off remains to be seen. The idea of a pan-nordic firm is one that has often seemed attractive in theory, but rarely manages to work in practice. Generally, it has made most sense to outsiders who have lumped Denmark, Norway, Sweden and Finland together, without respect for the historical, cultural and economic differences that set the countries apart. Of the four countries, the closest links exist between Finland and Sweden, which explains the arrival of Hannes Snellman and Roschier in Stockholm, and the relative importance of Swedish referrals to the domestic Finnish legal market. Norwegian and Danish firms, however, have never opted to enter the Swedish market, which is undeniably the key business hub in the region. There have been discussions among Scandinavian firms in the Nordic region, but they haven t come to much, Vislie at Haavind says. The Scandinavian countries are more different than international firms appreciate. We have quite different cultures and legal systems. Most people here seem to feel that the clients aren t too interested in it either. One occasion where it was attempted was with Lindh Stabell Horten, which had offices in Oslo, Copenhagen and Stockholm, but eventually became part of DLA Nordic in Even under the global DLA brand, the difficulties of holding such a Scandinavian alliance together were illustrated when the Danish arm took a more independent stance and returned to its original guise of Horten in late The firm does, however, still cooperate with DLA Piper on a less formal basis. Anderson: Nordic firms are less at risk The only other attempt to form a cohesive approach to the region was with the Scandinavian Law Alliance between Thommessen, Kromann Reumert and Vinge, three of the top firms in Norway, Denmark and Sweden respectively. The best-friends alliance was eventually abandoned, as Vinge s Wigge explains: We decided to wind it up. There was the name, but we didn t have such a close tie up with the firms. We still have a very good relationship with both firms. We meet on a regular basis, but we don t need a heading for that. That doesn t rule out our work going to other Norwegian and Danish firms and their work going to other Swedish firms. The firms still share a London office in New Broad Street, alongside Icelandic law firm LOGOS, but Vinge s participation in this will come to an end in September as it withdraws from the UK. The market now, compared to 25 years ago when we started the office, is completely different, says Wigge, whose firm has now established European desks for those jurisdictions it doesn t have an office in. You don t need to be actually physically placed there. All this technology has drawn up a new map. It is a way to adjust the operation to the market. Nevertheless, Vinge, like several other Scandinavian firms, still maintains an impressive network of offices, spanning Brussels, Hong Kong and Shanghai, while its main Swedish rival Mannheimer Swartling also has offices in Germany, Russia and the US. Several of Norway s largest firms have also taken a surprisingly expansive international route, often, as in the case of Wikborg Rein, to follow clients in areas such as shipping. The offices abroad are mainly set up to service our clients who have business in Singapore, China, London and Japan, says Wikborg Rein managing partner Per Ristvedt. Even in these jurisdictions, where we have offices, we follow a best-friends strategy so that we work together with local counsel on many cases. This creates a unique service with a Norwegian touch for our clients. FOREIGN INVASION For most of the major Nordic firms, the main strategic challenges won t come through their international networks, but how they can compete with international firms on their own turf, especially now that work is becoming increasingly scarce. This threat isn t even from those on the ground, such as 84 Legal Business April 2009

10 We think a Nordic concept makes sense, but how we do that is too early to say. Johan Aalto, Hannes Snellman Ashurst, Baker & McKenzie, Bird & Bird, Linklaters and White & Case, but those firms that have established Nordic desks working out of London, including Allen & Overy, Clifford Chance and Freshfields Bruckhaus Deringer. Firms such as Hannes Snellman, Mannheimer Swartling, Roschier and Vinge are now of the size that they can t afford simply to do the local side of a deal while a UK or US firm takes the lead. They have to lead the transaction themselves. I used to say referrals are dead, says Mannheimer Swartling s managing partner Stefan Brocker. We spent so much time on networking and creating good alliances with certain firms, but the trend is they do more and more of the work themselves, and the local advice bit is a very small part of the pie today. Ten years ago that could have been a very good assignment. During the boom, especially in Sweden where private equity played a disproportionately huge role in the M&A market, there were enough transactions for everyone. With fewer Nordic deals, but far more firms with Nordic capabilities, the competition can only get tougher. Most Scandinavian and Finnish firms are well positioned to deal with the challenging climate in the short to medium term, but if the market continues to decline into 2010, then the spectre of redundancies could loom a lot larger. LB anthony.notaras@legalease.co.uk We re looking for trouble we can handle it. When your trouble becomes our concern, you re free to put your mind into what really matters. At Juridia, our mission is to create solutions and to ensure you won t have to regret even the most difficult decisions you make. Understanding your business is a central part of our expertise. Peace of mind for sale. Fabianinkatu 29 B, Helsinki, Finland Tel Fax