With soaring interest rates, global instability, as well as political and economic insecurity both at home and abroad, the beginning of 2023 was a cautious and uncertain time for law firms across the Nordic region, particularly given the tumultuous year that was 2022. Nevertheless, the region has remained remarkably resilient to global pressures, with firms seeing 2024 as a year of opportunity, driven in part by weak local currencies in Sweden and Norway, developments in AI and ESG mandates, and a surprisingly active corporate space.

‘Like most lawyers, we were surprised at how good 2023 was,’ says Jan Dernestam, managing partner at Mannheimer Swartling. ‘We had to predict cautious budgets for 2023, but it’s looking like we’re up roughly 10% from 2022. This goes for most of the larger firms in Scandinavia.’ Overall, he notes: ‘It’s difficult to pick one area where we’ve been busy because we’ve been busy all over,’ despite the initially challenging market.

‘At the outset of 2023 the macroeconomic factors were quite dire,’ agrees Maria-Pia Hope, managing partner at Vinge. ‘In terms of transactional activity, the beginning of the year was relatively weak. But then, contrary to our predictions, things really picked up towards the end of spring – and the autumn was incredibly busy. We had our best November ever.’

The Norwegian market also saw more optimistic results than feared, with firms noting that 2023 proved to be a surprisingly positive year. ‘We experienced good levels of activity across several areas,’ notes Thommessen’s managing partner, Sverre Tyrhaug. ‘Though we saw a decrease in activity in certain fields, like aquaculture, this was more than made up for by unexpectedly high levels of activity elsewhere, particularly in the corporate space. It showed the importance of a diverse offering.’ Like Dernestam, Tyrhaug also puts Thommessen’s estimated growth at around 10%.

Firms note the relative weakness of local currencies as a key driver of activity. ‘Sweden had a weak currency in 2023, so it was cheaper to buy things. Sweden saw a lot of interest from elsewhere in the world,’ notes Hope. Roschier’s managing partner, Mikko Manner, agrees: ‘There is a very favourable investment environment, driven partially by the fact that the krona has been decreasing in value, and that means that it’s a very interesting market for any corporate or financial investor who works with dollars or euros.’ Likewise, in Norway, Tyrhaug agrees that despite domestic political uncertainty, partially driven by the introduction of a controversial ground rent tax on salmon, he believes that Norway will continue to remain an attractive market for international investors. ‘Because of the weakness of the Norwegian krone, more foreign capital is entering Norway.’

Another key driver was corporate work. ‘Our corporate group did extremely well, exceeding what was already a fairly aggressive budget,’ notes Tyrhaug. ‘We saw a lot more M&A, both private and public, than we had assumed.’ Dernestam is a little more subdued on the private M&A front, noting that there has been a slight downturn in activity in this space. ‘Still, when we say downturn in private M&A in Scandinavia, in practice this means that we’re more or less back to pre-pandemic levels,’ he says.

Nevertheless, political insecurity, both domestic and global, remains a core concern. ‘Geopolitical issues will draft much of the agenda for 2024 and things can happen really quickly,’ says Dernestam. ‘Half the world’s population is entering into an election year,’ notes Hope. ‘That will affect activity and how busy law firms will be. It’s a very volatile time, isn’t it? It’s become increasingly difficult to predict what will happen.’

This in itself means significant opportunities for law firms, with Hope commenting: ‘Volatile times create a lot of opportunity because people want to be proactive.’ Across the border, this same sentiment echoes. ‘It’s a space of opportunity, in terms of risk advisory and compliance, even if the geopolitical backdrop is bad news,’ agrees Tyrhaug. ‘One of our biggest investments of 2023 was into our strategic risk advisory offering. We’re looking at geopolitics and risk in a wider sense. Norwegian businesses want to know how what they read in the newspapers will affect them and their business models, supply chains, and hiring plans. This will significantly shape 2024.’

Ultimately, firms remain cautiously optimistic when looking ahead. Notes Tyrhaug: ‘We’re entering 2024 with the feeling that, as a lawyer, we’re pretty hopeful that this will be a fairly good year – nothing crazy, but fairly good.’ ‘We’re not seeing any signs at the moment suggesting that 2024 will be a worse year than 2023,’ says Dernestam.

For firms in Denmark, 2023 played out in a similar fashion, with the year providing a bounce back from the instability of 2022. Niklas Korsgaard Christensen, managing partner at Plesner, comments: ‘We anticipated 2023 to be a rather difficult year because of the war in Ukraine, inflation and the energy crisis, however the year proved to be the busiest year in the history of the firm.’

Lawyers were kept active across the board, with the energy sector – particularly renewable energy and ESG projects – continuing to dominate the Danish market; the jurisdiction remains a leading region in the green transition, particularly regarding offshore wind farm developments. It hasn’t all been smooth sailing, however, with the Danish government closing its ‘open door’ offshore wind scheme in early 2023 following concerns that the policy didn’t comply with EU rules, ultimately leading to the remaining offshore projects that had applied to the scheme being rejected.

For Christensen, this ESG trend, paired with the buzz around AI, are the key issues moving forward: ‘ESG and AI might be buzzwords to many, but for us, they are very important subjects that are of high interest to clients, employees and management. Not only from a business point of view but also the responsibility that comes with being a significant part of society today.’

Maintaining the trend of recent years, the Danish market has also been awash with lateral moves and partner hires, adding variation to a traditionally stable legal market. One of the main proponents of the movement is Norwegian firm Schjødt which, following the establishment of its Copenhagen base in November 2022, has recruited extensively across practice areas from other firms to fill out its Danish offering. Christensen also cites that the ongoing war for talent in Denmark is driving competition between firms to be an attractive place to work.

Unlike the rest of the Nordics, the reflections in Finland are perhaps more subdued, with firms reporting growth that fell short of the promise 2023 offered. ‘Everybody had a moderately positive year,’ states Manner, ‘but I don’t think any firm really actually grew in any meaningful way. Everybody thought that 2023 would be a boom year, when in reality it was a third super slow, a third picking up and a third active.’

When establishing the driving factors behind the changeable year, two trends stand out. Firstly, the slow recovery of the transactional market, particularly private equity-driven transactions, saw a decline in domestic and cross-border deals in the Finnish market. As Manner recognises, ‘private equity driven or sponsor-driven deals became non-existent, and this had a spillover effect to practice areas that are not inherently driven by volume on the deal side.’ However, from mid-2023 onwards, the picture began to look a little rosier: ‘From the middle of the year, there was a lot of activity on the public transaction side which supplemented, or replaced, the issues on the private side,’ Manner adds.

‘I don’t think any firm really grew in any meaningful way. Everybody thought that 2023 would be a boom year, when in reality it was a third super slow, a third picking up and a third active.’ Mikko Manner, Roschier

Secondly, an increased cost-consciousness by clients, particularly on the corporate side, has increased the work kept in-house, with external counsel often reserved for the most complex mandates. According to Manner: ‘There’s pressure on corporates to insource a lot of the pre-work, meaning they’re doing a lot of the preparatory work themselves. The level of certainty of a project has to be pretty high now for external counsel to be involved.’

When looking ahead, Finnish firms are keeping the country’s eastern neighbour firmly in the periphery: ‘There may exist a challenge for Finland due to the so-called country risk stemming from our border and the unpredictability of the Russian regime,’ says Manner. However, on a more positive note, the energy sector remains a key focus for investment, with the green transition propelling an anticipated boom for 2024.

Ultimately, Nordic firms are entering 2024 in a hopeful mindset, with the green transition, foreign investment, and a surprisingly resilient corporate and transactional space providing opportunities for continued growth and activity in the year. Although global conflict, both in the Middle East and along the Finnish and Norwegian borders, remains a pressing issue, this also serves as a space for opportunity. At the end of the day, says Manner: ‘We believe that the Nordic market continues to punch well above its weight in terms of the demand and complexity of the legal work.’ LB

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In an increasingly tumultuous market, the Nordic region has thus far remained resilient to pressures; as the Covid-19 pandemic begins to abate, new stressors, such as the war in Ukraine and global economic downturn are starting to affect investment and deal flow across Norway, Sweden, Denmark and Finland. With the countries’ proximity to Russia, and Finland and Sweden in the process of joining Nato, the political and economic situation doesn’t look like settling down anytime soon.

In Norway, Thommessen’s Sverre Tyrhaug states that despite the vicissitudes of global market forces and a drop in capital markets work, 2022 ‘turned out surprisingly well, we were busy and up in terms of turnover’. With regards to sectors, as with most countries in Europe, Norway is looking to increase energy security and Thommessen has seen an increase in renewables, as well as oil and gas, and hydrogen projects. As for 2023, Tyrhaug remains optimistic: ‘Lots of clients will put cost-cutting high on the agenda, especially due to increasing inflation. However, it will not necessarily be a bad year for lawyers; we expect consolidation in the tech, energy and renewables sector and a lot of M&A and distressed M&A work.’ Norway remains a stable legal market with indigenous, independent firms taking up the bulk of high-profile work.

In Sweden, Vinge’s Maria-Pia Hope says: ‘The M&A market remained comparatively busy, if not at 2021 levels, and stock exchange volatility created opportunities – public takeover bids were a clear trend for the year.’ With regard to trends for the next year, she adds: ‘We expect the elite independent firms in the Nordics, with their full-service offering and robust client base, to continue to do well in a weaker market.’

In terms of sectors, infrastructure and energy will be a key area of focus, as it is across the Nordics and Europe; this will create investment opportunities for clients. With a weaker domestic currency, Hope suggests: ‘Swedish assets will continue to be attractive at a more general level to certain international investors.’

Denmark entered 2022 with a buoyant M&A market, particularly in the life sciences, financial services, and technology sectors, though early signs of deterioration soon became reality in September with the Ukraine conflict. In the latter half of the year, firms saw an uptick in insolvency mandates, as rising interest rates and material prices led to a steep decrease in real estate transactions. The renewable energy sector continues to remain strong within the Danish market, particularly with the development of offshore wind farms.

As firms contend with the possibility of an impending recession in 2023, practitioners worry about more than the potential impact on earnings. Christina Bruun Geertsen, managing partner of Kromann Reumert, expresses her concerns about the cultural effect of navigating employees through a potential recession, acknowledging that ‘getting used to a new normal’ may cause employees to develop stress, but ‘at least, sitting in Denmark, we will likely not be severely impacted’.

‘We expect the elite independent firms in the Nordics, with their full-service offering and robust client base, to continue to do well in a weaker market.’
Maria-Pia Hope, Vinge

The previously stable Danish legal market saw unprecedented movement in the form of lateral partner hires and team moves around Copenhagen, in addition to the growing presence of large audit firms, including KPMG. The Big Four have continued to establish legal practices within Denmark, despite thus far being unable to fully permeate the market. Geertsen confirms: ‘While they aren’t as present right now, we anticipate they are coming, they have the financial muscle’ [to compete with local firms].’

As the Ukraine war casts a shadow over Finland’s economic outlook (and consequently its 1,340km shared border with Russia), firms have seen energy transition become a huge area of investment as Finland seeks to reduce its dependence on fossil fuels. Despite previously maintaining a peaceful relationship with Russia, Finland’s decision to apply for Nato membership will affect the perceived risks for global investors and the surrounding investment environment, and will continue to affect how the nation will thrive over the next three to five years.

Mikko Manner, managing partner of Roschier, notes the ‘massive amounts of money being poured into industrial projects’ across the energy sector, particularly in relation to carbon capture. Firms have also noted an increase in general corporate mandates as Nordic companies scramble to exit from Russia, with Manner confirming that ‘there’s a lot of disruption in the environment’.

Decreases in activity in the capital markets and M&A spheres, though less severe than feared by numerous practitioners, has raised concerns for the possibility of economic recession in 2023. Practitioners, including the managing partner of Krogerus in Finland, Mårten Knuts, remain cautiously optimistic, with him suggesting that the ‘relative cosiness’ of the Finnish market ‘makes the consequence of a recession very tolerable… it will hit firms fairly equally’. But with the legal services industry showing surprising resilience overall, Manner cautions that the recession could have an uneven impact: ‘The smaller the firm and the weaker its position, the harder it’s going to be.’

In the face of a turbulent year of change, Nordic firms have retained their optimistic outlook for the future, cushioned by the longstanding stability of the region’s legal market. Looking forward, firms continue to contend with several issues, including the war for talent. Geertsen acknowledges that firms compete not only with each other, but ‘other businesses and ways of working that compete with the way law firms work’ and contends that firms must in turn ‘adapt and offer the solutions and workspaces’ which employees can identify with.

While coming year promises to provide uncertainty abound, practitioners remain confident, with Knuts observing that ‘the legal services industry is surprisingly resilient’, having survived the impact of the Covid-19 pandemic in tandem with ongoing geopolitical and economic anxieties. LB

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The post Euro Elite 2023: Nordics – New challenges appeared first on Legal Business.

Much like the rest of the world, the Nordic market couldn’t escape the consequences of the coronavirus pandemic. However, the virus seemingly kept the Nordics in its periphery, while the rest of Europe felt the brunt of the impact. Average GDP across Norway, Sweden and Denmark in 2020 fell by roughly 3% (the wider EU GDP fell by 6.1%) with the biggest impact, unsurprisingly, on the tourism industry (Iceland, a nation heavily reliant on its tourism, saw a GDP drop of 6.6%). However, the predictions for 2021 show GDP growth across all three of the main Nordic countries, with 3.7%, 3.4% and 3% growth predicted respectively.

‘The Nordics have suffered less than many other European countries in the course of the pandemic,’ states Roschier’s managing partner Mikko Manner in Finland. ‘It has been forecast that during the second quarter of 2021, most restrictions will be eased due to vaccinations, and the Nordic economies will be able to start a swift recovery, with economic activity reaching pre-crisis levels later this year.’

Coping strategies

While the general consensus is seemingly positive, arguably the greatest impact has been the effect the pandemic has had on the Nordic Council’s plans for a highly integrated region by 2030. Longstanding collaboration schemes including the Nordic Passport Union, which allows citizens to reside and travel freely throughout the member states, were temporarily overwritten by uncoordinated responses to the virus and harder border closures, leading to greater separation in the region.

‘The Nordics have suffered less than many other European countries in the course of the pandemic.’
Mikko Manner, Roschier

The most notable (and arguably controversial) response to the pandemic saw Sweden take the opposite approach to the vast majority of nations. With no national lockdown, limited restrictions and social distancing measures only applied to large gatherings, the ultimate goal was herd immunity among the wider population, which, at a macro level, saw varying degrees of success. According to Jan Dernestam, managing partner at Mannheimer Swartling in Stockholm, the legal market came out relatively unscathed: ‘We never had a lockdown in Sweden and the business activity remained very much the same even after the Covid outbreak in March 2020.’ While many firms saw a reduction in activity in the initial months of the pandemic, the impact was ultimately short lived. Dernestam continues: ‘Since June 2020, all our practice groups (transactions, dispute resolution and regulatory) have been very busy and 2020 finally became our best year ever. 2021 has also started well and we are up 25% during the first six months compared to the first half of 2020.’

Seemingly the Swedish government’s approach to protect the economy ultimately bore fruit, as Dernestam comments: ‘We are also happy to say that the reason why we have been – and are – so busy is not due to crisis-related work but the reason is that the Swedish multinational companies, banks and the private equity industry are all doing very well. The pandemic is of course a very tragic health crisis but it never created any financial crisis, and the Swedish national economy is still very strong with the Swedish national debt-to-GDP ratio being one of the lowest in the world.’

The Icelandic market also bounced back with relative ease. Outside of the impact on tourism, it generally experienced very little fallout in 2020 and early 2021. According to Örn Gunnarsson, managing partner at Lex Law Offices: ‘Iceland was probably the country that felt the least impact of the pandemic.’ M&A work has bolstered the legal market throughout the course of the pandemic, even picking up the slack where other practice areas decreased. Gunnarsson explains: ‘Business has been good although, because of the restrictions, we experienced delays in dispute resolution cases, but that has been offset by an increase in M&A activity. In many cases the pandemic caused certain industries or particular companies to struggle, which has led to frantic exploration to increase efficiency. Downsizing and restructuring has been the way forward for many, while in other instances a merger has been deemed the best option. M&A activity has therefore been at an all-time high for the latter period of the pandemic.’

For Norway, the early stages of the pandemic looked to be particularly challenging. The beginning of the pandemic followed hot on the heels of a substantial oil price drop, which saw prices plummet to an 18-year low, fuelled by the combined effect of an oil price war between Saudi Arabia and Russia in early March 2020 and the reduction or halting of production by oil companies worldwide as a result of early global lockdowns. As commented by Wiersholm’s managing partner Morten Goller: ‘Many pointed to Norway as the big loser as it was hit hard by the coronavirus pandemic and oil prices collapsed at the same time. However, thanks to a rebound in oil prices and a tax relief package, oil investment was less of a drag than feared and the recovery in the Norwegian economy has been stronger than expected.’

‘Iceland was probably the country that felt the least impact of the pandemic.’
Örn Gunnarsson, Lex Law Offices

For Anne Marie Due, managing partner at Hjort, the Norwegian market has also seen an increase in public sector and employment work as a direct result of the pandemic: ‘The pandemic has affected the types and categories of requested legal services. The public sector, for example, has been an active purchaser of legal services during the pandemic, with a resulting increase in demand for public law advice. The same is true of employment law, due to the pandemic’s impact on all aspects of working life.’ She also comments that the pandemic has ultimately led to a more competitive legal market, which, in a jurisdiction where full-service firms are already in abundance, has put pressure on client service models and pricing structures: ‘While demand has been high in most practice areas over the past 12 months, price levels and pricing models are under pressure due to increasing professionalisation among purchasers of legal services.’

Finland also came out of the other side of the crux of the pandemic relatively unscathed, with the bulk of the nation’s 3.1% GDP reduction stemming from a drop in consumer purchases as a result of lockdown. As Manner states, ‘The spread of Covid-19 has been at a high level in most EU countries, including the Nordic countries, and economic development was held back by continuous restrictions to control the spread of the virus. Now the vaccinations have begun and it seems that the economic recovery is picking up again, supported by expansionary fiscal and monetary policy.’

Denmark’s market also saw similar trends and changes, with initial panic and uncertainty making way for increased market activity and, ultimately, a successful year for the majority of firms in the jurisdiction. Steen Rode, chief executive partner at Bech-Bruun, comments: ‘All firms were concerned with the market development in the beginning of last year as many projects were shut down initially. However, since September the market has been particularly busy.’

According to Rode, the market has seen notable activity across M&A and real estate transactions, as well as employment law issues and renewable energy projects. Gorrissen Federspiel’s managing partner Martin André Dittmer agrees: ‘There was a lot of uncertainty around how the market would respond, and the majority of the crisis work was done at the outset. That was an important moment, and an interesting one, as every company was suddenly navigating unknown territory. For the year as a whole, it has been less about adapting to the kind of work and more about adapting to new ways of working. M&A deals have closed without either side meeting in person, but consolidation activity has continued across key sectors and deal pipelines look strong.’

‘We will see a more permanent high level of flexible work arrangements for all types of employees, and the market has been propelled many years ahead compared to previously within this area.’
Steen Rode, Bech-Bruun

Standout work

This Nordic-wide resilience saw firms across the region house a variety of high-profile mandates and novel transactions. In Sweden, Mannheimer Swartling advised Vattenfall, a multinational power company owned by the Swedish government, on its €4bn euro commercial paper programme, the first-ever Swedish law-governed ECP programme; and also assisted fintech company Klarna with its $1bn equity financing. For Roschier, the firm handled Bain Capital’s €2.1bn public cash tender offer for Ahlstrom-Munksjö, which was the largest cash takeover in Finland in 2020, and also advised on Boels’ €614m public cash tender offer for Cramo, which included an accelerated squeeze-out procedure in the middle of the Covid-19 outbreak. Bech-Bruun also had its fair share of substantial transactions, notably advising on CVC Capital’s acquisition of STARK Group.

When asked what has facilitated the continuation of the high standard of legal work across the Nordics, Manner comments: ‘In times like these, our clients are facing a lot of new issues with a rapid pace. To solve these issues, traditional thinking or measures are not enough, and there is a clear need for high-end legal advisory services with a creative and curious approach.’

Due also adds: ‘Like firms and companies in many other industries, Hjort has found the pandemic challenging. However, the past 12 months have also presented the firm with new opportunities, particularly for streamlining the organisation and professionalising customer interaction and cooperation through the adoption of new working methods. 2020 also gave us the opportunity to sharpen our profitability focus. Overall, the year was far better than anticipated at the start of the pandemic and 2021 has been a very good year for us thus far.’

Due also comments that the pandemic should be seen as an opportunity for firms looking ahead: ‘We are convinced firms that successfully embrace the opportunity to restructure – in terms of efficiency, profitability and flexible working methods – will continue to grow going forward.’

When looking at the long-term impact of the last 12-18 months, flexible working and adaptive methodology are at the forefront of everyone’s mind. For Rode, ‘the main impact will be on the way we work and collaborate. We will see a more permanent high level of flexible work arrangements for all types of employees, and the market has been propelled many years ahead compared to previously within this area.’

‘Sweden will most likely see the same development as the rest of the legal word as far as working from home is concerned. Hopefully, this will help our associates and staff to manage their work/life balance better than before.’
Jan Dernestam, Mannheimer Swartling

Gunnarsson adds: ‘The pandemic has tested the resolve of employees and management to figure out new ways of processing and delivering the advice to our clients. Not unexpected, the whole of the firm has walked hand-in-hand to figure out and implement new methods. This whole process has led to more and better communication between management and employees and in general a better working environment’. Dernestam agrees: ‘Sweden will most likely see the same development as the rest of the legal word as far as working from home is concerned. Hopefully, this will help our associates and staff to manage their work/life balance better than before.’

Fine margins

So, in a market dominated by independent firms and boutique offerings, what separates those that are thriving versus those struggling? For Gunnarsson, the answer is not always clear cut, but focuses heavily on the client experience: ‘The question on why some firms are thriving and some not is always difficult to answer. The most important element of the legal industry is to really understand the needs of the clients. Why are they asking for advice and how can we, the lawyers, deliver as much value as possible as efficiently as possible? If one loses sight of that, you are subject to becoming dispensable’.

Manner agrees: ‘Essentially all of the leading firms are independent and we believe a strong demand for their services will continue in the coming years. Thriving firms focus on client experience, top-notch legal skills and implementation.’ Due adds: ‘Effective use of technology allows mid-sized firms to compete at the top tier. Clients benefit from a broader range of high-quality advisers. Ultimately, this represents a better value proposition for clients. However, innovation is about more than just technology. Adaptation to ever-changing client needs is also crucial. Firms need to understand clients and their individual business strategies and goals.’

For others, the divide between firms is influenced by the size of the offering. Dernestam suggests that while all leading firms in the Nordics are independent, it is probably fair to say that the segmentation of the legal industry has continued with the largest firms doing very well while smaller firms have had to fight more for their business. Rode also adds: ‘There is an ongoing tendency that the big law firms are getting stronger and the boutique, highly specialised law firms are also doing well.’

‘There is no doubt that the pandemic will have a substantial and lasting impact on the legal market in the years ahead. We anticipate further strengthening of global networks and continued digitisation in the legal field.’
Anne Marie Due, Hjort

This dominance of independent firms across the Nordics has been the norm for decades, with pricing models and cultural differences often acting as a barrier to international firms trying to enter the already oversaturated and overlawyered markets. However, several recent moves have shown that there may be a shift on the horizon. DLA Piper, which has bases in Sweden, Norway and Denmark, is starting to make waves across the Nordics after an initial uphill battle, and other international firms in Denmark and Sweden are gradually increasing their presence as well.

This is exemplified by recent moves in the Norwegian market. In January 2020, Schjødt, one of the five dominant full-service firms in Norway, expanded its presence into Sweden through its merger with Hamilton, creating the first-ever Norwegian-Swedish cross-border firm. This was followed in 2021 with the announcement that leading global firm CMS had joined forces with Kluge, which is now a full member firm of the CMS network and, from late 2021, will be known as CMS Kluge. Further rumours continue to circulate regarding possible future mergers and acquisitions, suggesting that this may not be the last move into the Nordics by global firms.

Looking ahead, what does the future post-pandemic generally look like for independent firms in the Nordics? According to Due: ‘There is no doubt that the pandemic will have a substantial and lasting impact on the legal market in the years ahead. Changes in consumer habits during and after the pandemic represent both challenges and opportunities for service providers. Previously profitable and respected companies are under pressure and may continue to struggle, while other players have adapted to the situation with great success. We also anticipate further strengthening of global networks and continued digitisation in the legal field.’

For Gunnarsson, the long-term impact will be better working environments and increased efficiency in the delivery of service. Manner concludes: ‘While the demand surge was unexpected, our ability to work across the firm as well as we have was also a bit unexpected. Many of the conventions of the industry have been challenged, and for the better.’ LB

Amy Ulliott

The post Nordics: Northern Lights appeared first on Legal Business.

Rivalries are rarely more intense than the enmity between the Finland and Sweden ice hockey sides. Sweden took the plaudits in the recent Winter Olympics with a straightforward 3-0 win, but when it comes to legal market superiority, the Finnish have clearly roughed up the Swedes.

At the end of April, Finnish firm Roschier secured yet another senior name in Stockholm, this time by hiring Björn Winström as a partner just hours after he had been appointed counsel at Linklaters. His hire took Roschier’s headcount in Sweden to nine partners and 50 lawyers. It’s enough to challenge the longstanding hegemony of Sweden’s traditional legal giants, Mannheimer Swartling and Vinge. Stockholm-based Axel Calissendorff took over as Roschier’s senior partner in 2009, yet another indication of how the firm’s emphasis has shifted westwards to the Swedish capital.

Of the Nordic nations, the Swedish market has undergone the greatest transformation over the past five years. Linklaters, which blazed into Sweden with its headline merger with Lagerlof & Leman in 2001, has now shrunk to just eight partners in Stockholm. At the same time, the gentle influx of international firms such as the UK’s Ashurst, and the arrival of Finnish leaders Roschier and Hannes Snellman, has created an effervescent recruitment market. It’s a far cry from the staid market of the 1990s. Indeed, few could ever have imagined that firms from the much smaller Finnish economy would end up competing for the premium work in Stockholm.

‘Internationalisation will not stop. If firms want to compete in the long run they’ll need to have a strong cross-border capacity’
Mats Andersen, Clear Blue Water

When he joined Roschier from Mannheimer Swartling back in 2005, Calissendorff says that the Finnish firm had already made a significant impression on Swedish clients from its headquarters in Helsinki. He suggests that many Swedish or Stockholm-based clients had indicated that they would consider switching more of their work to Roschier if it had an office in the Swedish capital. ‘We had become so big in Finland that there were no true expansion opportunities. The partners perceived that the market was changing and Stockholm was increasingly becoming the business hub of the region,’ Calissendorff says. ‘Many private equity houses have offices in Stockholm and cover the entire region from there. Many of them said that in the event we set up an office in Stockholm, they would retain us in Finland and in Sweden.’

Calissendorff claims that, in the private equity sector at least, the Roschier message is getting through to clients. ‘It is about greater partner attention when leading a deal, and about partners who know the private equity industry better and who are more commercially aware,’ he says. Swedish clients include the private equity giant IK Investment Partners (formerly Industri Kapital).

Unsurprisingly, one partner at a leading Swedish firm plays down Roschier’s impact, describing the firm as a ‘mouse that roars’, but its ability to assemble a truly credible team in just five years is an indication of its standing both in Stockholm and across the region. The firm advised Saab Automobile when General Motors sold the Swedish carmaker to Holland’s Spyker Cars for €315m earlier this year.

Since Roschier hired Calissendorff in 2005, many leading names have followed, including former Linklaters partners Jens Bengtsson and Fredrik Rydin and leading competition specialist Lars Johansson from Cederquist, as well as seasoned litigator Claes Lundblad and experienced employment figure Magnus Wallander, both from Mannheimer Swartling.

Aside from threatening the dominance of Mannheimer and Vinge, Roschier’s ability to prise prominent names away from big firms has changed what was a rather serene legal market to one of the most hotly contested in Europe.

Market forces

Roschier’s principal rival in Finland, Hannes Snellman, has also made a bold play to gain a greater share of Nordic business. It followed Roschier into Stockholm in 2008, but appears to have much grander plans for the region. ‘We see all of the separate Nordic markets as very interesting. They are all related markets, but nobody has yet provided a credible Nordic solution,’ Hannes Snellman’s managing partner Carl-Henrik Wallin says. Rumours of the firm fervently knocking on doors in the other Nordic states are not unfounded, Wallin admits. ‘We are actively looking at Denmark and Norway, but it is too early to tell what we are going to do,’ he says. Roschier however, is not looking beyond Stockholm. ‘We have no plans whatsoever to merge with a Danish or Norwegian firm, or to set up greenfield operations in those countries,’ Calissendorff confirms. The firm will do no more than tighten relationships with the top firms in those jurisdictions.

The Danish and Norwegian legal markets remain largely free of foreign firms. DLA Piper maintains a presence in Norway, and Eversheds has an office in Copenhagen.

In contrast, Sweden has succumbed to internationalisation and this has created much greater fluidity in the recruitment market.

‘We see all of the separate Nordic markets as very interesting. They are all related, but nobody has yet provided a credible Nordic solution.’
Carl-Henrik Wallin, Hannes Snellman

Roschier and Hannes Snellman’s arrival in Stockholm has certainly shaken things up, but the boom in transactional activity from around 2004 to 2007 also provided many mid-ranking firms with much greater exposure to high-value deals.

Calissendorff says conflicts partly explained his decision to start afresh and leave Mannheimer, and his former firm does not dispute the fact that it and Vinge’s dominance of a relatively small market was causing issues. Adam Green, a Mannheimer partner who recently represented Volvo during its $1.8bn disposal to China’s Zhejiang Geely Holding Group Co, says: ‘It is true to an extent that Swedish conflict rules have created a degree of overflow work that other firms have benefited from. This was particularly true in 2006 and 2007.’ Green claims that since transactional activity has subsided the firm has been proportionately less affected than its smaller rivals. Mannheimer’s managing partner Stefan Brocker adds that, while Swedish transactional activity dipped by about 60% in 2008 and 2009, the firm’s deal levels only dropped by about 20%.

Much of this can be explained by the influence of private equity during the M&A boom. Private equity was, like in many markets, a key driver of the M&A wave, and with that came numerous contested auctions, raising the need for multiple legal advisers. As industrial M&A has taken centre stage again, at least until private equity transactions return, Green and Brocker believe that conflicts will be less evident and as such, clients will be less inclined or compelled to consider smaller or mid-market firms.

Even so, with Hammarskiöld & Co advising General Motors on its sale of Saab Automobile to Spyker Cars, it is clear that smaller, second-tier firms are winning headline mandates. Cederquist, for instance, worked alongside Allen & Overy to represent Spyker, and it also teamed up with Freshfields Bruckhaus Deringer to act for Geely on the Volvo transaction.

Redrawing the map

It’s clear that the Swedish legal market will probably never return to the days when lawyers remained wedded to one firm throughout their careers. Petter Wirrell, a partner at Cederquist, says that his firm has certainly felt the impact of the increased fluidity in the recruitment market: ‘We have had to react, as we have been hit by the increase in lateral moves. We contributed to Roschier with two partners and it took us quite some time to recover. One partner [Lars Johansson] headed our competition group. We also lost three partners to a new set-up in Stockholm.’ He adds: ‘We have had to rethink, be more flexible, and focus on organic growth. We need to pursue growth and then lateral hires will come.’

Cederquist has recently hired two senior lawyers from White & Case’s Stockholm and New York offices, with Martin Ulfsen joining as a partner and Lars Bärnheim as a senior associate. They will form part of the firm’s new emphasis on private equity, perhaps just as that market is showing signs of recovery.

When the economy does recover and transactional activity returns, the competition for mandates will be more heated than ever. Joakim Edoff, CEO of Swedish firm Setterwalls, says that ‘the old map is being redrawn’ with the heightened trend for lateral moves.

Local firms, like their international competitors, are more tightly managed and profit driven. Vinge’s managing partner Michael Wigge says: ‘We have to have constant control over costs and we are really focused on profitability, utilisation and staffing. This was not so common in the market previously. We have to be competitive to attract and keep the best legal talent.’

‘We are focused on Sweden and Scandinavia as it is under-represented by international law firms.’
Adrian Clark, Ashurst

For firms, the bolt-on or the gradual development of new practices is viewed as the most appropriate way to guard against the effect of boom-and-bust economic cycles. Mannheimer Swartling has a pre-eminent dispute resolution practice, according to The Legal 500 Europe, Middle East and Africa, and this has helped to sustain solid financial results even during the economic downturn. Brocker says that dispute resolution revenues at the firm grew by 35% to 40% during the last financial year. Last October, the firm was mandated to represent the Republic of Hungary in its energy dispute with EDF under the Energy Charter Treaty.

This ability to provide counter-cyclical services has become the core strategy of many of its competitors. Setterwalls’ Edoff says that the firm’s full-service approach has enabled it to stay busy during the economic downturn by staying close to clients even while transactions have been non-existent. In fact, he claims that all departments in 2009 out-performed 2008 figures.

Jyrki Tähtinen, the senior partner of Finland’s Borenius & Kemppinen, says that the firm’s full-service commitment has been crucial. ‘We didn’t go into cutting service lines to become a transaction machine. We’ve had very healthy litigation, arbitration, labour and pre-insolvency workout matters for our financing lawyers. That is 2007 to 2009 in a nutshell.’

International stage

What many Nordic firms are missing is the confidence to go after international transactions. According to Mats Andersen, head of Stockholm-based strategy consultant clear blue water, firms need to work harder to get involved on international deals. The former Linklaters partner says: ‘If you look at the economy, internationalisation will not stop, it will grow and grow. If firms want to compete in the long run they’ll need to have a strong cross-border capacity and then the question is how they build that up. Take Mannheimer Swartling: it has offices in Russia, Germany, China, Brussels and New York and that might be right, but it’s very difficult for Swedish firms to set up powerful offices in the larger economies because they can’t afford to attract high-quality people.’

Clearly, the larger firms are ahead of the curve on the international front. Mannheimer Swartling believes that its involvement in the Volvo transaction earlier this year is portentous for the Nordic market and the firm’s business. Lead partner on the Volvo deal Adam Green believes that it is the ‘deal of the decade’. The former Cravath, Swaine & Moore associate says: ‘Volvo is so tied up with the Swedish national identity, both here and abroad. It was a huge event domestically and when you think of the industrial history of China, it could be that Volvo is the first premium consumer brand that China Inc has acquired.’

‘We have been hit by the increase in lateral moves. We contributed to Roschier with two partners and it took us quite some time to recover.’
Petter Wirrell, Cederquist

Mannheimer has offices in Shanghai and Hong Kong, and Brocker believes that the firm’s commitment to China will be crucial to its continued success: ‘More and more we are seeing a flow of capital from East to West, so it’s vitally important to have a team in China building and nurturing our contacts there.’

Vinge’s Wigge has just returned from a trip to China to meet with Chinese corporations and local law firms and to prepare for a Swedish delegation to Expo 2010 in Shanghai. He says the Chinese he met with had outstanding knowledge of the Nordic region. ‘They were so knowledgeable about the market and the type of companies here. They had pinpointed a number of companies that interested them. They had clearly done their homework,’ he says.

Wigge is also adamant that the Chinese will be initially drawn to Stockholm as the ‘gateway to the Nordic region’. He is no soothsayer in expecting another wave of cross-border work with much of it driven from China. Economists and law firms around the world are all braced for this phenomenon, but it will inevitably lead to even greater rivalries within the Nordic legal markets.

Even with the gradual downsizing of Linklaters in Stockholm, this has not spelt the end of international firms’ interest in the Nordic region. London-headquartered Ashurst is still committed to building its Stockholm presence, even with the legal profession’s current fixation on emerging markets and Asia. ‘We are focused on Sweden and Scandinavia as it is under-represented by international law firms,’ Ashurst’s global head of corporate Adrian Clark says. ‘Of the ten or so largest Scandinavian companies, all are large international corporates who are prepared to pay international rates. If we go into the head office of these big corporates we can sell them something totally different.’

Although firms in the region have consistently played down the impact of Linklaters’ arrival in 2001, the Magic Circle firm still topped mergermarket’s Nordic M&A tables by value for 2009. And Ashurst’s statement of intent must at least cause some concern. For Stockholm’s intensely competitive legal scene and for the wider Nordic market, facing up to the unstoppable internationalisation of local economies must be top of the agenda. And no doubt, as firms make themselves attractive for cross-border mandates, it could create even icier relationships between the Swedes and their Finnish equivalents. LB

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