LB145 Finland p60-66
24/5/04
3:25 pm
Page 61
Finland
Cautious during the boom years, Finland’s legal market weathered the subsequent economic freeze better than its Nordic counterparts. As the thaw sets in, Legal Business discovers where the country’s largest firms are heading ANTHONY NOTARAS
BRING UP THE NORWEGIAN AND Danish legal markets with Finnish lawyers and you’ll be greeted with a mixture of puzzlement, bafflement and outright bewilderment. Quite simply, they are mystified. Such incomprehension seems strange initially. Sweden’s greater size and economy makes it hard for Finnish law firms to relate to, but with their geographical proximity and comparable GDPs, cultures and populations, one would expect Denmark and Norway’s legal markets to be similar. Not so. ‘What is going on in Denmark would not be sustainable in Finland,’ Tomas
Lindholm, Roschier Holmberg’s senior partner, says. ‘We have to be more realistic.’ The differences are in scale and approach. With a population of 5.2 million, Finland’s two largest firms – Hannes Snellman and Roschier Holmberg – have just over 100 lawyers apiece. Apart from Castrén & Snellman, which at the last count numbered 77 lawyers, few Finnish firms make it beyond the half-century mark.
Clearly, the emphasis in Finland is not on size and, while firms are growing, most are aware of the natural limitations of the domestic market. As Petri Haussila, head of White & Case’s Finland office, points out: ‘It is difficult for second-tier firms to compete aggressively, as they would just hurt themselves.’ Certainly the largest firms feel they have reached the optimum size. ‘We are smaller than our friends in Norway and certainly in Denmark,’ Johan Aalto, joint head of M&A at Hannes Snellman, says. ‘Doing what we are doing, 100 lawyers is a fairly good size. Bigger is not better, better is better.’ Easier said than done – but numerous Scandinavian (and UK) firms would be feeling a lot more secure if they had followed this simple mantra.
Neighbourhood watch In contrast, Danish and Norwegian firms have displayed a glorious lack of restraint. Denmark has more small- to mid-range companies and Norway is sheltered by its vast resources of oil and gas, but that still doesn’t explain why their legal markets are so much larger. Both countries are littered
June 2004 Legal Business 61
>
LB145 Finland p60-66
24/5/04
3:25 pm
Page 62
Finland
THE BOTTOM LINE THE BIG TWO Roschier Holmberg
No of fee-earners Turnover 2003 102 €26m
Hannes Snellman
101 €25.8m
THE BEST OF THE REST Castrén & Snellman
77 €15.9m
Borenius & Kempinnen
50 €10.8m
Krogerus & Co
39 €6.2m
Dittmar & Indrenius
26 €6.5m
Fennica Attorneys at Law
21 €4.5m
Waselius & Wist
20 €4.5m
White & Case
12 €10m*
Top clients Nokia (according to rivals), Sampo, Hackman Group, General Electric Sampo, Kone, Novo Group, Ford, TeliaSonera
Key partners Tomas Lindholm – credited by rivals as the the main driver behind the firm’s success, Lindholm is the grand statesman of the Finnish legal profession. Johan Aalto – has been at the firm since starting the law in 1987, is currently co-head of the firm’s M&A group. Undoubtedly one of the most active M&A lawyers in the country.
Pohjola Group, Komatsu, Bank of Scotland, ABN AMRO
Just beneath the top two, is the only major Finnish firm with an office in St Petersburg. With star partner Kimmo Rekola, the firm has an excellent reputation in the IT sector. Fonecta, PI-Management Oy, The only large Finnish firm with a genuine presence in the Dragon Mining, TeliaSonera Baltics, it has two very strong offices in Estonia and Latvia. Managing director Jyrki Tähtinen remains one of Finland’s best-known corporate lawyers Elcoteq, ABB Credit, Capvest Established in 1992 by name partner Hannu Krogerus, it is Venture Fund, GE Finance one of Finland’s fastest growing firms with an excellent reputation for domestic transactions. The firm has five offices in Finland. Scottish & Newcastle, Cap Gemini Top corporate finance boutique that sees itself as the Wachtell, General Motors, GlaxoSmithKline Lipton, Rosen & Katz of Helsinki. Senior partner Markus Hewlett Packard Troberg has a superb international pedigree. Xerox, SAP Finland, Established in 1999 as a TMT boutique, the firm enjoys a WM-Data Novo deservedly top-notch reputation. IT specialist Pekka Takki and corporate finance partner Jori Taipale are leaders in their fields. JPMorgan, TXU Europe (in Formerly senior partner at Roschier Holmberg, esteemed name administration), Canadian partner Jan Waselius gained an OBE for his role as advisor Imperial Bank of Commerce to the British government in Finland. Name partner Tarja Wist is one of Finland’s top capital markets experts. AGCO, Nordic Capital, Ratos AB Office head and co-head of White & Case’s global securities Stora Enso Corporation, Sonera practice, Petri Haussila is the undisputed king of Finnish and Finnish government on the capital markets work. The office recently recruited corporate TeliaSonera merger finance partner Risto Ojantakanen from Roschier Holmberg.
*Figures from 2002. 2003 figures not released yet
> with mid-tier firms that range from 70 to 90 lawyers in size. Denmark, with its population of 5.3 million, somehow supports two law firms – Bech-Brunn Dragsted and Kromann Reumert – with nearly 250 lawyers each. Norway is smaller than Denmark, yet its six largest firms range from 142 down to 105 lawyers in size. Proportionally speaking, Clifford Chance is a minnow. The late 1990s and early 2000s were heady days, and the largest Danish and Norwegian practices entered the party with gluttonous appetites and ballooned in size. Alas, the inevitable hangovers will be long and painful. In 2003 came the first batch of redundancy notices, and if the market
62 Legal Business June 2004
Source: Legal Business and Balance Consulting
doesn’t improve, the unwelcome sound of Scandinavian P45s hitting tasteful pine desks is likely to become more frequent. Barring a handful of unrenewed short-term contracts, Finnish firms have not had to axe any fee-earners. Profits may have taken a slight dip in 2003, but even the most cynical and cautious Finn will admit that things are getting back on track. Nevertheless, most will concede that transactional activity won’t return to the halcyon days of the recent past.
‘If we go three years back, it was a hysterical period and everyone wanted to buy something. There were plenty of assignments for everyone. Today the atmosphere is very different,’ Markus Troberg, a senior partner at top corporate finance boutique Dittmar & Indrenius, notes. ‘To put it bluntly, nothing will be like before. To negotiate a deal takes longer, as it is a much more cautious proceeding. The number of deals is less, but we have seen a recovery this year and at the end of last year,’ Troberg adds.
Slow thaw Even when times were good and growth slipped into the fast lane, most Finnish
LB145 Finland p60-66
24/5/04
3:25 pm
Page 63
Finland
law firms kept one foot hovering over the brake pedal. This sense of caution is the key to the relatively healthy state of the legal market. Lessons from the past played a large part in this cautious approach. ‘In the early 1990s there was a truckload of insolvency work; that was when we learnt the lesson that when things are too good to be true, they will eventually come to an end,’ Jyrki Tähtinen, managing partner at Borenius & Kemppinen, explains. Jan Waselius, name partner at Waselius & Wist, agrees: ‘We were probably harderhit by the downturn in the early 1990s, which brought about structural changes that helped us withstand things better than our neighbours.’ The collapse of the Soviet Union, which accounted for about 20% of trade, certainly exacerbated the situation
TOP SCANDINAVIAN-BASED FIRMS FOR NORDIC M&A IN 2003 Adviser Linklaters Mannheimer Swartling Vinge Bugge Arentz-Hansen & Rasmussen Roschier Holmberg Thommessen Hannes Snellman Kromann Reumert Bech-Bruun Dragsted
Total deal value $13,296m $10,312m $7,703.8m $4,641.1m $4,218.5m $3,298.7m $2,422.3m $1,022.3m $866.2m
No. of deals 43 47 61 4 20 3 24 2 1
No. of fee-earners 130 295 246 105 102 141 101 230 249
Source: figures taken from Thomson Financial, size from European Legal 500 2004
and made that recession much harder to bear for Finland – in fact numerous debts from that period remain outstanding.
Opportunity Nokias The seemingly conservative size of most Finnish firms is a reflection of the domestic market as a whole. Take the technology and
WASELIUS & WIST `xÅuxÜá Éy à{x Y|ÇÇ|á{ UtÜ WASELIUS & WIST is a leading Finnish commercial law firm, with particular emphasis on finance law, capital markets and mergers and acquisitions.
The latest edition of The European Legal 500 ranks WASELIUS & WIST as a top tier firm in the categories Capital Markets, Corporate and Commercial (including M&A) and Banking and Finance. The latest edition of IFLR 1000 ranks WASELIUS & WIST as leading firm in the categories Banking, Capital Markets and Mergers and Acquisitions. In the latest edition of Global Counsel 3000, WASELIUS & WIST is considered as one of Finland’s leading law firms in the category Banking and Finance.
The combination of broad-based expertise and focused specialisation coupled with the firm's emphasis on practical business-friendly solutions to legal problems enabled the firm to provide its clients with legal services of an unrivalled quality. ETELÄESPLANADI 24 A, 00130 HELSINKI, FINLAND Tel: +358-9-668 9520, Fax: +358-9-668 95222
www.ww.fi
June 2004 Legal Business 63
>
LB145 Finland p60-66
24/5/04
3:25 pm
Page 64
Finland
> telecoms sectors, areas where Finland is rightly famous. The downturn was by no means as harshly felt as it was in Sweden, its larger neighbour, for several reasons. ‘Sweden had a much bigger technology bubble than Finland. There has been a huge consolidation there and many have closed shop,’ says Tähtinen, whose own firm has a strong IT and IP focus. ‘Finnish venture capitalists, on the other hand, made one or two investments each, so there haven’t actually been many forced shutdowns. When it was good it wasn’t as good as in Sweden, but when things went sour, it wasn’t so bad,’ he adds. The relative stability of Nokia, which accounts for approximately 70% of HEX, the Finnish stock exchange, is also a major boon to the sector. Numerous companies, often referred to as the ‘Nokia cluster’,
almost wholly rely on the telecoms giant for sub-contracted work. Law firms in turn get a large slice of the action. For most, not representing Nokia is better than actually advising it, for obvious conflict reasons. Nokia instructs several domestic firms to varying degrees, and while Roschier Holmberg is admirably coy on the subject, it is the firm that rivals claim to see acting most frequently for the telecoms giant. But the fact remains that Nokia’s top corporate instructions go to the major international firms, and its in-house legal team is actually bigger than all but the two largest domestic firms. Still, most remain extremely grateful for the work. ‘Nokia is a once-in-a-lifetime company, but it will not disappear,’ says Troberg. ‘I have plenty of assignments thanks to Nokia. Not directly from it, but from associated companies.’ The generalist approach to the law taken by most Finnish firms also ensures that they aren’t overly exposed to a downturn in one particular sector, be it technology, capital markets or corporate finance. Even the larger firms with specialist divisions can shift lawyers from one discipline to another without too much trouble. ‘It is a fairly new situation where we talk about people being specialists. In many firms you have generalists, and in bad times it is always good to be a generalist,’ says Aalto. ‘While all these lawyers are specialising, to be a good M&A lawyer you still need to be a generalist.’
Never mind the Baltics The question now for most of the top Finnish firms is: where next? Most agree that the
Lindholm: constant referrals to the Baltics
domestic market has reached its natural limit and that further growth, at least within Helsinki, would be damaging. Since 1 May, however, the EU accession of the Baltic states has presented the Finnish legal market with an alternative avenue for growth. Roschier Holmberg is one firm that has embraced the opportunity – on 20 April, it announced an alliance with Raidla & Partners, Lejins, Torgans & Vonsovics and Norcous & Partners, of Estonia, Latvia and Lithuania respectively. The exclusive relationship will now provide legal services under the common brand of RoschierRaidla. Lindholm and Roschier Holmberg managing partner Lennart Simonsen are effusive about the prospects. ‘A City firm with a prominent client investing in the Baltics won’t know the local firms that well. They know
‘Doing what we are doing, 100 lawyers is a fairly good size. Bigger is not better, better is better.’ Johan Aalto, Hannes Snellman 64 Legal Business June 2004
LB145 Finland p60-66
24/5/04
3:25 pm
Page 65
Finland
our brand and reputation and this offers them security,’ explains Simonsen. ‘Since the launch I’ve been surprised by the questions and referrals from clients. Almost every hour we are sending referrals to the Baltics.’ Lindholm adds: ‘The short-term effects have been stunning.’ The firm has certainly picked its partners well: Norcous & Partners might be a relative newcomer to the Lithuanian market, but Raidla and Lejins are both top-tier firms in their countries. Despite the unquestioned pedigree, however, the move has raised eyebrows in Helsinki. One issue is whether the Baltic firms will remain loyal to their Finnish allies. ‘My understanding is that the only firms winning on such co-operation agreements are the Baltic firms,’ says one partner, who did not wish to be named. ‘These Baltic firms have all kinds of co-operation
that they have joined the EU, would they agreements with other really be looking North for their legal help?’ countries. For Roschier The feeling is that once the Baltics have Holmberg, it is good so they can found their feet, it is to Brussels, say to their Finnish London or New York that they clients that they will be looking, rather than have the best Helsinki. Hannes Snellman has resources in the no intentions, as yet, to follow Baltics, but that is in the footsteps of its rival. ‘We temporary. I bet look upon the Baltics as we do that this coany foreign country,’ Aalto says. operation won’t last ‘The only measure we’re taking five years.’ is to consolidate our existing Another adds: ‘To contacts, and we don’t aim to me, it lacks any establish exclusive relationships logic. Even though with firms in the Baltics. You Estonia is close to should never say never Finland, there obviously, but our prevailing is no similar strategy is what is sufficient for closeness to Latvia our clients, for the time being.’ and Lithuania. Now Waselius: harder-hit by downturn in early 1990s
June 2004 Legal Business 65
>
LB145 Finland p60-66
24/5/04
3:25 pm
Page 66
Finland
through its alliance with Magnusson Wahlin Qvist Stanbrook, which has offices in Rank Legal adviser No. of Total deal Denmark, Sweden and Poland. The eventual plan is for the deals value relationship to extend to the 1 Hannes Snellman 27 $2.4bn Baltics. ‘We believe that Scandi2 Roschier Holmberg 17 $1.39bn navia and the Baltics will be 3 Mannheimer Swartling 8 $1.37bn seen as one geographical block,’ 4 Vinge 10 $1.09bn managing director Juha Pekka 5 White & Case 3 $1.06bn Katainen says. ‘We will have a 6 Clifford Chance 2 $729.6m network of firms in countries 7 Freshfields Bruckhaus Deringer 1 $672.8m surrounding the Baltic Sea 8 McCarthy Tétrault 1 $614.7m and Scandinavia, providing a 9 Herbert Smith/Gleiss Lutz/Stibbe 4 $395.4m one-stop shop.’ 10 Hengeler Mueller 1 $349.4m Other than Krogerus & Co, 11 Slaughter and May 2 $224.9m Aalto: no advantage to Scandinavian one-stop shop few are convinced that Scandi12 Linklaters 1 $206m > He adds: ‘Furthermore, navia is a viable option. 13 Fenwick & West 1 $200m Roschier Holmberg might be Finnish business has shifted to 14 Castrén & Snellman 1 $192.4m gunning for the Baltics, but Estonia since the beginning of 15 Dittmar & Indrenius 7 $161.8m Scandinavia is certainly not on the 1990s, and it is difficult to 16 Waselius & Wist 3 $144m the cards. ‘The number of see whether EU accession will 17 Shearman & Sterling 7 $134.5m leading Scandinavian firms in dramatically increase this.’ 18 Jones Day 1 $84.4m each jurisdiction is very small,’ 19 Baker & McKenzie 1 $65.6m explains Lindholm. ‘If you have Eastern promise 20 Krogerus & Co 1 $64.4m too close a co-operation with Despite the concerns over Source: Thomson Financial them you could run into serious exclusive relationships, most conflict issues.’ remain enthusiastic about the On this, Aalto agrees: ‘Clients don’t Jähtinen. ‘We are in discussions business opportunities to be found in the see any clear advantage in a one-stop with Vilnius, but we aren’t a big Baltics. Borenius & Kempinnen, for one, has shop covering Scandinavia. The other Anglo-Saxon firm that can actually gone one step further, and with issue is conflict of interest – usually clients dictate the terms. We are a bit Luiga Mugu Borenius in Tallinn and Liepa want to have the best and have a freedom more humble in our approach Skopina Borenius in Riga it has a fully of choice.’ and want to have long-term integrated cross-border partnership. And it isn’t just the clients who want relationships, rather than be the ‘RoschierRaidla and the other things freedom of choice. ‘A predominant feature master of someone. Our concept we’ve been reading about are marketing of lawyers is that we want to be free,’ says takes longer to negotiate, and concepts and very competitive ones at that,’ Waselius. ‘As long as you can survive and part of the thinking is that managing partner Jähtinen admits. ‘Our live well and not have these link-ups, then maybe in a few years there will view is different and, in the long-term, you that is the preferred position.’ be more partners in Riga than have to look at the same balance sheets and It is an underlying sentiment that is held in Helsinki.’ income statements.’ by most Finnish firms. There is no rush and The going hasn’t been easy for the firm, certainly no need to over-extend yourself which has been directly involved in the Go west unnecessarily, be it through alliances or Baltics for over six years, yet in this time it While firms are prepared to growth. Caution is key and that is by no has nurtured two high-quality practices. ‘It’s look east for potential link-ups, means a bad thing. LB not like you can go and say: “Here I am, I only Krogerus & Co has taken anthony.notaras@legalease.co.uk want to practice.” It takes time,’ says the Scandinavian route,
LEADING ADVISERS ON FINNISH M&A IN 2003
‘In the early 1990s there was a truckload of insolvency work; that was when we learnt the lesson that when things are too good to be true, they will eventually come to an end.’ Jyrki Tähtinen, Borenius & Kemppinen 66 Legal Business June 2004