27 September 2010
An office launch and a merger sent ripples across the Nordic legal market this month.
Hannes Snellman opened in Denmark as part of its quest to comprehensively cover the Nordic region, while Helsinki firms Merilampi and Veikko Palotie & Co merged.
According to Merilampi, the merged firm will be Finland’s seventh-largest, with a turnover of e12m (£9.9m).
The two developments neatly embody trends that have emerged across Europe since the economic downturn - mid-market players consolidating and firms increasing their regional coverage.
Another predicted post-recession trend, discussed at length in a special report last year (The Lawyer, 11 May 2009), emerged from a report for Linklaters conducted by TNS Gallup. This highlighted the belief among large Nordic companies that, although M&A would decrease, companies would continue to do deals in a bid to expand across the Nordic region.
We asked lawyers from some of Finland’s top firms whether the research conducted by TNS Gallup has proved to be an accurate predictor, and also whether Hannes Snellman’s and Merilampi’s strategic grabs are one-offs or indicate a wider trend.
Arttu Mentula, managing partner, Merilampi
The Lawyer (TL): A report conducted last year stated that the main driver for companies looking to make acquisitions was to reach new markets. Has this materialised into a trend in the past 12 months?
AM: There’s been more activity and more companies entering into the Finnish market from other Scandinavian markets. For example, we represented Swedish Nordnet Bank on the acquisition of eQ Corporation [a SKr400m (£36.2m deal)]. However, nothing dramatic has happened in respect of many new companies entering
the Finnish market or
TL: What type of work, or sector of the economy, is driving legal work in Finland at the moment?
AM: At the moment we have lots of litigation and arbitration work, as well as competition law work. Additionally, there are lots of construction assignments due to our recent merger with Veikko Palotie. And the Finnish M&A and real estate markets are picking up too.
TL: Do you think your merger with Veikko Palotie is a prelude to further consolidation in the market?
AM: The major Finnish firms have been anticipating that there will be further consolidation in the Finnish market for some time, and now the merger between Merilampi and Veikko Palotie is a sign of that. It’s likely there’ll be further consolidation, especially if you look at what’s already happened in other Nordic countries such as Sweden, Denmark and Norway.
On the other hand, law firm mergers might also lead to a situation where small boutiques will be established, for example in the area of litigation.
TL: Hannes Snellman has recently expanded into Denmark as part of its strategy to become a pan-Nordic law firm. Is this a model that is likely to catch on?
AM: I don’t believe it’s likely that other Finnish firms will enter the Danish market. The other question is whether, for example, a Swedish firm would be interested, but it’s not that easy to enter the Danish market. Anyway, it’s likely that Danish firms will also look more closely at which firms they’ll cooperate with in the future.
Vesa Silaskivi, managing partner, Hammarström Puhakka Partners
TL: A report conducted last May stated that the main driver for companies looking to make acquisitions was to reach new markets. Do you agree?
VS: We’re definitely seeing more activity in both the domestic and cross-border M&A markets. However, I’m not sure we could categorise the transactions as being mainly for entry into new markets, although that’s certainly one of the reasons behind some of the deals we’ve worked on.
Naturally, following a period of financial uncertainty some deals are about consolidation and cost reduction and sharing, as well as giving access to new markets.
For Finnish companies with growth ambitions the real routes to new markets are via strategic acquisitions or finding good, reliable partners in key markets.
We’re seeing clients adopting both strategies, with activity levels increasing notably in terms of both M&A and commercial agreements.
Also, there’s been an increased number of indications of interest in Finnish targets that haven’t necessarily materialised into actual deals, although we hope that with economic recovery the conversion rate will increase.
TL: Was the Merilampi merger with Veikko Palotie a sign of things to come?
VS: It’s possible that other mergers will follow, with a growing awareness among Finnish firms that size is starting to matter, particularly if a firm has international aspirations. In terms of our own merger with Gahmberg & Co in September 2009, the rationale behind it was not one of gaining size, but of continuing our policy of building market-leading expertise in specific sectors.
Gahmberg was the leading transport and logistics boutique, with only four lawyers. Following the merger our mid-term growth strategy is one of organic growth, shown by the fact that we have added headcount in 2010.
In terms of the market generally, it’s possible that other firms will consolidate to achieve critical mass, but this will definitely be offset by another trend in the market, namely movement from larger firms at senior level either to set up smaller firms or to downsize to smaller ones. This has happened more in the past two years than at any other time I can remember
– perhaps a reflection of the economic climate.
Jukka Niemi, managing director, Castrén & Snellman
TL: A report conducted last May stated that the main driver for companies looking to make acquisitions was to reach new markets. Has this materialised into a trend in the past 12 months?
JN: In the past year and a half M&A activity has been low, so it’s difficult to say if those transactions that have taken place follow a specific trend or not. Activity is increasing now and we’re receiving more offer requests and giving more offers. The transactions are, however, proceeding slowly but deliberately and this is expected to continue.
TL: What sectors or practice areas are driving your practice?
JN: As a result of increasing M&A activity the workload is also increasing in other practice areas, especially in our EU and competition practice and our tax practice. Our employment practice has already been busy due to layoffs and other symptoms of the recession, but transactions are now increasing the workload in this expertise area too.
TL: Will the Merilampi-Veikko Palotie merger herald more consolidation?
JN: There’ve been a few similar mergers in recent years. Juridia and Heinonen & Co merged in April 2008 and Bützow Attorneys merged with Asianajotoimisto Kallioinen Tolppanen Salminen & Co in January 2009, but the firms that have merged are fairly small. For example, the collective turnover of the latter merged firms was a bit over e6m in 2009.
These mergers have no particular effect on the Finnish legal market and we presume we’ll see more in the future.
TL: How important is cross-border work to your practice? Will the Nordic countries develop a similar legal landscape to the Baltic States’, ie where firms of a certain size are expected to have a reach that spans neighbouring countries?
JN Cross-border work is very important to us, as more than half of our assignments are international. As many Nordic companies perceive the Nordic and Baltic countries as well as the northeastern part of Russia as their home market, it’s only natural that there’ll be law firms that have this kind of coverage over the course of time.
We see that there are three ways to work internationally: to establish branches abroad; to work in close cooperation or integrate with good partners in specific countries; and to be a local office for a global firm.
For example, Hannes Snellman has now chosen to put its effort, time and money into establishing its own offices in the Nordic countries, which gives us more opportunities to grow in Finland and in Russia. In the Nordic countries we already have excellent, long-term relationships with local firms and we’ll continue to take good care of these relationships in the future.
TL: Do you think Hannes Snellman’s model is likely to catch on?
JN: Most likely yes. And in addition, it’s only a question of time when a pan-Nordic firm will be created through mergers of local firms.
Mika Ståhlberg, partner, Krogerus
TL: A report conducted last year stated that the main driver for companies looking to make acquisitions was to reach new markets. Do you agree?
MS: It may, but at the same time the Finnish legal market’s already been saturated to the extent that there are now five major firms, each having between 80 and 90 lawyers, a high level of specialisation and the capacity to handle international transactions.
A merger creating a firm less than half the size of the largest ones may not be enough. Therefore there has been a lot of discussion about the smaller firms, or certain departments of the larger ones, doing the opposite - focusing on one or a few expertise areas and becoming as good as possible in those fields.
Good examples of this are the departures of Thomas Lindholm (former senior partner at Roschier), Kari Lautjärvi (former head of banking and finance at Hannes Snellman), Kai Kotiranta (former head of litigation at Borenius & Kemppinen) and Patrik Lindfors (former head of litigation at Hannes Snellman), who all departed to set up their own boutiques.
TL: Is the Hannes Snellman strategy of becoming a pan-Nordic law firm likely to catch on?
MS: I believe that if one has opened up an office in Stockholm, then Copenhagen and probably Oslo would be logical next steps.
Breakdown of Finland’s Top domestic firms