Since entering the market in 2000 through a merger with Lagerlöf & Leman, Linklaters has gone from 35 to just nine partners. In only the first four months of 2010 two more partners left the firm’s Stockholm office.
But even with the latest departures, Linklaters remains calm about its steadily shrinking office, safe in the knowledge that it is still the most significant international player in Stockholm. A state of affairs that says a lot about UK and US firms in Scandinavia.
As Sweden ambles out of a mild recession one thing looks clear: the halcyon days of M&A, which categorised the first seven years of the new millennium, are over and they are not coming back. At least, not the way they were.
A future with a more sedate transactional market is not one that is peculiar to this Nordic country. It is the same the world over and as a legal jurisdiction, Stockholm still has a lot to offer.
Sweden, which went through its own financial crisis in 1993 resulting in its currency devaluing by around 30 per cent, responded decisively and effectively to the crash this time around, keeping the market alive with privatisations and a $260bn (£170.66bn) bank-rescue package.
And with so many investment banks and companies with headquarters in the region, and Stockholm’s position as the centre of the Nordics, Sweden remains
a significant market.
The country is still dominated by its native firms. Mannheimer Swartling and Vinge hold the top spots followed by Lindahl, whose resurgence after merging with RydinCarlsten in February 2009 pushed Linklaters out of the top five.
Linklaters defends its dramatic reduction saying a large international operation in a small jurisdiction such as Stockholm is inappropriate. According to Stockholm managing partner Per Nyberg, the firm’s size is in “perfect position” going into a period of increased activity.
Certainly for a boutique practice, shrinking does make sense. The scope for high-profile, high-fee work in Stockholm is limited and Setterwalls’ chief executive Joakim Edoff describes Linklaters’ decisions as “logical”.
But some voices in the market express doubt over the magic circle firm’s strategy.
“They thought they would take a lot of outbound transactions with the very big Swedish companies because they have a one-stop-shop everywhere,” says Mannheimer Swartling managing partner Stefan Brocker, “but they’ve not really got them. One mistake was perhaps saying they weren’t interested in doing smaller work. That’s the kind of comment that irritates some people because clients say ’if you want to work with us then you would have to do smaller work too, because we want a relationship with a firm and even though it’s not as profitable you must do the smaller work’.”
Others believe that the cull of staff at Linklaters, combined with the hierarchical nature of UK firms, has clashed with the Scandinavian ethos, harming the culture at the firm and causing valued staff to look for the exit. With the firm’s focus on corporate transactions, the two most recent defectors – M&A big-hitters Martin Börresen and Peter Högström, who went to Ashurst and Lindahl respectively – would have still been considered assets.
“I have friends who have been partners in firms such as Linklaters and White & Case,” says one partner at a Swedish firm, “and they tell stories of complete frustration, with partners from Paris and London trying to tell them how to do everything.”
But Linklaters’ Nyberg rejects any suggestion of micromanagement. Instead, he says, it is a shared vision among partners that precipitates a unified approach.
“It is therefore this consistency and determination among partners in working towards fulfilling our global strategy that differentiates us from local firms,” he says. “The fact that we’re actually able to do this successfully isn’t the result of being controlled centrally.”
Other international firms in Sweden have also failed to capture as much of the market as they might wish.
White & Case has been successful, although some commentators in the market question what will happen when Claes Zettermarck, who is largely responsible for the firm’s relationship with its key client Nordic Capital, retires from the firm.
And though Ashurst, which according to Stockholm managing partner Jon Ericsson aims to become one of the top corporate finance practices in Sweden, scored a coup in hiring Börresen, it has suffered losses of its own – the firm was down to just two full-time partners in December 2009.
Of course, for the size of the market no international firm would benefit from a large operation in Stockholm, competing for smaller deals with native firms. But there still seems to be something inhibiting US and UK firms’ progress.
“I think it’s down to a different mentality between UK and Swedish lawyers,” says Cederquist managing partner Jens Tillqvist. “I did a second year in a UK firm in the mid-1990s and it was very different. UK firms tend to be more hierarchical and try to commoditise and structure more. They are building firms like law firm factories, which is necessary when you reach a certain number of employees – and they know a lot about how to succeed in the legal profession – but it doesn’t really fit in the Swedish system. Everyone wants to be their own boss.”