25 April 2011
25 April 2011
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29 September 2011
Pestalozzi’s split uncovered the fault lines between Zurich and Geneva. Joanne Harris asks whether Swiss firms can truly work across cultures
In any market, but particularly a small one like Switzerland’s, a law firm split gets people talking. So it is that the loss of the bulk of national firm Pestalozzi’s Geneva office more than six months ago still holds the attention of competitors.
Pestalozzi was formed in 2001 through the merger of Pestalozzi Gmuer & Patry and Lachenal Brechbuhl Cottier Roguet. The former had offices in both Zurich and Geneva, while the latter was Geneva-based.
But in October last year a group of mainly older partners in Geneva broke away to form Lachenal & Le Fort, leaving behind all of Pestalozzi in Zurich and two partners - Christophe Emonet and Sébastien Roy - in Geneva.
Although Pestalozzi managing partner Robert Furter thinks the split is now “cold coffee”, he is happy to run through the reasons for it.
“We had this collaboration with our Geneva partners and this wasn’t on a fully integrated basis,” he explains. “We were missing the synergies. We tried to find a structure in which we could have continued on a more integrated basis, but that wasn’t well-received by our former partners.”
Furter says the firm had always planned to try to integrate the offices.
“We had the goal to integrate fast but it never happened,” he admits. He says the decision to finally make the move last year was driven by younger partners.
Christophe Rapin, a partner at Lachenal & Le Fort, agrees that strategic differences lay behind the divorce. Rapin describes Pestalozzi’s former structure as “two law firms” and says the structure proposed was to integrate Geneva within the partnership as a branch office.
“We weren’t ready to go that way,” Rapin explains.
Roy and Emonet’s practice, according to both Rapin and Furter, fits better into Pestalozzi’s strategy than Lachenal’s.
“We’ve decided to concentrate on the core areas of banking, finance, litigation and M&A in Geneva,” Furter says, adding that he does not see private client work as core for the future of “a firm like ours”.
“Our concentration is clearly more on corporate and there’s just not that much synergy between that particular private client business and the corporate law business we do here in Zurich,” Furter stresses.
Rapin agrees that the partners who formed Lachenal had and have retained “a strong private client division”. But he says the firm considers itself a full-service practice. Lachenal, he says, is focusing on developing its IP and competition capabilities and has also “developed a tax department that did not exist in the past”.
The firm also took the opportunity, having split from Pestalozzi, to set up an office in Lausanne. The French-speaking town is also on the shores of Lake Geneva and, says Rapin, is increasingly attracting interest from industrial businesses. This is largely due to the fact that there is no longer office, or indeed residential, space in Geneva for new entrants to the market, forcing an exodus along the lake.
“It’s clear that from a national perspective we lost some capacity in the M&A market,” says Rapin, explaining the Lausanne launch as an effort to try to build capacity in a new place.
Both Rapin and Furter acknowledge that cultural differences remain between the French- and German-speaking parts of Switzerland. This is a view shared by many in the Swiss market.
“We’re always being asked why we don’t open an office in Geneva, and my response is, ’Why doesn’t Clifford Chance have an office in Manchester?’,” says Philippe Weber, a partner at Zurich firm Niederer Kraft & Frey. “We feel that the kind of work we do can be done out of Zurich only. It’s never been a competitive disadvantage for M&A or capital markets work, even when serving Geneva companies.
“I think one of the reasons we don’t think there’s so much merit is that the culture between Zurich and Geneva is different in terms of how lawyers work in practice. There’s no doubt it can be lucrative to be in the Geneva market, but in the end the question is, is it a fit?”
“From time to time we have this discussion in our firm,” reveals Vischer partner Jürg Luginbühl. “We’d be the largest firm in Switzerland if we merged with a large firm in Geneva. The problem is we don’t have a firm on the screen that we believe would properly fit with our culture.”
Schellenberg Wittmer managing partner Vincent Jeanneret has no doubt that Zurich and Geneva firms can merge successfully. His firm was formed in 2000 through a tie-up between Zurich’s Schellenberg & Haissly and Geneva’s Brunschwig Wittmer.
“For us it’s an ongoing success,” reports Jeanneret with pleasure. “It’s like being a couple sometimes - you discover what the other person’s like after seven years. After 11 we’re absolutely convinced that on both sides it makes sense.”
Bär & Karrer Geneva managing partner Cédric Chapuis says his firm has not experienced much of a culture clash since it opened its Geneva office 11 years ago. He believes the key was to address any potential problems from the outset and through doing “a lot of talking”.
Culture was also central to the strategy of Lalive. The Geneva firm opened in Zurich in 2010, hiring associates from Zurich firms and also transferring German-speaking lawyers. Partner Alexander Troller says the office has surpassed expectations and says the firm is planning further expansion.
Troller says Lalive has always sought to present itself as an international-facing firm and wanted to find individuals who would continue that approach in Zurich.
A tale of two cities
While the handful of firms with presences in both main cities say they are confident of the synergies between Zurich and Geneva in terms of nationwide presence and breadth of practice, other firms - including Homburger, Niederer and Walder Wyss - say they do not want to be in both places, at least for the time being.
Homburger managing partner Heinz Schärer says Geneva is somewhere the firm looks at “from time to time”, but for now it is sticking to its strategy of being a single-office practice.
“We’ve got a business there, and although our arbitration team sometimes thinks we should be there we’re not so strong in private banking,” Schärer says, pointing out that it is possible to service francophone clients from Zurich.
At Walder Wyss, managing partner Didier Sangorgio says the firm had a serious look at Geneva a decade ago. Sangorgio reveals that Walder Wyss went so far as to have merger talks with two firms in the city, but decided against going ahead with a tie-up for strategic reasons.
“At the time we’d switched to a lockstep system as a fully integrated firm,” he recalls. “The Geneva firms are still working in a traditional way as partnerships. That would have thrown us back a bit.”
There was another reason too.
“We’d taken the decision back in 1996 as a partnership that we’d desist from taking trust-related work. If you merge with a Geneva firm you have to accept that,” he says.
But Sangorgio thinks the market is slowly beginning to change, prompting Walder Wyss to start looking at Geneva again.
“We’re starting to see that in some areas there are advantages,” he admits. However, Walder Wyss would still stick to its strategy of not doing trust-related work if it did, at some point, go ahead with a Geneva merger.
Another firm examining its relationships in Geneva is Meyerlustenberger. The firm has an association with Geneva practice Crosier Gillioz & Associés. Partner Thomas Lustenberger says the relationship is predominantly founded on corporate work. Meyerlustenberger is thinking about associating with a larger Geneva firm to expand the practice areas offered.
Centres for attention
Switzerland is not all about Zurich and Geneva, however. A few firms have offices in Lausanne, as a neighbour to Geneva. Another handful have offices in Basel. Meyerlustenberger is one of the few to be based in Zug, the small town near Zurich that is promoting itself heavily as a place for international businesses to headquarter themselves.
Homburger’s Schärer says there is a good amount of trading activity, particularly in raw materials, happening in Zug, but he does not think law firms need to be present in the town.
“Zug’s basically Zurich, he says. “You sit in your car and step on the gas and you’re in Zug.”
Pizza the action
Meanwhile Eric Stupp, Zurich managing partner at Bär & Karrer, points to the Italian-speaking city of Lugano as another place where lawyers have not traditionally looked to base themselves.
“Not many people talk about Lugano and the Italian side of Switzerland,” he says. “It’s similar work with a more Italian angle.”
Stupp says there are a lot of Italian companies that have established headquarters, or at least offices, in Lugano. There is plenty of tax, M&A and banking work with a Northern Italian angle. He believes Bär & Karrer benefits from being present in the city and being physically closer to these clients.
Despite all the talk about the national footprints of Swiss firms, lawyers in the jurisdiction are also keeping an eye on international trends. Many have long benefited from referrals from international firms and all have significant international client bases.
Some believe the reliance on referred work from overseas dropped off in the credit crunch and has yet to return.
“I think that during the financial crisis there was a clear shift towards local work and a reduction in referral work,” says Weber. “Still today we benefit from a strong local client base that is active worldwide. This allows us to do referrals to foreign colleagues and we rely much less on referral work from foreign law firms.”
In contrast, Weber and others say they have noticed an increase in foreign firms trying to muscle their way onto Swiss deals.
“More and more they can convince their clients that Swiss transactions are governed by foreign law,” explains Luginbühl. “If a foreign law firm gets involved with a deal that’s linked to Switzerland they try to avoid any connection to Swiss law and get the deal done by UK or US law. If they’re convincing their clients to do this then there’s no real need for Swiss lawyers.”
Although Swiss lawyers are then needed for some aspects of such deals, Luginbühl points out that this work represents a fraction of the fees generated from the transactions.
As yet few international firms have tried to open offices in Switzerland. Those that have are restricted mainly to narrow specialisms connected to their own expertise. For example, Holman Fenwick Willan launched in Geneva last year with a shipping team, while Withers focuses on trust and private client issues.
There are persistent rumours that Allen & Overy (A&O) has been looking at Zurich. Lawyers report that the magic circle firm talked to large Swiss outfits last year, but when no partner was forthcoming it moved on to trying to hire teams and individual partners. To date these searches have been fruitless and A&O itself continues to deny the rumours. All Swiss lawyers agree that A&O’s entry into the market would be significant, indicating the strength of the country’s economy and the opportunities within it, but difficult.
Another hurdle for any potential new entrant to the market, or Swiss firms wishing to expand, is the competition for associates. Patrick Sommer, managing partner at CMS von Erlach Henrici, says large numbers of law students decide not to become lawyers once they are qualified.
The in-house market is also more attractive than it once was, particularly in the banking sector, reveals Rapin at Lachenal.
“Young lawyers can find interesting jobs in the in-house market,” he says. “The banking world’s changing and they have huge challenges to face.”
“The key challenge now, certainly for the mid- to large-sized law firms, is recruitment,” comments Lenz & Staehelin partner Marcel Tranchet. “We all have enough work to hire more people, but the typical law student looks at various options, not just at signing up to a law firm.”
Meanwhile, Sommer says firms will increasingly look at hiring from overseas to fill any gaps. High levels of recruitment are likely to continue as there is no doubt that the work generated in Switzerland is interesting and expanding.
Rather like their banking sector, Swiss law firms are not exactly renowned for their transparency. Getting financial figures from the market has traditionally been next to impossible -
but times are changing.
For The Lawyer European 100 2011 Niederer Kraft & Frey and Walder Wyss both became legal pioneers by providing turnover figures.
Walder Wyss managing partner Didier Sangorgio says the decision to reveal figures came after consulting the entire partnership, with the firm deciding that it had “no problem” with providing turnover.
However, persuading the rest of the market to be equally open is likely to be a long process, with the majority of Swiss firms remaining coy.
TOP SWISS FIRMS
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