The Finnish line
24 September 2012 | By James Swift
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Despite the establishment of breakaway boutiques and some consolidation, all is steady in the Finnish legal market
Although some corners of the Finnish legal market are showing signs of change, on the whole little has changed as the M&A market remains quiet. Nevertheless local lawyers remain confident of survival.
One of the biggest stories to hit the Finnish legal market in the past 12 months was that of a new M&A boutique established by managing partners from two of the country’s leading firms.
The new firm, Avance, was established in October 2011 by Ulf-Henrik Kull, previously the managing partner of €52.4m firm Roschier, and Carl-Henrik Wallin, previously th=e managing partner of €57.2m firm Hannes Snellman. Kull is the senior partner of Avance while Wallin is the managing partner.
The talk going round the legal market was that the pair had become unsettled by the shift in gravity from Helsinki to Stockholm at their previous firms. Hannes Snellman launched an office in Stockholm in late 2008 and has grown rapidly since then. Roschier, meanwhile, opened an office in Sweden in 2005, which has also grown in size and prominence.
“Both [Kull and Wallin] were unhappy with the situation,” says one partner at a top firm in Finland whose views were echoed by others. “Roschier and Hannes Snellman both opened Stockholm offices and hired a lot of high-profile lawyers, and we suspect that some of the Finnish parters at both firms were unhappy about how things have developed.”
Wallin, however, denies that is the case.
“I wouldn’t put it that way,” he says, adding that for there to be a shift in gravity there would also have to be a shift in where most of the profit was being made. “It is not so that we were disappointed. There were many reasons [why we left] but the only fruitful way is to look forward and not backwards. We left and the reasons were what ever they were, and now we look forward.”
Indeed, Wallin prefers to think about Avance as a fresh start.
“We’re only 11 months into it but it’s been a really fantastic ride,” says Wallin, who adds that the gestation period for the new firm was short, describing his initial talks with Kull as an “immediate meeting of minds”.
“Kull and I sat down and talked and realised that we saw many things the same way,” he says. “And we sensed that although it was something that was a bit crazy, we thought there was a clear space on the market for us.”
Avance focuses on corporate. According to Wallin, some 92 per cent of the firm’s revenue comes from M&A deals, but that figure also includes related financing mandates. The remaining 8 per cent or so tends to be quite varied and is a by-product of Kull’s unusual practice. Kull is known by competitors as one of the market’s most impressive rainmakers, but he is also politically connected and often finds himself working on a range of matters, including competition, state aid and IP work.
Wallin says that despite a sluggish second half to the year, the firm has had double the amount of work than it expected. In less than a year the firm has grown from a six-lawyer firm to a 22 fee-earner firm – including one non-lawyer – although Wallin adds that there are no particular growth targets to adhere to and that he is uninterested in comparing the firm’s volume of work with any other firm.
“We want to do the type of work we like to do,” says Wallin simply.
Indeed, Wallin adds that there were many things associated with the running of a traditional law firm that he did not want to carry over to his and Kull’s new venture.
“I spent close to 20 years at Hannes Snellman and [Kull] spent some 20 years at Roschier,” he says. “We asked ourselves if we were to build a firm from scratch, how would we do it? If we’d decided that we wanted to create something similar to our old firms, then we could have just stayed where we were.
“We decided that we would have no budgets and no financial targets. There’s no internal watching over people’s shoulders to check who’s doing what. We fully count on having the right people and that they are ambitious. That might sound naïve, but so far it’s worked out fine.”
Brave new world
Wallin talks about his firm as being part of the 3.0 world, where there is little or no need for hierarchy within a law firm, provided you have the right raw materials. He says that when the firm holds a meeting it involves everyone, from the most senior partner to the youngest lawyer, sitting in a room deciding what needs to be done. “But 95 per cent of the time,” adds Wallin, “we’re working on client matters because that’s what we like doing.”
In addition to involving everyone at the firm in decision-making, Wallin says that he wanted to scrap titles that delineated lawyers’ status within the firm, as well as giving every member of staff the option of ownership.
“We decided we didn’t want to continue with the traditional model of having different types of lawyers – partners and non-partners,” says Wallin. “To me, ownership is a positive thing and I didn’t want to be restrictive. With the right kind of people there’s no need to segregate.”
Alas, it seems the market is not ready for Wallin’s concept of a 3.0 law firm. Wallin says that people were continually asking for lawyers’ titles – were they a partner or an associate? – and so he relented rather than explain his firm’s concept every time he picked up the phone.
Finland’s bar rules were against him, too. Non-lawyers are barred from owning a law firm in Finland, as are lawyers who are not advocates, a title only awarded to those who have practised for more than four years.
Crossing the pond
The other significant expansion undertaken by a Finnish firm of late was attorneys-at-law Borenius’ New York launch in July. The firm has bolted on Vanto Law PLLC, a three-lawyer firm led by Jarno Vanto, who specialises in privacy and data protection law, cross-border contracts and general corporate.
“The idea of the New York office is not to offer the same full-service practice of law as in Finland and the Baltic States, but it will operate as an important bridgehead,” said Borenius managing partner Jari Vikiö in a statement. “The US will continue to be an important market and growth area for the growing Finnish technology, media and design companies.”
Vikiö told The Lawyer that the firm planned to expand in New York in due course by hiring local lawyers with a Scandinavian background. Borenius is keen to exploit its expertise acting for young, fast-growing Finnish companies in New York, especially those in the technology sector, an industry that accounts for some 25 per cent of the firm’s total revenue.
But, those developments aside, law firm movement has been largely quiet in Finland as the market continues to tick along.
“I think we’re still very much suffering from the financial crisis,” says White & Case’s Helsinki managing partner Petri Haussila. “For three years in a row I started the year with fairly high expectations. There were a lot of transactions waiting to be done but every year we’ve been disappointed.
“A lot of companies talk about doing deals early in the year but these fall away and then activity picks up towards the end of the year. This year, however, it was the opposite. The beginning was busy but it’s looking like the rest of the year will be less so. M&A is particularly quiet in terms of private equity deals. There are some exit transactions but new deals are almost non-existent because banks are looking to shrink their balance sheets, which means private equity houses can’t line up the kind of financing that they used to get three or four years ago. Of course, there is also a lot of uncertainty related to valuations.”
Deal of steel
There was at least one big deal that helped boost many firms’ coffers. In February Finnish steel company Outokumpu announced its intention to acquire Inoxum, a fellow steel producer and a unit of German company ThyssenKrupp, which was valued at €2.7bn (£2.1bn).
White & Case, led by Haussila, advised Outokumpu as Finnish corporate counsel for the deal, as well as on a €1bn rights offering by Outokumpu. The firm worked as co-counsel alongside Skadden Arps Slate Meagher & Flom, which put out a team led by London M&A partner Scott Simpson and Brussels antitrust partner James Venit.
Hengeler Mueller advised ThyssenKrupp as lead counsel, corporate partners Maximilian Schiessl and Georg Seyfarth led on the deal. Hannes Snellman, led by senior partner Johan Alto, also advised ThyssenKrupp.
Even Avance, which had only been in existence for a matter of months, scored a role on the deal, advising Soludium Oy, the principal shareholder in Outokumpu in connection with the merger and the subsequent rights issue by Outokumpu. Castrén & Snellman partners Merja Kivelä and Juha Koponen meanwhile, advised JP Morgan, Nordea, BNP Paribas and Crédit Agricole as managers and underwriters of Outokumpu’s rights issue – one of Finland’s largest ever – which was used to part fund its acquisition of Inoxum.
Roschier was not on the deal, but that was only because the firm was conflicted out of acting.
For the most part, however, the kinds of deals keeping firms active are around the €200m mark and relate to industrial companies.
“The market has been holding up a little bit better in the Nordics, based on what I hear about other countries,” says Hannes Snellman’s M&A head Sten Olsson. “One reason is that the Scandinavian banks are in pretty good shape and open for business, and can providing financing for acquisitions.”
But if there is one thing that previous years have shown Finland’s lawyers, it is that you cannot count on anything.
“We remain optimistic that clients will continue to go through with the deals,” says Castren & Snellman’s M&A head Jan Örndahl. “But things change rapidly so we need to be creative and think outside the box. The general outlook is still very cautious.”