New regulations and a generally tougher market are prompting much introspection, often as a prelude to merger, at law firms in Scandinavia.
The Scandinavian legal market is undergoing an evolutionary shift as continued economic pressure forces the profession to make changes to the way it works. In Denmark large firms are looking below their normal client bases, meaning mid-sized firms are now feeling the squeeze. As a result the legal sector is undergoing a phase of consolidation.
Kromann Reumert lawyer Jakob Hans Johansen explains that the high levels of activity seen in 2007 and 2008 in M&A, acquisition finance and structured finance came to a halt, albeit slightly later in Denmark than in many countries. The impact on Danish legal work only hit towards the very end of 2008 and early 2009.
“The decrease has had implications for the legal sector as a whole, but has probably hit the second and third tier the hardest,” explains Johansen. “Many medium-sized firms and niche corporate firms are suffering as a result of their lack of capabilities and established client relationships within insolvency, finance and banking regulatory.”
Heavies stay top
An additional effect of the financial crisis, he adds, is that clients seem to have opted for more mature brands in the market. The top firms have not suffered a decrease in work thus far, as other areas have compensated for the loss of mid-sized M&A transactions.
“Mid-sized firms without a clear specialisation are struggling,” says Hannes Snellman Copenhagen managing partner Philip Risbjørn. “They’ve been hit particularly badly.”
“I predicted six months ago we’d see some of the mid-sized firms disappear,” states Danders & More senior partner Anders Hansen. “Over the past year four law firms have disappeared. If you’re a traditionally focused Danish firm focused on the Danish market, then the financial crisis has now come back to sting you in the tail.”
As of last October, nine-lawyer transactional boutique NSR merged with Danders, with the former relinquishing its name. In a statement at the time, NSR partner Frantz Sigersted-Rasmussen said the merger was a “natural move, like a football team moving up a league”.
Reports in the Danish press suggest 13-partner Lind Cadovius is going through troubled times. Partner and environmental lawyer Håkun Djurhuus is quitting the firm to join Denmark’s second-largest firm Bech-Bruun at the start of 2012.
The latest merger to hit the headlines is that of full-service outfit Philip and Bech-Bruun. Effective from January 2012, this will see Bech-Bruun employ 275 lawyers.
“These are desperate moves,” says Hansen. “The stronger parts hope to get more work; for the weaker parts it’s for survival reasons. Merging two parts that aren’t working can’t be good. I think we’ll see downsizing. If your only claim to fame is that you’re big, then that won’t work at all.”
“We’re looking at our size,” confirms Rønne & Lundgren partner Steen Puch Holm-Larsen. “The trend is that we’ll see more consolidation and a few more larger firms and boutiques. Currently we’re in between, so we need to do something. It could go either way. I used to work for Bech-Bruun and I’d personally like to be that size again, but I can see the advantages of being a boutique.”
Over in Norway Wikborg Rein managing partner Susanne Munch Thore believes the legal market has grown.
“Small to medium-sized players have become a bit larger,” she says. “We now have more medium-large law firms. In Oslo we have more firms with 70-80 lawyers than five or six years ago. It could be that the total market for legal services has expanded as the business market has expanded.”
As a result of regulations introduced last year the legal profession in Norway now places more emphasis on monitoring the working hours of junior associates.
After inspecting law firms, the national labour inspection authority came to the decision that junior associates do not come under the exemptions granted to particular employees. The limits on ordinary work hours are now nine hours per day, 48 hours per week and 1,824 hours per year.
Thommessen partner Lars Eirik Gåseide Røsås says the regulations affected some, but not all, of his firm’s 70-odd junior associates. “Some associates worked considerably longer hours before the regulations were introduced,” he explains, “whereas for other associates the change hasn’t been that significant.”
Munch Thore adds that junior associates at Wikborg Rein were working over the permitted hours “in some instances” before the rules were introduced.
Firms can apply for a tariff agreement, which allows junior associates to work 10 hours per day, 54 hours per week and 2,130 hours per year.
“Our associates came to us and said they were worried that these restrictions would affect them from being involved in lengthy litigation work,” relates Kluge partner Atle Degré. “So we got a tariff agreement. There’s now a larger focus on registering hours. Not only billable hours, but all working hours.”
“We divide the work more evenly,” adds Munch Thore. “It’s healthier that we now have these systems. This has now become part of our daily routine and not a challenge.”
Meanwhile, partner Maria-Pia Hope at Swedish firm Vinge reveals that these days in excess of 50 per cent of the recruits into the firm are female.
“Certainly it’s the case that a lot of the really talented young lawyers are women,” she says. “So that puts an increased focus on how we retain talent in the long run – for all firms, not just Vinge.
“We’re certainly trying to recognise that being a lawyer and starting a family can be tough. We want to try to make it possible to work flexibly. It’s the sort of thing that our young lawyers expect us to be able to offer them. I think that’s certainly the way forward, to allow increased flexibility.”