With a reduction in activity by some of Finland’s largest companies, the changing economic focus is forcing law firms to think creatively. Dale McEwan reports
Mobile phone producer Nokia, based outside Helsinki, is poised to chop some 4,000 positions worldwide. Meanwhile UPM-Kymmene, Finland’s second largest papermaker, is to cut 1,170 jobs in Europe. The company will close its mills in Kouvola, Finland and Albbruck, Germany, as well as three paper machines as part of a plan to reduce capacity by 1.3m tonnes in Europe. And Stockholm-based Nordea Bank, which is Finland’s biggest lender, is also about to scrap around 500 jobs in Finland.
Amid this spate of redundancies, prime minister Jyrki Katainen is quoted in the Finnish press as saying that the country faces challenges in creating profitable companies. In such an export-focused country the task now is to develop new businesses to safeguard economic growth.
“In the past Nokia played a big role in the Finnish market,” says Jani Ylä-Autio, managing partner at Merilampi. “It had a number of big suppliers, so it wasn’t only Nokia but also a number of other smaller businesses that benefited from its presence.”
Andrew Cotton, specialist counsel at Hammarström Puhakka Partners, understands the present situation.
“Naturally it’s bad news for Finland and Finnish law firms if major corporates are struggling, because even if a firm doesn’t act for a major corporate there’s always work acting for counterparties and businesses on the other side of the table,” says Cotton. “However, looking at this positively, I wonder whether in five or 10 years’ time the Finnish economy will not be so over-reliant on a small number of big companies – maybe some former employees who have left and formed their own companies will act as new drivers for the economy.”
The question now centres on which industries should be developed to compensate for these job losses and how legal practice areas will grow in response.
“At the moment there’s a lot of discussion in Finnish economic and political circles about what should be done and what industrial areas could be developed,” says Kari Lautjärvi, a partner at Dittmar & Indrenius.
“The restructuring of the economy isn’t going to work unless Finland can bring niche companies to the fore,” adds Krogerus partner Kimmo Mettälä. “One way to diversify our industry base is to nurture companies that have the potential to become international success stories in niche sectors rather than in all areas. It’s an interesting future – good for lawyers with international experience.”
Firms are in agreement that Finland could lead the way in new high-tech businesses. Cotton cites Finnish computer game developer Rovio Entertainment as a good example of the type of company the government should be looking to encourage in the next few years.
“Moving production out of Finland to countries where production is cheaper is an important trend in the Finnish economy,” says Tarja Wist, one of the founding partners at Waselius & Wist. “We hope the level of Finnish education will help us come up with new industries. Finnish engineering is supposed to be high quality, so we’ll most likely see some kind of tech-based businesses. Also, we have experience in medical equipment. These new industries seem to be growing, but they need capital and they need luck.”
Wist adds that the companies that are reducing their operations in Finland are also cutting down on their legal costs, which is bad news for firms.
“This perhaps means that private equity has become more important for securing new industries,” says Wist.
Emerging companies in the Finnish market should perhaps heed Lautjärvi’s advice, which is to consider alternative financing methods.
“One of the trends I’d like to promote is that Finnish companies should increase opportunities to increase their financial bases,” Lautjärvi proposes. “They must try to find new sources of bank financing. Mezzanine financing is one of the areas where we should be more creative and active.”
Jori Taipale, managing partner at Bird & Bird Finland, says the firm is developing its IP practice in response to the predicted birth of new businesses.
“Many of the industries are either IP-driven or regulated,” says Taipale. “We’re well-positioned in that we know the problems in IP industries, and that’s creating a lot of work for us.”
Environmental technology could be one of the industries where Finland could be a leading country, suggests Lautjärvi, commenting that “it could be very natural”.
Pauliina Tenhunen, managing partner at Castrén & Snellman, agrees that IP and IT will be active in the future, but also believes the firm’s environmental and energy practice areas will see growth. Earlier this year the firm hired lawyer Miika Pinomaa from wind power company WinWinD. The firm also hired lawyer Annaliisa Lehtinen from the municipality of Jyväskylä to develop its public sector practice.
“We see that there are more public procurement issues the municipality needs assistance with,” adds Tenhunen. “Municipal enterprise groups are significant purchasers of legal services and we expect that such purchases will be increasingly handled through competitive tender processes. For this reason, it’s vital to understand the operating environment and ownership steering rules of municipal enterprise groups. Annaliisa brings inside experience to our company, which is in short supply elsewhere.”
Retaining good people seems to be easier said than done in Finland.
“There’s been a lot of turbulence, especially in the big law firms,” explains Lautjärvi. “Many young lawyers, especially females at senior associate level, have left firms. The profession is not so attractive as it was two years ago.
“We’re focusing on management and the working environment to take into consideration young lawyers and women. We’re trying to develop the culture so we’re educating our senior associates to manage well.”
Johan Aalto, senior partner at Hannes Snellman, agrees that retaining good lawyers in private practice is difficult in Finland, with many taking up in-house positions in banks and industrial companies.
“That’s something we’ve been thinking a lot about,” adds Tenhunen. “We’ve been active in recruiting female lawyers.”
Almost half – 47 per cent – of Castrén & Snellman’s lawyers are female, including managing partner Tenhunen. Castrén & Snellman has now held the title of most popular law firm employer among Finnish law students for three years in a row. The Ministry of Justice holds the top spot, with the courts being the second most popular. The next law firm is Hannes Snellman, in fifth place.
There are also opportunities for Finnish law firms outside the country. In recent years both Roschier and Hannes Snellman opened in Stockholm, with the latter also expanding to Copenhagen.
“In the Finnish market, many mid-sized firms are now challenging,” says Lautjärvi. “The biggest law firms have nearly reached their limits in the Finnish legal market, so this is giving more scope for the others because the expansion of firms into Sweden has caused Swedish firms to renew their referral policies with Finnish firms. This has created more Nordic work for the challengers. This is a good time for challengers in the Finnish market.”
Cotton agrees with these sentiments, adding that, while Hammarström Puhakka has no plans to expand, Roschier’s and Hannes Snellman’s office launches in nearby capitals present a significant opportunity for the firm to work with their former Swedish and Danish best friends.
Big is beautiful?
In addition to all this, Finland’s legal market is still in the process of consolidating.
“This might reflect a perception that, while Finnish firms will never match UK or US firms in terms of size, to be credible as an international law firm there’s a certain size below which a firm can’t really drop,” Cotton says. “It’s subjective to put an actual figure on the size a firm should be, but suffice to say that if you want to be credible in key areas, including transactions and dispute resolution, on matters that are either complex or of a certain duration, then you need sufficient resources to deal with those big matters as well as handling the more routine caseload.”
After the bankruptcy team at Peltonen Ruokonen & Itäinen left to form its own boutique, a merger was sealed between Peltonen and LMR that went live at the start of September. Peltonen LMR now has almost 50 lawyers.
One partner, who prefers to remain anonymous, says that for various reasons some mid-sized firms are struggling, either through a lack of succession planning and business development or weak management and no unified vision. He adds that this has led to last-minute mergers, and there may be more.
The partner also believes that more international firms may enter the market through spin-offs from the best parts of local firms.
“Law firms are much slower to consolidate [in Finland], but it’s a trend that will continue,” he says. “What is characteristic is that lawyers are conservative and they only do something when they have to. It could be that firms are even more conservative in Finland.”
But independent firms still see a future in Finland.
“Maybe the jury is still out on this issue, but what works best for us is a strong, independent firm with a robust best friends network,” concludes Krogerus’ Mettälä. n