Best-laid plans

The Swedish government’s plans to sell off the state’s stake in a range of industries were good news for lawyers. But the world economic crisis may have put paid to them.


Best-laid plans Having been buffeted by a series of economic storms over the past 20 years, the people of Sweden are used to scare stories surrounding the financial markets.

Even so, the latest bad news emanating from the rest of Europe and beyond has ­finally started to be felt on the OMX – the Stockholm stock exchange – with banks looking for bailouts and deals being put on hold.

Lawyers are feeling the sea change as more work heads towards restructuring and ­insolvency – practice areas in which the firms in Sweden, Finland, Iceland, Norway and Denmark have much experience.

Well positioned as a financial hub for the Nordic countries, Sweden operates the largest stock exchange in the region and attracts international investment, making it the focus for M&A activity and allowing it to boast an active legal market as a result.

The big sell-off

After being elected in 2006, Sweden’s ­centre-right coalition government announced plans to sell off the state’s ­holdings in OMX, Nordea Bank, SBAB, TeliaSonera, Vasakronan and Vin & Sprit.

The ambitious scheme aimed to raise around 200 billion Swedish krona (KR) – equivalent to £16bn – in its four-year ­mandate period. Since then it has successfully unloaded Absolut Vodka maker Vin & Sprit, real estate firm Vasakronan, holdings in bourse operator OMX and a stake in ­telecoms operator TeliaSonera.

Without the Chinese wall system that is frequently employed in the UK, much of the work on the government projects had to be split up among Sweden’s law firms, ­providing the smaller mid-market firms with a trickle-down of work that the larger firms were too busy to manage.

However, plans to sell mortgage lender SBAB and a 20 per cent stake in Nordic and Baltic bank Nordea appear to have hit the buffers following the market turmoil in the rest of Europe, ­stopping the flow of work.

Sweden is an old hand when it comes to turbulent markets. The country experienced fiscal woes during recessions in 1987, 1991 and 2001, and has since prided itself on the security of its financial institutions.

But recently Swedbank and investment bank Carnegie have both taken major knocks in the fallout from the credit crunch. Carnegie received a KR1bn (£79.93m) loan from Sweden’s central bank to boost its ­liquidity, and at the time of writing was ­looking at the possibility of a sale as one of its options to survive.

One of the worst days for the Swedish banks saw Swedbank shares fall 12.6 per cent, while Carnegie stocks plummeted 52.76 per cent – proving that the global slide has landed in the country, despite it having done its best to insulate itself from the ­creeping recession plaguing most of the western world.

Mannheimer Swartling partner Biörn Riese says he has “been around long enough” to live through the oil, gulf, IT, real estate and bank crises, and now the financial chaos of today, but sees differences between this downturn and earlier financial crises.

“While there are many similarities between the last two, there are also ­differences,” says Riese. “One evident ­example is that real estate is an asset that will be let out again in a matter of time. The question is when, by whom and to who. Highly leveraged private equity structures have different challenges. This adds on another dimension this time.”

With a turnover of e115m (£91.87m) and 450 lawyers in four Swedish and eight ­foreign offices, Mannheimer is the largest law firm in Sweden and the Nordic region. It is well placed to judge what is happening in the Scandinavian market.

“Needless to say, the number of leveraged transactions has gone down significantly in the Nordic market, as everywhere else,” adds Riese. “Some transactions have only been deferred, some will probably be fulfilled in a better market, while some others may not happen at all, at least not in the way earlier intended. After a crisis, there has often been a need for divestments when the market returns. As history tells, that’s just a matter of time, although valuation of the underlying assets may be very different when it begins.”

Distressed deals

Riese has seen the number of distressed deals grow and expects this to continue, with restructuring work and advice in ­relation to solvency issues also on the increase. This situation is creating a need not only for insolvency lawyers when a bankruptcy is going to happen, but also long before, for teams consisting of experienced and sophisticated transactionists, tax, securities, banking and financing, employment lawyers and other specialists.

Axel Calissendorff, a partner and head of Roschier in Stockholm, says on the macro level, recent success on the international stage has left the Swedish market exposed.

“Generally we’re in good shape compared with previous downturns, but the market is reasonably international and as a result it is feeling the global mood,” he says. “We’re being affected by events, especially in the global financial sector.”

Roschier, which began life in Finland, entered Sweden in 2005 and has since worked with bidders on the government’s privatisation deals. Calissendorff thinks the ­present centre-right Alliance for Sweden party will struggle to finish its sell-off ­mandate if it is replaced by the left-leaning Swedish Social Democratic Party in the ­elections due in 2010.

“It’s hard to imagine the government completing its proposed sales in the current climate,” he says. “The decision to sell off the companies hasn’t been well received by the voters and it looks like there’ll be a change. From the perspective of lawyers, the sell-offs were good business.”

Calissendorff, whose 55-lawyer operation is nearing the firm’s optimum size in the country, says the firm’s banking and finance practice is “heavily engaged at the present”, as is – echoing Mannheimer’s Riese – its ­dispute resolution practice, with this ­division of work expected to continue throughout the downturn. On a more ­sombre note, Calissendorff adds that he “fears” the long-term perspective for the Swedish legal market.

A growing phenomenon

Thomas Nygren, chairman of the board at 90-lawyer firm Hamilton, describes the ­economic downturn as a growing phenomenon, but is more positive about the prospects for lawyering.

“Sweden got hurt later and things only started to feel different in spring – I noticed in April and May that it was harder to get bank financing,” says Nygren, whose firm is currently involved in an industrial deal being driven by the downturn. “This ­economic climate will still encourage ­business. Lots of companies will be sold or refinanced and there’s lots of insolvency work out there. Consolidation is also taking place among developing companies, such as those in the technology and IT markets. I’m confident in the amount of work out there for lawyers in the future.”

Nygren admits that if the government deals disappear they will be missed by the legal market, which benefited from ­conflicts arising out of the deals, pushing work to other firms that were not directly involved.

Mannheimer’s Riese agrees that firms offering a full service will be protected from the downturn. “Our experience and resources put us in a very good position to assist entities in distress, as well as financiers and other creditors,” he says. “Firms that over recent years have focused only or ­heavily on transactional work will now have a more difficult ride ahead.”

Table of Scandinavian firms by turnover. Click here