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Sweden’s ‘one-stop-shop’ versus the ‘best-of-breed’

William Farrington looks at the latest legal market developments from the Nordic’s largest nation

Senior partner departures, lateral team hires, boutique firm establishments – these are all gold dust for Legal 500 researchers seeking to determine which are the serious players in any given legal market. I have covered some countries – such as India, Malta, and Nigeria – where these changes are few and far between. On the other hand, recent developments on the Swedish legal scene have been marked by more twists and turns than a finely crafted kannebulle.

Following 2019’s establishment of intellectual property boutique Westerberg & Partners and corporate outfit Cirio Advokatbyrå – a spin-off of MAQS Advokatbyrå’s Stockholm office – 2020 kicked off with a market first. Advokatfirmaet Schjødt, one of the leading commercial firms in Norway, has entered the Swedish market by way of acquiring the mid-sized, full-service firm Hamilton Advokatbyrå.

“While Sweden and her Nordic neighbours share similar legislative frameworks, any market-entry strategy is bound to encounter some roadblocks along the way”

On the face of it, the advantages for an international firm in establishing a Stockholm office are obvious. The thriving capital markets are considered the de facto Nordic hub for international investors and, despite talks of a recession, industry remains strong with more unicorns produced per capita in Sweden than anywhere else barring Silicone Valley. The dynamic, forward-thinking economy has brought global firms from London, the US, and other parts of northern Europe (most notably Finland’s Roschier and Hannes Snellman) to the fold. So why have we waited until now to witness an entrance to the market from Sweden’s important cultural and economic neighbour, and will the Schjødt in the dark pay off?

On the face of it, one potential difficulty will be managing Schjødt’s transition from a collaborative cross-border counsel to direct market competitor. Since Swedish firms and their clients benefit from affiliations with others across the Nordics (and vice versa), could Schjødt be taking the risk of burning bridges with the already established names on the market which will now see it as a direct competitor? According to Johan Kahn, co-founder of Kahn Pedersen, that could be the case.

‘I believe this would be a natural consequence of a cross-border merger of this type,’ he says. ‘If I were a client I would consider it a benefit to have seamless services in day-to-day multijurisdictional matters. If, however, a matter is really important I would definitely prefer the “best-of-breed” approach coordinated by a lead counsel I know and trust.’

While Sweden and her Nordic neighbours share similar legislative frameworks, any market-entry strategy is bound to encounter some roadblocks along the way. I ask Kahn, what are the primary issues a new player on the scene faces when it comes to understanding the Swedish client and how a domestic transaction works?

‘I think the Swedish buyers of legal services are less “transactional” and more “relationship” oriented in their view of legal advisors,’ he replies. ‘This is in many ways great for both parties involved but would require more thought when it comes to client management. I also believe that few qualified Swedish buyers of legal services appreciate junior staffing and partners who are simply overlooking the work. Partner time and top-tier skill is required.’

“Few qualified buyers of legal services would value the ‘one-stop-shop’ higher than the ‘best-of-breed’ for important matters”

The partner loyalty of Swedish clients is evident through the extremely high level of client retention when it comes to lateral movement; the successful recent establishment of boutique firm Westerberg & Partners is partly due to that loyalty. This may well be the exception to the rule though – while client loyalty is evident, numerous voices have also suggested that it’s becoming increasingly important to be a ‘one-stop-shop’ in the Swedish scene. So what does the future hold for Swedish boutiques?

‘I think there is a fair amount of wishful thinking in this viewpoint,’ says Khan. ‘Few qualified buyers of legal services would value the “one-stop-shop” higher than the “best-of-breed” for important matters. I think most peers and clients agree that the firms facing the real existential challenge would be the large number of mid-sized and smaller large firms that indeed provide a one-stop-shop but that are not top tier in any area of practice. I would guess only a smaller number of clients would find such an offer attractive in any other way than related to specific individuals or lowest-bidder fees.

‘None of these motives are sustainable. At the end of the day it is all about the founding individuals. Their standing in the market is of course an important factor, but equally also is the ability to build a new business which requires quite a complex set of skills.’

This mid-market squeeze is likely a primary motivator for Hamilton’s merger with Schjødt, with the key to success hinging on client and senior talent retention. And bearing in mind the level of senior talent remains the same, regardless of how many new players set up shop, retention strategy looks set to become more competitive down the line. But what are other typical cultural or economic hurdles that must be dealt when it comes to a merger in the Swedish legal market?

‘Any differences in profit per partner, client acquisition, and the amount of billable partner hours must be dealt with. This is of course quite similar to the situation where firms in the same jurisdiction merge and it is evident that it could be a real challenge. I am sure any merger would draw some blood since not all partners would be willing to accept the results of the compromises that have to be made.’

On that note, I asked Eric Halvarsson, banking and finance partner at Schjødt’s Stockholm (hear that Champagne pop) office, what the biggest challenges going forward will be in terms of recruiting and retaining talent. From my observation, Swedish clients are particularly loyal to the individual, with ‘brand power’ not having the gravitas it perhaps has in London or elsewhere. So will it further become an employee market down the line?

The Swedish legal market has indeed traditionally been driven to a large extent by personal relations between clients and individual lawyers while brand recognition has been of more limited value, although not insignificant,’ says Halvarsson. ‘That is a situation that we see changing, with clients taking a more institutional approach to allocating its external legal work, more akin to the approach in the UK and parts of continental Europe.

 

‘With the significant footprint in the Nordic region of our combined firm, we believe that we are well positioned to capitalise on these changes in the market. Similarly, we believe the size of the firm and the strength of the brand in multiple markets will make us very attractive in the recruitment market. It is encouraging that we have already seen an uptick in the number of applications from law students and unsolicited approaches from talent wanting to join us.’

 

One certainty is that other firms throughout Sweden and Norway will be following the pioneering work of the Hamilton/Schjødt merger as an indication for whether others will follow suit. As Schjødt’s head of dispute resolution, Per M. Ristvedt, recently mentioned in an interview with The Legal 500’s Caribbean and Nordics editor, Amy Ulliott, (fivehundred, November 2019), ‘we know that other law firms have contemplated this, but none have had the guts to try it. When the merger was announced several other firms in Norway complemented us and actually told us: “This is impressive, only Schjødt could do this!”’ So, in short, watch this space.

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