Much like the rest of the world, the Nordic market couldn’t escape the consequences of the coronavirus pandemic. However, the virus seemingly kept the Nordics in its periphery, while the rest of Europe felt the brunt of the impact. Average GDP across Norway, Sweden and Denmark in 2020 fell by roughly 3% (the wider EU GDP fell by 6.1%) with the biggest impact, unsurprisingly, on the tourism industry (Iceland, a nation heavily reliant on its tourism, saw a GDP drop of 6.6%). However, the predictions for 2021 show GDP growth across all three of the main Nordic countries, with 3.7%, 3.4% and 3% growth predicted respectively.
‘The Nordics have suffered less than many other European countries in the course of the pandemic,’ states Roschier’s managing partner Mikko Manner in Finland. ‘It has been forecast that during the second quarter of 2021, most restrictions will be eased due to vaccinations, and the Nordic economies will be able to start a swift recovery, with economic activity reaching pre-crisis levels later this year.’
Coping strategies
While the general consensus is seemingly positive, arguably the greatest impact has been the effect the pandemic has had on the Nordic Council’s plans for a highly integrated region by 2030. Longstanding collaboration schemes including the Nordic Passport Union, which allows citizens to reside and travel freely throughout the member states, were temporarily overwritten by uncoordinated responses to the virus and harder border closures, leading to greater separation in the region.
‘The Nordics have suffered less than many other European countries in the course of the pandemic.’
Mikko Manner, Roschier
The most notable (and arguably controversial) response to the pandemic saw Sweden take the opposite approach to the vast majority of nations. With no national lockdown, limited restrictions and social distancing measures only applied to large gatherings, the ultimate goal was herd immunity among the wider population, which, at a macro level, saw varying degrees of success. According to Jan Dernestam, managing partner at Mannheimer Swartling in Stockholm, the legal market came out relatively unscathed: ‘We never had a lockdown in Sweden and the business activity remained very much the same even after the Covid outbreak in March 2020.’ While many firms saw a reduction in activity in the initial months of the pandemic, the impact was ultimately short lived. Dernestam continues: ‘Since June 2020, all our practice groups (transactions, dispute resolution and regulatory) have been very busy and 2020 finally became our best year ever. 2021 has also started well and we are up 25% during the first six months compared to the first half of 2020.’
Seemingly the Swedish government’s approach to protect the economy ultimately bore fruit, as Dernestam comments: ‘We are also happy to say that the reason why we have been – and are – so busy is not due to crisis-related work but the reason is that the Swedish multinational companies, banks and the private equity industry are all doing very well. The pandemic is of course a very tragic health crisis but it never created any financial crisis, and the Swedish national economy is still very strong with the Swedish national debt-to-GDP ratio being one of the lowest in the world.’
The Icelandic market also bounced back with relative ease. Outside of the impact on tourism, it generally experienced very little fallout in 2020 and early 2021. According to Örn Gunnarsson, managing partner at Lex Law Offices: ‘Iceland was probably the country that felt the least impact of the pandemic.’ M&A work has bolstered the legal market throughout the course of the pandemic, even picking up the slack where other practice areas decreased. Gunnarsson explains: ‘Business has been good although, because of the restrictions, we experienced delays in dispute resolution cases, but that has been offset by an increase in M&A activity. In many cases the pandemic caused certain industries or particular companies to struggle, which has led to frantic exploration to increase efficiency. Downsizing and restructuring has been the way forward for many, while in other instances a merger has been deemed the best option. M&A activity has therefore been at an all-time high for the latter period of the pandemic.’
For Norway, the early stages of the pandemic looked to be particularly challenging. The beginning of the pandemic followed hot on the heels of a substantial oil price drop, which saw prices plummet to an 18-year low, fuelled by the combined effect of an oil price war between Saudi Arabia and Russia in early March 2020 and the reduction or halting of production by oil companies worldwide as a result of early global lockdowns. As commented by Wiersholm’s managing partner Morten Goller: ‘Many pointed to Norway as the big loser as it was hit hard by the coronavirus pandemic and oil prices collapsed at the same time. However, thanks to a rebound in oil prices and a tax relief package, oil investment was less of a drag than feared and the recovery in the Norwegian economy has been stronger than expected.’
‘Iceland was probably the country that felt the least impact of the pandemic.’
Örn Gunnarsson, Lex Law Offices
For Anne Marie Due, managing partner at Hjort, the Norwegian market has also seen an increase in public sector and employment work as a direct result of the pandemic: ‘The pandemic has affected the types and categories of requested legal services. The public sector, for example, has been an active purchaser of legal services during the pandemic, with a resulting increase in demand for public law advice. The same is true of employment law, due to the pandemic’s impact on all aspects of working life.’ She also comments that the pandemic has ultimately led to a more competitive legal market, which, in a jurisdiction where full-service firms are already in abundance, has put pressure on client service models and pricing structures: ‘While demand has been high in most practice areas over the past 12 months, price levels and pricing models are under pressure due to increasing professionalisation among purchasers of legal services.’
Finland also came out of the other side of the crux of the pandemic relatively unscathed, with the bulk of the nation’s 3.1% GDP reduction stemming from a drop in consumer purchases as a result of lockdown. As Manner states, ‘The spread of Covid-19 has been at a high level in most EU countries, including the Nordic countries, and economic development was held back by continuous restrictions to control the spread of the virus. Now the vaccinations have begun and it seems that the economic recovery is picking up again, supported by expansionary fiscal and monetary policy.’
Denmark’s market also saw similar trends and changes, with initial panic and uncertainty making way for increased market activity and, ultimately, a successful year for the majority of firms in the jurisdiction. Steen Rode, chief executive partner at Bech-Bruun, comments: ‘All firms were concerned with the market development in the beginning of last year as many projects were shut down initially. However, since September the market has been particularly busy.’
According to Rode, the market has seen notable activity across M&A and real estate transactions, as well as employment law issues and renewable energy projects. Gorrissen Federspiel’s managing partner Martin André Dittmer agrees: ‘There was a lot of uncertainty around how the market would respond, and the majority of the crisis work was done at the outset. That was an important moment, and an interesting one, as every company was suddenly navigating unknown territory. For the year as a whole, it has been less about adapting to the kind of work and more about adapting to new ways of working. M&A deals have closed without either side meeting in person, but consolidation activity has continued across key sectors and deal pipelines look strong.’
‘We will see a more permanent high level of flexible work arrangements for all types of employees, and the market has been propelled many years ahead compared to previously within this area.’
Steen Rode, Bech-Bruun
Standout work
This Nordic-wide resilience saw firms across the region house a variety of high-profile mandates and novel transactions. In Sweden, Mannheimer Swartling advised Vattenfall, a multinational power company owned by the Swedish government, on its €4bn euro commercial paper programme, the first-ever Swedish law-governed ECP programme; and also assisted fintech company Klarna with its $1bn equity financing. For Roschier, the firm handled Bain Capital’s €2.1bn public cash tender offer for Ahlstrom-Munksjö, which was the largest cash takeover in Finland in 2020, and also advised on Boels’ €614m public cash tender offer for Cramo, which included an accelerated squeeze-out procedure in the middle of the Covid-19 outbreak. Bech-Bruun also had its fair share of substantial transactions, notably advising on CVC Capital’s acquisition of STARK Group.
When asked what has facilitated the continuation of the high standard of legal work across the Nordics, Manner comments: ‘In times like these, our clients are facing a lot of new issues with a rapid pace. To solve these issues, traditional thinking or measures are not enough, and there is a clear need for high-end legal advisory services with a creative and curious approach.’
Due also adds: ‘Like firms and companies in many other industries, Hjort has found the pandemic challenging. However, the past 12 months have also presented the firm with new opportunities, particularly for streamlining the organisation and professionalising customer interaction and cooperation through the adoption of new working methods. 2020 also gave us the opportunity to sharpen our profitability focus. Overall, the year was far better than anticipated at the start of the pandemic and 2021 has been a very good year for us thus far.’
Due also comments that the pandemic should be seen as an opportunity for firms looking ahead: ‘We are convinced firms that successfully embrace the opportunity to restructure – in terms of efficiency, profitability and flexible working methods – will continue to grow going forward.’
When looking at the long-term impact of the last 12-18 months, flexible working and adaptive methodology are at the forefront of everyone’s mind. For Rode, ‘the main impact will be on the way we work and collaborate. We will see a more permanent high level of flexible work arrangements for all types of employees, and the market has been propelled many years ahead compared to previously within this area.’
‘Sweden will most likely see the same development as the rest of the legal word as far as working from home is concerned. Hopefully, this will help our associates and staff to manage their work/life balance better than before.’
Jan Dernestam, Mannheimer Swartling
Gunnarsson adds: ‘The pandemic has tested the resolve of employees and management to figure out new ways of processing and delivering the advice to our clients. Not unexpected, the whole of the firm has walked hand-in-hand to figure out and implement new methods. This whole process has led to more and better communication between management and employees and in general a better working environment’. Dernestam agrees: ‘Sweden will most likely see the same development as the rest of the legal word as far as working from home is concerned. Hopefully, this will help our associates and staff to manage their work/life balance better than before.’
Fine margins
So, in a market dominated by independent firms and boutique offerings, what separates those that are thriving versus those struggling? For Gunnarsson, the answer is not always clear cut, but focuses heavily on the client experience: ‘The question on why some firms are thriving and some not is always difficult to answer. The most important element of the legal industry is to really understand the needs of the clients. Why are they asking for advice and how can we, the lawyers, deliver as much value as possible as efficiently as possible? If one loses sight of that, you are subject to becoming dispensable’.
Manner agrees: ‘Essentially all of the leading firms are independent and we believe a strong demand for their services will continue in the coming years. Thriving firms focus on client experience, top-notch legal skills and implementation.’ Due adds: ‘Effective use of technology allows mid-sized firms to compete at the top tier. Clients benefit from a broader range of high-quality advisers. Ultimately, this represents a better value proposition for clients. However, innovation is about more than just technology. Adaptation to ever-changing client needs is also crucial. Firms need to understand clients and their individual business strategies and goals.’
For others, the divide between firms is influenced by the size of the offering. Dernestam suggests that while all leading firms in the Nordics are independent, it is probably fair to say that the segmentation of the legal industry has continued with the largest firms doing very well while smaller firms have had to fight more for their business. Rode also adds: ‘There is an ongoing tendency that the big law firms are getting stronger and the boutique, highly specialised law firms are also doing well.’
‘There is no doubt that the pandemic will have a substantial and lasting impact on the legal market in the years ahead. We anticipate further strengthening of global networks and continued digitisation in the legal field.’
Anne Marie Due, Hjort
This dominance of independent firms across the Nordics has been the norm for decades, with pricing models and cultural differences often acting as a barrier to international firms trying to enter the already oversaturated and overlawyered markets. However, several recent moves have shown that there may be a shift on the horizon. DLA Piper, which has bases in Sweden, Norway and Denmark, is starting to make waves across the Nordics after an initial uphill battle, and other international firms in Denmark and Sweden are gradually increasing their presence as well.
This is exemplified by recent moves in the Norwegian market. In January 2020, Schjødt, one of the five dominant full-service firms in Norway, expanded its presence into Sweden through its merger with Hamilton, creating the first-ever Norwegian-Swedish cross-border firm. This was followed in 2021 with the announcement that leading global firm CMS had joined forces with Kluge, which is now a full member firm of the CMS network and, from late 2021, will be known as CMS Kluge. Further rumours continue to circulate regarding possible future mergers and acquisitions, suggesting that this may not be the last move into the Nordics by global firms.
Looking ahead, what does the future post-pandemic generally look like for independent firms in the Nordics? According to Due: ‘There is no doubt that the pandemic will have a substantial and lasting impact on the legal market in the years ahead. Changes in consumer habits during and after the pandemic represent both challenges and opportunities for service providers. Previously profitable and respected companies are under pressure and may continue to struggle, while other players have adapted to the situation with great success. We also anticipate further strengthening of global networks and continued digitisation in the legal field.’
For Gunnarsson, the long-term impact will be better working environments and increased efficiency in the delivery of service. Manner concludes: ‘While the demand surge was unexpected, our ability to work across the firm as well as we have was also a bit unexpected. Many of the conventions of the industry have been challenged, and for the better.’ LB
Amy Ulliott