Changes are taking place in the Scandinavian legal market, with Stockholm, in particular, becoming a target for ambitious Finnish firms. Sofia Lind reports

Change is in the air in Scandinavia. The region's legal centre, Stockholm, has long been dominated by a combination of the major Swedish players and a number of international outfits. However, ambitious Finnish firms are increasingly looking to muscle in on the action. At the same time, there are signs that the Norwegian and Danish legal markets – long considered rather local-minded – may be beginning to open up.

Finnish firms on the march

The internationalisation of Stockholm's legal market has been dominated by UK and US firms. Leading players include Linklaters, White & Case, DLA Piper (DLA Nordic), Baker & McKenzie, Bird & Bird, Ashurst and Eversheds. However, three years ago top Finnish firm Roschier launched a Stockholm office, while in September its Helsinki-based rival Hannes Snellman announced it was planning to do the same.

Hannes Snellman's imminent launch in the Swedish capital has been met with much interest, not least because the firm's entry comes with five big-name lateral hires. New office head Fredrik von Baumgarten, an M&A specialist, arrives from Vinge, one of Sweden's top firms, while capital markets partners Soeren Lindstroem, Richard Aakerman and Jan Jensen have been recruited from 150-lawyer Swedish firm Setterwalls. Linklaters' Stockholm head of litigation Martin Wallin, who had initially announced he was going to join Setterwalls, has been persuaded to follow them.

Hannes Snellman has said it intends to follow up the launch with an extensive recruitment drive, taking numbers to around 30 lawyers over the next year, and to between 80 and 100 in the following four to five years. It then plans to open offices in Denmark and Norway, creating a Scandinavian stranglehold.

"The pan-Nordic idea has been discussed for around 20 years but nobody has actualised it. There have been some loose networks which have collapsed. Setting up an office is not a problem, but you need top lawyers on board," says Hannes Snellman managing partner Johan Aalto (pictured left).

The strategy will now incorporate what the firm calls its two 'legs'; one in the Nordic region and one in the east, counting 45 lawyers in Russia and five each in Ukraine and China.

Some rivals believe that the firm has chosen an unfortunate time to enter Sweden, just as the financial crisis has reached the Nordic markets, but Wallin thinks differently: "The number of disputes will increase and that is an opportune moment to get started somewhere. The firm does not have a lot of clients on its register in Stockholm which means less risk of conflicts of interest and an opportunity to build a relationship with clients. It also means we can adjust our recruitment to the current market."

Roschier's opening in Stockholm was also marked by high-profile lateral hires, including that of office head Axel Calissendorff, who came from major Swedish firm Mannheimer Swartling. Mannheimer also lost long-term litigation partner Claes Lundblad to Roschier. Lundblad now heads the firm's Stockholm dispute resolution practice.

Although Roschier does not feature in the Swedish deal league top 10, it found itself at the heart of the action in March this year when it acted alongside magic circle heavyweight Clifford Chance on a SEK27.9bn (£2.2bn) deal that saw Volkswagen increase its stake in Swedish lorry maker Scania. Currently Roschier has no plans to grow its 52-lawyer Stockholm office, but says that in the long term it envisions it could sustain around 90 lawyers.

Expansion into Sweden aside, Roschier has taken a different approach to Hannes Snellman in terms of international strategy. Rather than looking to Oslo, Copenhagen and the Far East, it has concentrated on forming an alliance in the Baltic countries, known as the RoschierRaidla network. The alliance operates in Estonia, Latvia and Lithuania, as well as Sweden and Finland. Calissendorff says the strategy is based on client needs.

"So far our clients are not requesting a presence in Oslo or Copenhagen, or indeed, in Russia, Germany or China," he says.

But why is it that Finnish firms, rather than those from other countries in the region, are leading the charge to set up offices abroad? Hannes Snellman's Aalto isn't sure exactly. But he cites a number of factors that he thinks may be behind the trend. "I am sure there are many reasons, but one is that we come from a smaller market which perhaps has become saturated at a faster pace. But that doesn't explain why Norwegian or Danish firms have not launched in Stockholm," he says, adding that it could have something to do with the distinct Finnish mentality.

For Calissendorff (pictured right), it is simple: Finnish expansion abroad is down to the strength of the country's firms. "Finnish firms have been well-organised and profitable, which has created a greater freedom to operate more extensively," he says.

Linklaters retreating

While the Finns bolster numbers in Stockholm, one established Swedish player is doing the opposite. Magic circle giant Linklaters has been the most significant international firm in the Swedish legal market during this decade, having merged with Lagerloef & Leman, one of Sweden's 'big three', in 2001.

However, the City giant's profile has fallen during the last year, with the office shedding a number of its partners. Alongside Carl-Henrik Wallin, who moved to Hannes Snellman, the Stockholm team has lost competition partner Erik Soederlind (to Linklaters' Hong Kong office, where he will head up the competition and antitrust practice). Meanwhile, two former office heads have announced their intention to depart; M&A real estate partner Rolf Johansson will leave on 31 October, and banking partner Joergen Durban will bid farewell in mid-November.

As a result, by the end of 2008 Link-laters' Stockholm office will contain only 14 partners – down from the 35 that were with Lagerloef at the time of the merger at the beginning of the decade.

The downsizing fits in with Link-laters' global strategy of focusing on certain core practice areas and key clients. This has previously led to streamlining in Germany and, most recently, in the central European region, where four offices will split away to form spin-off firm Kinstellar this November.

According to Linklaters' Stockholm head Peter Hoegstroem, only the office's banking capability will be replenished through lateral hires.

Hoegstroem, who has been with Lagerloef/Linklaters since 1989, says the Stockholm office's job is increasingly to feed the organisation as a whole, with a view to advising clients on a more global basis. This fits in with the trend for Nordic companies to look beyond the region as their home market share reaches saturation.

Linklaters' Stockholm lawyer defections may have affected headcount, but the office still increased its revenue last year. Turnover went up by 11% to SEK440m (£34.8m), from SEK397m (£31.4m) in 2006. It also remains in the top tier of Mergermarket's 2008 M&A deals by value chart, taking the second slot behind Vinge.

Recent deals which Linklaters' Stockholm team has been involved in include the Swedish Government's sale earlier this year of real estate giant Vasakronan to AP Fastigheter and Borse Dubai's SEK32bn (£2.5bn) acquisition of Nordic exchange OMX from Nasdaq.

Swedish stalwarts still going strong

Linklaters' downsizing has confirmed local heavyweights Mannheimer Swartling and Vinge as the only truly large firms in Sweden. Mannheimer has grown to 415 lawyers, including 86 partners, and Vinge to 311 lawyers, of which 90 are partners.

Mannheimer, which generated revenues of SEK1110m (£87.8m) in 2007, has offices in Frankfurt, Berlin, Moscow, St Petersburg, Shanghai, Brussels and New York. Its largest international presence is in Germany and Russia, between which it has approximately 50 lawyers.

Managing partner Stefan Brocker says his firm's strategy is based around assisting Scandinavian clients, both in Sweden and overseas. "We are a full-service firm doing mainly transactions, disputes and banking in the Scandinavian market, but also advising Scandinavian clients abroad in certain matters and specific markets," he explains.

The firm says around 20% of its turnover is generated abroad and that the figure is slowly increasing. It has no interest in being present in Norway or Denmark, which it serves through good-friends relationships.

Vinge had revenues of SEK973m (£76.9m) in 2007. It has four offices in Sweden and a small international presence in China, with offices in Shanghai and Hong Kong added in 1999 and 1985 respectively. However, it has recently moved away from launching overseas offices in favour of an international desk system. In line with this approach, it has shrunk its London presence to one part-time partner, and last year it abandoned the Scandinavian Law Alliance that it held with Danish firm Kromann Reumert and Norwegian outfit Thommessen since 1991.

Earlier this year Vinge advised the Swedish Government on its SEK58bn (£4.6bn) sale of liquor producer Vin & Sprit to French Pernod, while currently it is assisting the Swedish Government on the merger of the Swedish and Danish postal services on a deal reportedly worth between €3bn-€6bn (£2bn-£5bn).

Despite their capacity for further growth at home, Mannheimer and Vinge are limited by Swedish rule which prevents firms from advising more than one client in a single transaction. Significant expansion on the part of either firm would result in them being conflicted out to a debilitating extent. After much heated debate over the current situation – with Mannheimer, Vinge and Linklaters all lobbying for a relaxation of the rule, and the majority of local firms arguing in favour of keeping it remain in place – the Swedish Bar Association decided against making any changes.

While Brocker and his counterparts at Vinge may be cursing the Swedish Bar Association right now, even they would probably agree with the observation of Eversheds' Stockholm head Jonas Bratt that the decision may have a silver lining.

"The maintenance of the rule, and the limit it places on the size of firms operating in Stockholm means we will see quite a lot of changes ahead," he says. "It is exciting that people dare to approach new strategies – it is fun to see the Finns enter. It makes the market more dynamic. For employers it means new challenges; for young lawyers it means greater possibilities."