Euro elite: focus Baltics – All change

Consolidation among the biggest players in the Baltic states has led to the creation of an elite tier of independent firms.

2015 was a significant year for the Baltic legal market, with rapid consolidation between firms in Estonia, Latvia and Lithuania creating, as Sorainen’s co-managing partner Laimonas Skibarka describes it, a ‘Baltic Magic Circle’.

Rival firms Raidla Lejins & Norcous and Lawin confirmed they had traded their Estonian offices to form two new firms – Cobalt and Ellex. In late 2015, Cobalt acquired the Baltic offices of Finnish firm Borenius, taking its numbers to 31 partners and 176 lawyers. Ellex (technically three firms under one common brand) sits at 30 partners with 167 lawyers, keeping it in close competition with its rival.

Cobalt in particular has advised on some significant mandates, including advising Gjensidige Forsikring, a leading insurance company in the Nordic region, on the acquisition of 99.88% of the shares of PZU Lietuva, the first significant transaction in Lithuania taking place as a result of remedies imposed by the Lithuanian antitrust authority on PZU to divest its Lithuanian operations.

Sorainen makes up the third member of Skibarka’s self-proclaimed magic circle, with 25 partners and 176 lawyers across its four offices, with the firm’s total revenue for 2015 estimated at €19.5m. Overall, Skibarka believes the consolidation has been positive for the region’s legal market.

‘The negative aspect has been there were disturbances between alliances. It has been a bit messy for these alliances, which may be disturbing for some clients and international law firms,’ he says. ‘I see it as a positive that this consolidation is happening and bigger players are getting stronger. There’s a growing gap between top-tier and second-tier law firms.’

Although it has shied away from the mass consolidation that has occurred over the past year, Skibarka says his firm has still managed to reap the benefits. ‘From our side, we stand out in the region as a stable, integrated law firm and clients see now the value of working with one firm because there are developments where alliances were moving, swapping their offices and so on.’

The Euro Elite: Baltics	Total lawyers	Total partners	No. of offices
Sorainen	176	25	4
Cobalt	176	31	4
Ellex	167	30	4
Tark Grunte Sutkiene	140	24	3
Fort	40	12	3

After watching the firm’s revenue jump approximately 8%, Ellex managing partner Rolandas Valiūnas is content with where the newly-merged firm is sitting. After its rapid rise, Valiūnas says the effort within the legal market now needs to come from the firm’s competitors to try to achieve the scale it has managed to secure during its year of consolidation.

‘I don’t see a reason why we shouldn’t be even bigger. It’s not as if we intend to grow the number of people, but we can definitely grow the revenue. I’m trying to convince my partners to freeze the number of lawyers for the next couple of years because we have a lot of possibilities within the new ranks we have added to improve and preserve the quality. But I’m definite that the quality and specialisation of my partners has increased.’

However, consolidation has not been a smooth process for all of the five firms from the Baltics that help make up the Euro Elite. Tark Grunte Sutkiene added Baltic Legal Solutions’ Lithuanian office to its Vilnius team in 2014. The firm has also recently announced it has agreed to a tie-up with the Estonian arm of Varul, but concurrently has lost 16 of the 23 lawyers the firm had in its Estonian office before the tie-up, who have split off to create a new firm, TGS Law Firm. With 140 lawyers, 24 partners and a total revenue of €12.6m, the firm has yet to gain the scale other top players have reached within the market.

‘Two years ago our office started to consolidate with the Lithuanian market. We merged with Baltic Legal Solutions, we doubled in size and we became the largest, or almost the largest, law firm in Lithuania. We began the market consolidation process and then other law firms followed suit,’ says Lithuania managing partner Eugenija Sutkienė. ‘[The Baltic market is] very competitive. That’s why market consolidation is happening, because we really are competing in these markets very heavily.’

The firm completed some impressive instructions in 2015, not least representing Scandinavian financial group Swedbank on its acquisition of Danske Bank’s personal banking business in Lithuania and Latvia for €641m.

Although the shake-up of the Baltic legal market has been rapid, with some law firm leaders admitting that it may well have been confusing for some clients, there is an expectation the market overhaul will lead to a more sophisticated offering. The move is viewed by many as a natural union, with the firms that have combined holding complementary strengths.

Sorainen’s Skibarka believes it wasn’t only a desire, it was, to an extent, anticipated by the client. ‘As law firms are consolidating, they now have better capacity to handle large projects. They also have better capacity to specialise, not only by practice areas, but also by business sectors which is appreciated by clients. They expect that.’ LB

madeleine.farman@legalease.co.uk