Euro elite: focus Switzerland – Like clockwork

All the cultural stereotypes are ingrained in Swiss law firms – well-organised, independent and highly-impressive.

Six Swiss firms make the Euro Elite – impressive for a country of just 8.4 million people. But then the Swiss have a longstanding reputation for being well organised, well educated and well resourced, while the economy – lightly regulated and low taxed – consistently ranks as the world’s most competitive, enjoying the highest per-capita income of any major country, except Norway.

Swiss firms feature prominently in our report for three reasons. First, they are relatively large in terms of headcount (the six firms range between well over 100 and 200 lawyers); second, Switzerland’s cantonal system of government means that, in Zürich and Geneva, it has two distinct legal jurisdictions within one country; and finally, with the exception of Baker & McKenzie, international firms have made little traction. Accordingly, Switzerland’s big four – Bär & Karrer, Homburger, Lenz & Staehelin and Niederer Kraft & Frey – often play key roles advising Swiss-based corporates, such as Novartis and UBS, on important transactions.

Several bank scandals and increasing international demands for transparency, not least through the US Department of Justice Program, have left Switzerland on the defensive politically. None of which has done much to depress the Swiss legal market. Program-related work has kept many firms busy, while cross-border transactions have seen a continuous positive inflow of foreign investment, despite last year’s appreciation of the Swiss franc.

‘We had a very good year in 2015,’ says Daniel Hochstrasser, senior partner of Bär & Karrer. ‘We have been very active, probably even more active than last year,’ confirms Guy Vermeil, his counterpart at Lenz & Staehelin who saw revenues at his firm reach an estimated €120m. Two mega-deals completed in 2015: the Holcim-Lafarge merger ($42bn) and an asset swap between Novartis and GlaxoSmithKline ($16bn). But the largest deal announced last year was the $29.5bn insurance merger between ACE and The Chubb Corporation. Bär & Karrer advised ACE, while Chubb chose Lenz & Staehelin.

By far the biggest deal so far in 2016 is the $43bn all-cash takeover of Syngenta, the Swiss agricultural giant, by China National Chemical Corporation (ChemChina), the largest-ever acquisition by a Chinese company. Syngenta is being advised by Bär & Karrer, while ChemChina turned to Homburger – the same duo that advised in the Holcim-Lafarge merger.

The Euro Elite: Switzerland	Total lawyers	Total partners	No. of offices
Lenz & Staehelin	200	43	3
Homburger	140	33	1
Bär & Karrer	124	41	4
Walder Wyss	140	39	6
Schellenberg Wittmer	115	41	3
Niederer Kraft & Frey	100	33	1

‘If you look at the league tables, the large-scale transactions sound much more interesting but are not necessarily more profitable for the firm. We see many mid-cap transactions around €100m to €500m, with much higher fees overall than on large-scale transactions,’ reveals Hochstrasser.

Bär & Karrer’s revenues increased by 5% last year to €93m, as the firm made one prominent hire: Susanne Schreiber, formerly head of M&A at KPMG Switzerland.

‘In recent years, Bär & Karrer has been our number one competitor. We are both relative newcomers, having been founded in the 1950s or ’60s rather than 100 years ago,’ jokes Daniel Daeniker, managing partner of Homburger, where turnover grew to an estimated €100m last year – its best-ever performance.

Revenue is evenly balanced, with 28% of fees coming in from corporate/M&A and 27% from disputes/technology, followed by banking and finance and tax. Unlike its main rivals, Homburger does not have a Geneva presence, remaining exclusively in Zürich where ‘competition is much stiffer’, according to Vermeil.

Competition across Geneva and Zürich, the two key hubs, is almost entirely domestic, except in arbitration where there are multiple international players challenging for work. Stability, however, prevails between the local firms. ‘In Switzerland you barely ever see a partner leaving a firm to join another leading law firm,’ says Hochstrasser.

But there are some disruptors. Among the most ambitious local firms is Walder Wyss, which opened this year in Geneva and Lausanne with hires from Froriep. These follow its new offices in Berne (2009), Lugano (2013) and Basel (2014). The expansion saw the firm amass annual revenues in 2015 of €62m – an 18% increase.

‘We’ve grown faster than other Swiss firms. If you want to be successful, there’s no way around size,’ says partner Hans Rudolf Trüeb.

As for the pre-eminence of domestic independent firms in Switzerland, Daeniker believes that this may not last forever. ‘We’re not insulated from international competition,’ he suggests. ‘For now, the big threat is from international firms trying to serve Swiss multinational clients out of London or Frankfurt, rather than Zürich.’

Will the Magic Circle ever come to Switzerland? Hochstrasser thinks not. ‘The Swiss market is, from their perspective, too small,’ he says.

But although Freshfields Bruckhaus Deringer and Linklaters have an undeclared strategy of not entering Switzerland, not so Clifford Chance or Allen & Overy, which have intermittently been on the lookout in the Swiss market, according to legal recruiters.

Like much else in Switzerland, charge-out rates have also remained remarkably stable. ‘Most billing is done in Swiss francs,’ explains Vermeil. ‘Usually, we refuse to bill in dollars or euros. I became a partner here in 1997 and my hourly rate over the last 19 years has moved neither up or down.’

He concedes that, in real terms, rates have fallen against inflation, but the overall picture is strong. ‘Deals are bigger; mandates require more people because they are more complex. So in terms of profit, everything is fine.’ LB