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19 OCTOBER 2015/£3.95
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16/10/2015 17:42
20
The Lawyer | 19 October 2015
Special report
Finland
Healthy
H
y outlook
Privatised healthcare and the push for energy
diversity are likely to be big generators of legal
work as Finland slowly recovers after the
global crash
Q
There seems to have been
little consolidation in the
Finnish legal market. Why
is that, and do you see it
changing in the coming year?
Juha Pekka Katainen, managing
partner, Krogerus: Eversheds’
entry into the Finnish market in
2014 through its consolidation with
Juridia Bützow resulted in a firm
with a significant lawyer headcount in Finland. But, as is the case
with other international brands in
the country, such as Bird & Bird
and White & Case, it remains to be
seen if it will develop into a
full-service firm or retain a
presence in certain niche sectors.
Pauliina Tenhunen, managing
partner, Castrén & Snellman:
Some medium-sized law firms
might consider consolidation to
compete with the bigger firms, but
we see no other significant changes
In brief
On the panel
Our experts discuss the
continuing economic challenges
in Finland and their effect on
activity levels in the region.
Despite these challenges law
firms see new opportunities for
work in the energy and
healthcare sectors.
Borenius Juha Koponen,
Helsinki partner, and Jari Vikiö,
managing partner
Castrén & Snellman managing
partner, Pauliina Tenhunen
Hannes Snellman Helsinki
managing partner, Mikko
Heinonen
Krogerus managing partner,
Juha Pekka Katainen
Roschier managing partner,
Rainer Hilli
“Not only are
companies using
IPOs for funding,
private equity
players are using
them as an exit
strategy”
Juha Pekka
Katainen
in the market. Finland is quite a
small marketplace with well-established players.
Juha Koponen, Helsinki partner,
and Jari Vikiö, managing
partner, Borenius: In the Finnish
market there are five larger
full-service firms of 100-plus
lawyers. We do not anticipate
consolidation among the big firms.
Some smaller firms may consolidate, but there is usually a niche
market or service they would
target.
Mikko Heinonen, Helsinki
managing partner, Hannes
Snellman: There has only been
limited consolidation in the
Finnish legal market and we are
not expecting any major changes in
this area in the coming year. The
Finnish legal market is fairly
well-developed, stable and of
limited size. In the past few years
we have seen more boutiques
appearing than consolidation.
Q
The general election saw
prime minister Alexander
Stubb lose to Centre Party
candidate Juha Sipila. What
could be the long-term effects of
TL_191015 20
this and how might it affect your
business?
Koponen and Vikiö: It could have
an effect on taxation. Our corporate
tax rate is low, even by international standards, at 20 per cent. We
have a new government but we
believe the corporate tax will
remain low. We have seen some
inversion-type deals, such as the
latest Konecranes-Terex one, which
has been classified in the press as
partially driven by tax reasons from
the US to Finland. If the tax rate
were to increase we could see fewer
of these cross-border deals.
Tenhunen: The change is not so
significant for companies operating in Finland. Stubb’s Coalition
Party is still in the government and
new prime minister Sipilä has a
strong background as an entrepreneur. Based on this we believe the
government is willing to develop
our country by supporting
companies. If they succeed it will
naturally be good for our business.
Rainer Hilli, managing partner,
Roschier: The change of government is not radical and the present
government is in front of difficult
reforms to boost the competitiveness of Finnish industry. I do not
think the government’s actions will
affect our firm’s business significantly. It will be growth in our
export countries that improves the
Finnish economy.
Heinonen: The fact that the
Coalition lost its position as the
largest party will not make a great
difference because tough decisions
will have to be taken no matter
which party is at the helm.
We will see the public sector
undergo some reorganisation,
which will lead to new opportunities for the private sector and more
work for law firms.
16/10/2015 11:19
The Lawyer | 19 October 2015
21
CAPITAL MARKETS
BRIEFING
FINLAND
There has been
an upswing in
IPOs recently,
after many years
of virtually no
activity
By Juha Koponen, partner
and head of capital
markets, Borenius
Why IPOs are growing
The IPO market has opened up and Finland has seen
a surge of equity capital markets activity recently.
In 2014 there were a total of nine IPOs, three on the
Nasdaq OMX Helsinki main list and six on the market
regulated exchange Nasdaq First North Finland list.
To date this year there have been nine IPOs in
Finland, three on the NASDAQ OMX Helsinki main list
and six on the NASDAQ First North Finland.
This rise may be explained by the lack of adequate
returns in other markets as investments and
available funds were directed to the equity capital
markets.
Stricter banking regulation around the globe after
the financial crisis can also be seen as a cause, as
this affected the availability of financing on good
terms – or at all – for many companies, leading to
them seeking other financing options, such as
looking at the capital markets.
Dual-track processes
Alongside pure IPOs, dual-track processes have
been on the rise in recent years due to demand from
institutional investors in European equity and
successful IPO exits in the Nordics.
Also, given the volatility of the M&A market and the
subsequent uncertainty over timings, focusing solely
on an M&A exit can be risky.
There have been a few dual-track processes that,
in the end, have led to trade sales, but more recently
the IPO track has been dominant due to higher
pricing in the public market. Lately, there has been
an increased amount of volatility on the Finnish
equity markets, partially caused by recent
developments in China.
Some of the dual-track processes that, in the
financial press, have been strongly tipped to end up
as IPOs, may turn out to be trade sales. One example
of such a dual-track process turning into a trade sale
was seen last week when UK-based private equity
firm Vitruvian Partners acquired Helsinki-based
Accountor, a leading provider of financial services.
An IPO will typically require the owner to maintain
a stake in the company for a period of time following
the IPO. In Finnish IPOs in 2015 the lock-up period
has varied between six and12 months, so the
lock-up period for selling shareholders has varied
between six and 12 months while the lock-up period
for the issuer itself has usually been six months. The
market standard has been developing towards a
management lock-up period of 12 months.
In terms of 2015 Finnish IPO structures there have
been pure primary offerings by the issuer and pure
share sales by the shareholders (a secondary
offering), but probably most common has been a
combination of primary and secondary offering.
Cornerstone investors and dual listings
One recent trend in European and Finnish IPOs has
been the use of cornerstone investors. These are
typically large investors whose name carries weight
across the market.
In practice this means that these investors agree
to subscribe for a certain number of shares in the
IPO throughout the range. These commitments are
then disclosed in the prospectus to generate interest
in the IPO. This practice has been very successful
and used in deals recently, as it creates credibility
and interest in the IPO. It has also been used in one
Finnish IPO so far in 2015.
Another interesting development in the IPO market
is the growing interest in dual listings.
Dual listing means listing of the company’s shares
on two or more exchanges – for example, in Finland
and the US. Once more, the US securities exchanges
are becoming popular places to list among non-US
companies, as such an IPO gives access to a large
pool of investor capital in the US and offers the
potential for higher valuations for companies in
certain industry sectors than might be available on
other exchanges.
Companies in the pharmaceutical, gaming and
high-tech sectors are especially keen on exploring a
US listing option, and we have seen one Finnish
pharmaceutical company list on Nasdaq this year.
In addition, the Jumpstart Our Business Startups
Act effected in the US in recent years has introduced
a new type of “Emerging Growth Company” definition
that would qualify most growth companies
considering an IPO for exemptions from certain
governance and reporting requirements.
These changes have made the option of listing in
the US more attractive again for non-US growth
companies.
A positive outlook
The Finnish IPO market outlook for the rest of the
2015 is positive. There are some interesting IPOs
expected for Q4 launch. And the outlook for 2016
seems similarly promising.
The IPO market is not slowing down in Finland.
Specific needs
The reasons for doing an IPO and the use of the
proceeds vary depending on need and the specific
field the issuer operates in.
Borenius Attorneys Ltd
Eteläesplanadi 2
00130 Helsinki, Finland
Tel: +358 20 713 33
Email: [email protected]
Web: www.borenius.com
TL_191015 21
16/10/2015 11:03
22
The Lawyer | 19 October 2015
Special report
Finland
Key figures:
Finland
GDP
$271bn
Inflation
-0.2%
Population
5.5m
Unemployment
8.3%
Life expectancy at birth
81
Source: World Bank, Statistics Finland
Q
With Finland’s economy
still not quite recovered
from the downturn, what
are your predictions for activity
levels in the coming year?
Katainen: Our fiscal year ends in
March 2016 so we make predictions
far ahead with caution. Based on
our current estimates we anticipate
moderate growth.
On the transactional side we are
seeing steady deal flow as Nordic
private equity firms remain active
and Finnish banks continue to
provide financing for good
borrowers. However, terms and
conditions are more stringent than
before the global recession.
Coincidentally, this has helped
spur growth for our capital markets
practice.
Not only are industrial companies using IPOs for funding, but
private equity players are using
them as an exit strategy for their
portfolio holdings.
Reasons for the revival of the
equity capital markets include the
increasing valuations in equities
generally and the ability of
companies to get more lucrative
funding in the equity markets than
from banks – a result of the
tightened lending environment.
In 2014/15 some 16 Finnish
companies have been listed through
an IPO including Ferratum Oyj
which was, by market capitalisation,
the largest IPO in Finland last year,
and the first listing of a Finnish
company on a German exchange.
Tenhunen: At the moment activity
is quite low but the good news is
that we see no increase in insolvency assignments. That means
companies are doing okay and,
once they have the confidence and
courage to take action, the
situation might change. There may
be a pent-up need for transactions
that will activate later.
Koponen and Vikiö: M&A
volumes will probably be at a lower
level than last year. As the economy is still in recession there is no
natural need for growth for many
Finnish companies. Next year, with
the economy hopefully rebounding, there should be a healthier
environment.
Q
Deals involving Finnish
multinational Nokia
continue to make the
headlines. How has its merger
with Alcatel-Lucent affected the
overall M&A market?
Koponen and Vikiö: It was a big
one-off deal. It is hard to say
whether it will have any effect on
general M&A activity. At least it
sends out a positive signal that
Finnish companies should invest
in times like these.
Heinonen: In the short term the
effect is limited, but in the long
term a leading company like Nokia
will energise and develop an
“There may be a
pent-up need for
transactions that
will activate
later”
Pauliina
Tenhunen
infrastructure and network of
suppliers, co-operation partners,
service providers and activities,
including transactions.
Katainen: While headline-making,
this is one deal and not indicative
of the Finnish M&A market as a
whole.
We are only able to peek some
months into the future but based
on our best estimates, our M&A
deal flow for the second half of 2015
looks robust.
“The Nokia deal
sends out a
positive signal”
Jari Vikiö
“There will be
opportunities for
the private sector
and more work
for law firms”
Mikko Heinonen
Q
Outside technology,
which sectors will provide
most work for lawyers in
the next few years and why?
Koponen and Vikiö: Healthcare is
a growing area as we have an
ageing population. Private
healthcare will become a major
player in the macroeconomic
market. We also believe the retail
sector will see some new players
coming in from abroad.
Hilli: The energy sector is changing. As we have huge projects in
that sector, ranging from biofuels
and nuclear power plants to
windmills, there will be a lot of
work for lawyers in the next few
years.
Katainen: Commercial real estate
deal volume is on an upswing.
According to Finnish market
research group KTI, the size of the
Finnish commercial property
investment market at the end of
2014 amounted to some €50bn
(£37bn) – an increase of €2bn on
the previous year. Domestic
pension funds remain the most
significant participants in the
market but their share has
decreased recently due to the entry
of new players and the increasing
allocation of property to foreign
and indirect investments.
On the energy front we see
opportunities in projects related to
Finland’s increased use of renewable energy, including wind power
and biofuels, for which subsidy
systems are in development. We
are also seeing more consolidation
in the traditional electricity
market, where specialisation is
needed to understand the connections between transactional and
regulatory issues.
Finland is converting part of its
public healthcare delivery system
to the private sector, providing
opportunities for private equity
investors. This structural change
means significant deal potential for
law firms too.
Read more online at:
TheLawyer.com/Europe
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16/10/2015 11:19