After a few troublesome years during the global financial crisis, it seems like Slovenia is on a positive economic route again. On December 14, 2018, S&P Global Ratings affirmed an “A+/A-1” credit rating for Slovenia with a positive outlook. Slovenian GDP has grown in the last two years between three and four percent annually, with a growth forecast for 2019 of 3.4 percent.
Growth of the Slovenian Legal Market
It appears that law firms in Slovenia have taken advantage of the country’s economic growth, as the combined revenue of the top 30 law firms grew by approximately 30 percent, up from EUR 100-110 million in 2012-2014 to EUR 130-140 million in 2015-2017.
A few years ago, when a large M&A transaction was taking place in Slovenia, only four or five firms would compete to get the job. Today this number is closer to ten, and sometimes even more, which demonstrates that the competition is fiercer, keeping law firms on their toes. There are no large international law firms with offices in Slovenia, which is no surprise as the market – Slovenia has only two million people – is too small for them and they would probably have trouble competing with the strong local and regional firms.
However, in developing their business models, the law firms that are in Slovenia see the bigger picture and look across the borders. Among the top ten law firms in Slovenia in terms of revenues, you can hardly find a firm that is not either an integrated regional CEE/SEE firm or part of a network of law firms covering the countries of former Yugoslavia. Hardly a week passes without us receiving an inquiry referring to at least two countries of former Yugoslavia. This is no surprise, as clients see this territory, with more than 20 million inhabitants, as a single market, and they are keen to receive integrated legal services. It only makes sense for law firms to try to accommodate such clients and provide cross-border advice in different practice areas.
Sophisticated Work and Big Clients
The work done by law firms today is ever more sophisticated and complex. Clients are demanding, and only the smartest (and quickest) minds will survive this battle. It is interesting to see how the very nature of the legal work has changed in the past few years and how closely it follows the condition of the economy. Between 2013 and 2015, firms were busy with large financial and corporate restructurings, followed by non-performing loan portfolio sales in the years after. And in the last year or so, we have seen a lot of M&A and Real Estate deals in the market. Economic growth brought along a good inflow of investors making greenfield investments (including Magna Steyr, Yaskawa, and IKEA, among others), as well as vast interests from strategic investors and private equity firms (such as Apollo, HPS Investment Partners, York Capital Management, and KKR) for Slovenian companies.
Revenue growth is no guarantee of a good night sleep, of course. The Big 4 firms are trying to penetrate the legal market, so far with only mixed success. They definitely have a good platform of clients and financial resources, but they have not (yet) been able to attract the best lawyers in Slovenia to join them in building their legal arms. However, they have the potential to be a serious source of disruption on the Slovenian legal market in the long-term.
We have also seen a few spin-offs from largest Slovenian firms in past few years, either in the form of boutique firms or solo practitioners. Both are counting on their reputation and expertise and are taking their pieces of the pie.
Look to the Future
It is said that “clients will always need lawyers; only the nature of work changes.” Law firms in Slovenia have shown their ability to adapt through the turbulent times of the Slovenian economy and to demonstrate constant revenue growth.
As the Slovenian legal market is quite developed, one of the biggest challenges law firms may face in the future will be to attract, develop, and retain talented lawyers. Firms will need to demonstrate their ability to further develop viable career paths for young lawyers. The new generation of lawyers is less enthusiastic about starting their legal careers at the bottom and slowly make their way to the top. They want immediate action and quick progress.