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Homburger's partners: “Banking regulation will bring law firms more work in regulatory and compliance areas”
Daniel Daeniker and Frank Gerhard, Managing Partner and M&A Partner respectively at Zurich-based law firm Homburger, give us their insight on both the Swiss market and the strategy of one of that market’s major players.
Leaders League. Switzerland’s legal market is unique in Europe due to the small number of international law firms. What is your take on this situation?
Daniel Daeniker. Indeed, there are few international law firms or networks operating in Switzerland, even though we have recently witnessed international law firms opening new branches. We see two main reasons. Firstly, Switzerland is a midsized market. Its situation is close to those of the Nordic countries. The volume of M&A activity is contained and there are no signs that it will take off in the near future.
At the same time, the Swiss legal market is well covered by domestic law firms providing high quality work. International law firms generally serve their clients through local partners when carrying out their business in Switzerland but independent firms forge a better connection with companies, governments or regulators. International law firms cannot therefore be considered as competitors.
Leaders League. What is the international strategy of Homburger?
D.D. We have been advising clients for more than 20 years now on international matters, both on inbound and outbound deals: we are well positioned on the international market and we fit international strategies. However we have no intention of establishing ourselves outside of Switzerland. We prefer to conserve our ability to choose the right advisors for our clients. We team up with the most appropriate law firms outside of Switzerland whenever we need to. We are not and will not be part of any exclusive networks. In the US for example, we do have some great relationships with peers such as Cravath, Swaine & Moore, Sullivan & Cromwell or other top New York firms, depending of course on the particulars of the activity requested by our clients.
Leaders League. Switzerland is preparing for the end of banking secrecy in 2018. How will this affect the country’s attractiveness?
Frank Gerhard. For a country like Switzerland, which is one of the most developed banking centers in the world, the end of banking secrecy is a tough time. Since 2008 banks have been facing new regulations and this will not end in the near future. By 2020 the banking landscape will have been totally reshaped. The rise of regulations and the rise of technology also come with increased pressure on the margins of banks, which will automatically lead to concentration in the sector, especially in private banking. The forthcoming automatic exchange of information has also contributed to an acceleration of this trend.
Certain business leaders contend that Switzerland will lose one third of its banks in the near future. This will certainly bring to law firms some domestic or cross-border deals. By 2018, banks will also face new regulations with Basel III. This in turn will bring law firms more work on regulatory, compliance or even financing matters for their clients.
However, transparency and tax compliance of assets is a worldwide trend, so we believe that in the long run Swiss banks will get stronger after this catharsis.
Leaders League. There are two major financial centers in Switzerland: Zurich & Geneva. Where should an international investor choose to go?
F.G. The Swiss landscape is divided into several areas: Zurich first, which is the economic capital of the country with great incentives for international clients to land here: capital markets, financing and, of course, investors. Some other regions like Geneva also have a lot of assets such as a strong historical international position for private banking, and have also attracted investors operating in commodity trading, essentially due to tax optimization possibilities. Furthermore, the Geneva region has a strong portfolio of startup companies due to the presence of major institutions of higher education. That being said, the coming into effect of Corporate Tax Reform III (by 2019) will make certain tax privileged regimes disappear, which might affect, for example, commodity traders in Geneva. It will still be an interesting place for private banks and attract some wealth, especially from middle-eastern countries. Last but not least, Basel is also very attractive for technology and life sciences companies. There they can enjoy an extremely innovative ecosystem helping a wide range of companies from the large, such as Roche or Novartis HQ, to startups.
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