The growing international reach of Estonian and Baltic companies is also opening the rapidly expanding global legal market for Baltic law firms, writes Kaupo Lepasepp, Sorainen’s country managing partner in Estonia, in Äripäev (Finantsuudised).
The core of great legal service is the ability to apply excellent legal knowledge in the interests of clients. In terms of the quality of legal service and customer satisfaction, the Estonian legal services market has undergone colossal development in the last decade.
While at the beginning of the century, we learned from our Western colleagues what it means to provide legal services, the international Prospera customer satisfaction survey now reveals that Baltic firms have higher customer satisfaction marks than their Finnish and Swedish peers. In many fields, Baltic firms have world-class specialists and they work on highly successful transactions and disputes.
20 years ago, the market leader in Estonia had a turnover of 70 million Estonian kroons and a profit of 46 million kroons. Now the firms making such results position somewhere in the middle, while market leaders are approaching 15 million-euro turnovers and 5-million-euro profits. The once lavish 30,000-40,000 kroon-salaries of top lawyers have become the average salary of all law firms (2,676 euros). Once the sector restores its customary turnover growth in the range of 10-15%, the future looks bright indeed.
And yet, complacency is not what drives us forward. Instead, Baltic law firms need an expansion project.
Global volume continues to grow
In the last decade, Baltic market leaders have become pan-Baltic law firms. Larger clients see the Baltic States as one market anyway, and the most exciting projects are often the cross-border ones.
While the combined turnover of companies operating in the legal field in Estonia was 167 million euros in 2021, the market volume in Lithuania amounted to 378 million, with Latvian market reaching 166 million euros. The Baltic market, with its expected 1 billion euro market volume in the coming decade, certainly seems a presentable playground.
However, Baltic competition does not make front-page news. The global legal services market was estimated at 713 billion dollars in 2021 and is expected to grow to 1.3 trillion dollars by 2031, nearly doubling. Meaning, the seemingly boring and fully developed global market for legal services is about to get an additional 600 billion dollars over the coming decade.
What are the opportunities for Estonian and Baltic law firms to grab a share of the global market? One way is to go along with the existing customers who have global growth ambitions, structuring transactions and business models in other countries by subcontracting foreign law firms. This prospect is facilitated by the unified legal space of the European Union.
Exciting projects not to miss
However, a real breakthrough on the world market comes with providing legal services to clients not related to Estonia. Here, the best options are technology and a laser-sharp focus. The development of technology and the growing willingness of customers to use such services are creating opportunities to compete against global giants in niches. Alternative legal service providers are predicted to grow their market share by more than 20% per year in the USA, significantly exceeding the 5.9% expected annual growth of the entire legal services market.
A good example is set by legal service providers disguised as technology startups, such as the Estonian Pactum, which is successfully automating certain negotiations on the global market. The globally operating Deel.com, which relieves the headache of formalizing employment relations with global teams, is another great example.
The global market for legal services appears highly regulated and competitive. Tiny nations would be up against giants – in the market dominated by the US, UK and Chinese firms, the leader makes over 6 billion dollars in turnover. To make it among the top 100, one’s turnover must exceed 600 million dollars.
Learning from Estonian-born start-ups like Wise and Bolt, one can spot opportunities in countries or niches neglected by the giants – even a tiny 0.01% of the 600 billion global market growth adds up to 60 million dollars, a revenue that would shoot a firm to Baltic market leadership, leaving all competitors behind.
Of course, breaking into the global legal services market takes a lot of work. But if we do not service our customers on the international market, others will take our place, and with this the most exciting projects of Baltic companies.