Based on 130 CEE In-House Matters Deal 5 interviews, we analyzed the fundamental factors that play a role in GCs’ decision-making process in terms of choosing a new law firm to work with. The most frequently brought up factors are described below.
Branding and Reputation
A common pattern among GC responses regarding the reasoning behind picking a specific law firm was to highlight the branding and reputation of those law firms. For example, “ODI is one of the best-known transactional advisors in the legal field in Slovenia and they had great references,” Hranilnica Lon’s Imre Balogh noted. “We inquired with a few law firms but decided to go with Sorainen, due to their excellent reputation in M&A matters,” Montonio Finance’s Rasmus Oisma said. Similarly, Raunistal’s former owner Regiina Pihlak said the sell-side had “involved Lextal in the company’s sale process, as they are one of the leading firms in Estonia and their experts are at the top of their field.”
For others, the excellent positioning of the firm in the legal market was a good starting point for further inquiries. “We invited Clifford Chance to pitch as they are well-known in the market,” Commerz Real’s Dirk Schilo commented, adding that later, during meetings, the lawyers “gave the impression of being very competent whilst having a commercial insight into the market.” Similarly, AI Startup Incubator’s Angelo Burgarello said that “KSB is definitely one of the best law firms on the Prague scene” and that, with their primary point of contact lawyers, “we are able to quickly identify the must and nice-to-have features of the investment.”
A Friend Indeed
A number of GCs, on the other hand, emphasize that their choice of legal advisor was influenced by the fact that a specific law firm had been recommended by someone they trusted.
Frequently, law firms can be the ones advising companies on which colleagues of theirs to work with. Evli Growth Partners’ Riku Asikainen said that the company chose Walless as an advisor since the firm “got a nice and warm intro from trusted Helsinki law firm Avance Attorneys.” Likewise, Infosys’ Inderpreet Sawhney said that “since the deal involved other jurisdictions where Osborne Clarke is not present, they needed to switch to someone on the ground for bits of the deal. They told us they have a few best friends that they trust – Kinstellar and DLK Legal – and we went with their recommendation.”
“While this was our first deal in Lithuania, we had done deals in other former Eastern bloc countries before and built a good network of advisors,” ConHostinger’s Thomas Strohe said, adding that “we used this network to get introductions and suggestions for local law firms in Lithuania and screened the market.”
A personal factor also seems to play a certain role, according to GCs. For example, “KWKR was recommended to me by a friend of mine who’s been in startups for years,” Knacks’ Dawid Szymanski said. “LegalProof was recommended to me by one of my mentors, so that was a first step in building the trust needed with a potential partner,” Zipper Studios’ Radu Benga reported.
Finally, GCs note that sometimes such referrals come from an organization they work with. “We were looking for a company that looks at startups as future partners, not temporary clients,” Brette Haus’ Gennadii Bakunin said, adding that “the Latvian Startup Association advised us to contact Sorainen because of its good reputation in supporting local entrepreneurs.” Turing College’s Benas Sidlauskas also said that “YCombinator had top leading law firms as their partners, which they offered us to choose from.”
A Niche in the Market
For some GCs, an important feature when selecting a legal advisor is their expertise in a specific practice or industry. For example, Hackrate’s Balazs Pozner said that, “during the selection process, field experience in IT security and legal issues of cybersecurity services was an essential factor for us.” Albaraka Asset Management’s Emin Ozer also noted that the criterion for choosing a legal advisor was the fact that “Aksan is a well-known Turkish law firm focused on startup investments.”
Alternatively, GCs frequently highlight the matching expertise of law firms as a decisive factor. For example, Sun Investment Group’s Maciej Kalinowski noted that the company decided to rely on Clifford Chance since the firm “is known in Poland for its premium quality of legal services in the fields of energy and mergers & acquisitions,” and they were looking for a legal team “who merges expertise in both fields.”
And sometimes you have to tick all the boxes. “The one-stop-shop solution works well for us,” Van der Vorm Vastgoed’s Rene Voortmeijer explained, noting that their legal advisor had “a broad experience in legal services: corporate law, real estate, construction, and tax.” ElevenEs’ Nemanja Mikac agreed, saying that “for us, it was very important to have a world-class partner, who has expertise in different areas. So, when we need high-level negotiating (e.g., term sheets), tax, employment, or intellectual property support, in Karanovic we have found a great and safe partner.”
Stakelogic’s Stephan van den Oetelaar and Ciklum’s Anna Ryzhova noted that the firm’s international experience was essential. “In 2019, Ukraine was a ‘foreign country’ for Stakelogic,” Oetelaar said, adding that “therefore [we] looked for legal advice from an international law firm that could help to build business operations in Ukraine.” Ryzhova also said that “international legal support to any global business and trade is at the core of the in-house legal function”, and that Dentons was an easy choice since the firm had an experienced M&A team “in the countries where the target had a presence.” Fr. Lurssen Werft’s Dirk Malgowski echoed that sentiment, saying that “our goal was to find a Bulgarian law firm with international experience.”
Finally, GCs are also taking into account specific factors, such as the law firm’s understanding of the region or relationship with public bodies. Lurssen’s Malgowski said that Gugushev & Partners was an “ideal choice” since the firm had “experience in working with the Ministry of Defence and strong local knowledge.” FinBee’s Darius Noreika highlighted that Motieka & Audzevicius “is experienced in the field and is in good relations with the regulator,” and that “good relations with the regulator help to achieve informal and efficient communication when necessary.” Finally, Studen & Co Holding’s Natasa Pucar noted that one of the benefits of working with Ibrahimovic & Co was that the firm knew the “legal traditions in West Balkan countries, with 20 years of experience.”
Taking a Leap of Faith
And last but certainly not least, GCs sometimes look at elements such as shared values and a common vision about the project’s future, when selecting a legal advisor. “We wanted to find the ones who will believe in our future goals,” the Cherrisk legal team noted, adding that “Dentons was the one who came up with a vision regarding the ecosystem and products.” Or, as Solaride’s Kristel Leif put it: “I think it’s a positive mark that Hedman Partners sees a lot of potential in this project and wants to contribute with its legal know-how.”
The analyzed Deal 5 interviews were published between June 2020 and September 2022. Companies and positions were current at the time of their respective publishing.
This article was originally published in Issue 9.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.