Despite the strength of domestic law firms in Slovenia, not a great number of major local players have engaged in direct expansions across the region. Senica & Partners Managing Partner Uros Cop and Kavcic, Bracun & Partners Managing Partner Simon Bracun explore the reasons behind this trend, examine attempts at regional alliances, and identify recent developments that may incentivize firms to pursue regional expansion.
Market Size and Expansion Risks
“Exploring the growth of local law firms regionally can offer valuable insights into the legal landscape and its potential for expansion,” Cop begins. One primary consideration he puts forward is the market size, which has “kept many local firms rooted in the national market. These firms have cultivated strong local relationships and reputations, adding a layer of perceived risk and cost associated with regional expansion.” Additionally, he feels that understanding the diverse legal systems, regulatory environments, and business cultures in neighboring countries can “present challenges for firms without an existing regional presence. Moreover, many firms prioritize maintaining their independence and client-centered approach over scaling up and potentially diluting their brand and quality of service.”
Furthermore, while regulatory and legal systems in the region share a common background and cultural and linguistic barriers are relatively surmountable, substantial financial investments are required for successful expansion. “Establishing offices and recruiting local talent constitute significant obstacles. Maintaining the firm’s core values, culture, independence, and service quality during expansion poses a substantial hurdle,” Cop says.
Bracun agrees with Cop, saying that Slovenian law firms face significant challenges in expanding their reach and establishing regional offices primarily due to the substantial investments and regional risks involved. “The Balkan region, closely connected to Slovenia, is marked by country-specific regulations, particularly as most ex-Yugoslavian countries – except Croatia – are not part of the European Union. Additionally, Slovenia has the smallest market compared to its neighbors, putting its law firms at a size disadvantage relative to other major local or large domestic offices,” Bracun explains.
Regional Alliances: A Solid Alternative
However, in recent years, there have been “compelling trends and developments” that have incentivized “several local firms to pursue regional expansion,” Cop says. “The globalization of businesses, even within traditionally localized sectors, generates demand for legal services that seamlessly operate across borders. Furthermore, advancements in digital and remote work technologies have facilitated firms in managing operations and client relationships across different locations,” he explains.
“For instance, at Senica & Partners, we recognized the need for comprehensive regional legal support and, in response, established the Adriatic Legal Network with regional partners. Over time, our clients demanded 24/7 full-service global support, and to not lose them, all of us joined Andersen Global; by doing so, we expanded the variety of services we offer and started to operate as a global firm on a worldwide scale, serving our clients in 176 countries while retaining our independence,” Cop shares. “Therefore, while the trend of clients seeking comprehensive legal support continues to grow, firms need to meet the demand for seamless and tailored global support in addition to global expansion – this principle applies equally to Slovenia and the wider region,” Cop says.
In light of this demand and as an alternative to the perceived challenges of direct regional expansion, Bracun explains that “regional alliances provide a strategic solution for Slovenian law firms, allowing them to extend their reach and capabilities without the high costs and risks of setting up and maintaining physical offices in new locations. Through these partnerships, Slovenian firms can offer a broader range of services and access to international markets, maintaining their competitiveness in an increasingly globalized legal industry.”
And it’s not just Slovenian firms being inclined to consider regional alliances. Looking at Slovenia from the outside, Bracun assesses that “Slovenian top-tier law firms are primarily domestic law firms known for their high expertise, though they are generally smaller compared to well-established firms in foreign jurisdictions, with some exceptions. While large international law firms already serve significant international clients in the region, Slovenia’s relatively small market size and the presence of highly skilled domestic firms contribute to intense competition within the country.” Consequently, Bracun feels that “major local players opt for regional alliances and/or cooperation with domestic law firms on a case-by-case basis, instead of directly entering the Slovenian market and competing for what they perceive as a relatively small share.”
While there is a perceived risk for Slovenian firms to expand into the region and also for outsiders to enter the market, regional “alliances often emerge from the necessity to provide cross-border legal services to clients operating regionally,” Cop says. “The primary reasons behind these attempts include pooling resources, sharing expertise, and enhancing overall service offerings to clients. By offering broader geographical coverage and specialized local knowledge, such alliances aim to serve their clients better,” he explains.
“While some of these alliances have achieved success, others have encountered challenges when it comes to integration, cultural differences, and maintaining consistent service quality,” Cop goes on to say. “Successful alliances rely on solid strategic alignment and effective communication for their accomplishments and, most importantly, alliances should strive to have the same culture, which is often a significant barrier.”
Incentives for Regional Expansion Down the Line
“The Balkan region holds significant strategic importance for the European Union, which has led to a notable trend where certain SE countries are making substantial progress toward EU membership,” Bracun says. “Concurrently, the region is experiencing increasing interconnectedness, evidenced by a rise in direct investments between these countries. These developments suggest that current country-specific regulations will likely harmonize over time, adopting reforms and aligning their legal and economic frameworks with EU standards.” According to him, this alignment facilitates easier and more attractive conditions for trade and investment, fostering further economic growth. “Businesses are increasingly looking beyond their national borders, seeking opportunities across the region; continued progress in these areas could incentivize strong local firms to pursue regional expansion,” Bracun concludes.
This article was originally published in Issue 11.7 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
