Business
Business Services
Supporting Growth
05.02.2010
Whether they are riding the wave of an economic boom or grappling with the fallout from a crisis, it is usually exporters, energy companies and real estate developers that get the most attention. The providers of business services that make the market economy purr along come hell or high water, however, tend to get overlooked. Having high-quality business services support operations helps companies weather the crisis and seize new opportunities in the long-awaited rebound.It is not only the companies that profit from a well-developed business services market, however. Marja Torkar’s story is a case in point. A chemical engineer by profession, Torkar had been employed by a Slovenian pharmaceutical company, but then lost her job in a reorganisation. Instead of relying on government-sponsored employment agencies, she decided to throw her lot with a human resources management (HRM) firms.
Three months later she got a job with the same drug maker, the only difference being that the new job was better suited to her experience and abilities. “It seems that the agency was very well aware of what my employer wanted and where my skills could fit in,” she explains.
Hard times: An opportunity?
A skilled worked force may still be a hard-to-find asset, but these days, unfortunately, companies are thinking more of cost-cutting than investing in new employees. This may not bode well for those HRM services providers that were doing well only because the thirst of businesses for workers seemed unquenchable in boom times.
Other providers, however, may see the demand for their services rise as the economy reels. Tax advisors and accountants, helping companies navigate the flotsam and jetsam of tax codes and complex accounting regulations, are in high demand, especially at a time when every euro counts. It has become a platitude to say that a crisis can also be an opportunity, but at least in the field of business services some companies could come out on top, as their customers move to cut costs and exploit every loophole available to save money.
Not that bad
When the fallout from the US financial crisis hit Slovenia in early 2009, the stock market was the first to feel the pinch. With investors fleeing to safer asset classes, share values crashed and mutual funds were bleeding money. Not even a year later, however, the Ljubljana Stock Exchange (LJSE) started seeing the first increases in volume of traded shares. As central banks around the world inundated the markets with cheap money, some of it found its way to Slovenia, giving brokerages and fund managers a much needed boost.
Although the reputation of financial firms is at its lowest in decades, the loss of confidence will not hurt all financial services providers to the same extent. Take credit insurers, for example. With loans increasingly harder to come by and an increasing number of companies on the verge of insolvency, it is becoming increasingly sensible (and common) to take out insurance on loans or accounts receivable.
Sorting it out
However, is inevitable that some companies will go under. Perverse as it may seem, bankruptcies are not necessarily a bad thing, especially for those business services providers that specialise in insolvency and bankruptcy procedures. When it comes to untangling a web of claims on a bankrupt company’s assets, debt restructuring and selling off viable portions of the business, highly-qualified professionals are required.
Judging by the latest efforts of Slovenia’s competition watchdog to make sure that a competitive situation is established on markets as diverse as retail and electricity distribution, it seems that lawyers specializing in competition law will not be sitting empty handed any time soon.
Shifting priorities
On the other side, the crisis has resulted in a decrease of business transactions, such as mergers and acquisitions, hence a fall in demand for legal advice on these activities.
“Before the recession, we were mostly advising on transaction structuring within the framework of the applicable Slovenian laws – such as takeovers act, capital markets rules, specific regulatory regimes like the banking, insurance, energy sectors – and accompanying merger control advice,” explains Vid Kobe of the Schoenherr law firm.
However, at the start of the economic downturn, interest for investing in Slovenia fell significantly, but other issues surfaced and different types of legal advice were sought.
“Since the recession,” adds Kobe, “the focus of our clients’ interests has somewhat shifted to corporate housekeeping, capital maintenance rules, general compliance with regulatory laws. There is also growing interest in advice with regard to corporate restructuring and the implications of the Slovenian insolvency regime. Also, we have noticed an increase of demand for advice relating to the implications of the Slovenian merger control regime with regard to foreign-to-foreign mergers, reflecting the numerous ‘distressed’ mergers of large multinationals taking place these days.”
Value for money
What also emerged was that clients are now making sure they get their money’s worth, with every single piece of information requested is being scrutinised for its value.
“A client will – more so than before the recession – impose strict timing deadlines and fee limits, as well as carefully evaluate each individual piece of advice with respect to whether it is, indeed, helpful,” says Kobe. “Especially in the business of legal services it is now, more than ever, indispensable for a lawyer to truly understand the industry in which the client operates and to be able to produce accurate, lean and business-oriented advice.”
The old ways
Even though certain changes in the downturn have occurred, one would be naive to think that the change fundamental or permanent. The types of services are evolving and, with Slovenia coming out of the recession, foreign interest is returning. And with them, the old type of advice.
“Lately, we are seeing more and more foreign companies returning,” notes Nina Zidar-Klemenčič, a well-known lawyer. “They are primarily interested in investment opportunities and are seeking legal advice on their local operations. With increased foreign investment, we will experience an increased demand for top performance in the business service sector in Slovenia.”