Austria's Schoenherr Opens Equity to International Partners

Chris Johnson

The American Lawyer

Leading Austrian firm Schoenherr has opened up its equity to partners outside its Vienna headquarters for the first time, 16 years after the firm established its first international office. The five new partners -- based in Belgrade, Serbia; Bucharest, Romania; and Prague, Czech Republic -- will account for just over 20 percent of the firm's total equity partnership.

"Quite some time ago, we started to transform ourselves from an Austrian firm into an international firm," says managing partner Christoph Lindinger. "But you cannot be truly international with ownership that is only local, so this is clearly a step in the right direction. It's a new chapter for the firm."

After a closed ballot vote of the firm's 19 existing equity partners in September, Schoenherr's partnership deed was amended to allow international partners to become full members of its equity, with equal voting rights and places on the same modified lockstep.

Prague-based real estate head Martin Kubánek and competition specialist Martin Nedelka have joined the equity with immediate effect, with their draws backdated to February 2010. Belgrade-based Slaven Morav?evi? and Matija Vojnovi?, of Serbian alliance firm Morav?evi? Vojnovi? Zdravkovi? in cooperation with Schoenherr, will be promoted alongside Romanian real estate expert Sebastian Gu?iu in February 2011.

The move comes at a time when most European firms gradually are tightening their equity, partly in an attempt to maintain partner compensation levels in the face of falling profit margins. Lindinger denies that Schoenherr's equitization will have a dilutive effect on partner profits, as the five "exceptional performers" were already receiving compensation "in line with an equity partner," although he admits that annual profits are expected to fall slightly when the firm's financial year closes on Jan. 31, 2011. Lindinger insists the firm will still be among the highest in the market, however, with gross revenue forecast to be broadly flat. Lindinger would not comment on specific target budgets for the 2012 fiscal year -- they still are being finalized -- but he expects both revenues and profit to increase.

Schoenherr on Monday announced a further significant change to its management. Peter Kurer, the former chairman and general counsel of Swiss financial institution UBS AG, is joining the firm to take a place on its newly-established strategy committee. Sitting alongside Lindinger, finance director Gerold Zeiler and human resources head Michael Lagler, Kurer will hold a full vote on the four-member body, which was created in August and is responsible for setting the firm's business plan, annual budget and the merit-based portion of partner remuneration.

Since opening in Brussels in 1994, Schoenherr has expanded aggressively throughout central and eastern Europe. It now has 12 offices across the region and last month entered into an alliance with Istanbul firm Türko?lu & Celepçi. A full merger with the Turkish firm is "a definite possibility" in the long-term, Lindinger says, depending on the success of the alliance.

Schoenherr's main Austrian rival, Wolf Theiss, has pursued a similar strategy of targeting central and eastern Europe. It operates an almost identical 12 office network, but has had international equity partners since 2003 -- just three years after it launched its first foreign base in Prague.

"We always thought that building a strong regional firm and partnership does require extending equity beyond our initial home jurisdiction," says Wolf Theiss managing partner Horst Ebhardt. "But that is quite normal, I would think."