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The Finnish banking sector is not suffering as much as many other European countries. While Iceland is bleeding and the economic storm rages over British, Belgian, Dutch and Irish banks, Finland is doing relatively well....

The Finnish banking sector is not suffering as much as many other European countries. While Iceland is bleeding and the economic storm rages over British, Belgian, Dutch and Irish banks, Finland is doing relatively well.

An explanation for this is not too hard to find. The Finnish financial industry learnt its lesson in the early 1990s when the sector collapsed, and has subsequently understood the need for a moderate, conservative policy ever since.

"Since the beginning of the year we have seen a slowdown in the transaction market," says one banking partner. "Local banks are not financing at the moment but we are quite happy with the results. In Denmark or Sweden it is a lot worse." But Finland is not an isolated island, and has been affected by the market turbulence.

This can be noticed by the dwindling number of foreign investors in the Finnish market, with firms seeing foreign clients withdraw almost completely from Finland. "What is left of RBS in Finland is a minor player, and Finnish corporations should not expect anything from them in the near future," says one partner.

Another senior banking partner agrees: "The deals have become smaller, take longer to close and some companies or investors do not operate in this region at all anymore."

"The capital markets have practically come to a stand-still," says a senior partner of one of the leading firms. "It is very quiet at the moment and that is an understatement....

"The capital markets have practically come to a stand-still," says a senior partner of one of the leading firms. "It is very quiet at the moment and that is an understatement."

Although securitisation in Finland has traditionally been very limited, all other sectors in the market slowed down as well. Deteriorating market conditions caused many transactions to fail before being made public. Other deals were downsized, postponed or cancelled.

"Local banks are not financing at the moment – zero, nothing," says one lawyer. However, obstacles in the debt market and the lack of sufficient bank credit have put rights offerings into a new light, giving companies an opportunity to organise additional financing for the issuers. Regulatory advice has also become more important than ever.

But there is light at the end of the tunnel. "The market is not as crazy as Norway or Sweden," says one partner. "The Finnish are more careful and take less risks. That will help us in the near future."

Finland experienced a relatively healthy M&A market during the first six months of 2008, but after the summer the number of deals started to drop dramatically and the market cooled down significantly.Although it is mainly the financial sector in Finland which is hit as a result of the credit crunch, other sectors and industries have proved not to be immune....

Finland experienced a relatively healthy M&A market during the first six months of 2008, but after the summer the number of deals started to drop dramatically and the market cooled down significantly.

Although it is mainly the financial sector in Finland which is hit as a result of the credit crunch, other sectors and industries have proved not to be immune. While the small- and medium-sized market deals are still taking place, the large transactions have mostly been put on hold or cancelled altogether.

"Clients are more cost-aware than ever before, and the deals? Less in number and smaller in size," says one senior lawyer. "We have a number of deals under consideration and preparation, but you wonder – will they ever fly?"

On the other hand, the industrial buyer has re-emerged. While the beginning of 2008 was marked by the rise of the private-equity players, it seems industrial players are on the return backed by confidence that they won't be outbid by highly-leveraged competitors.

"'You do not need a crystal ball to tell there will be industrial consolidations and joint ventures," says the managing partner of one of the leading firms.

With the lack of liquidity in the market, practically everything is bought or exchanged in shares. "Only on the public side are there big transactions right now," says one senior partner. "But I am fairly optimistic. Work is picking up. Although I must admit, sometimes you get a little bit blind. You might think how you're experiencing it personally is how the world is doing."