The 2nd Legal Leaders Asia Forum is set to take place March 24-25, 2015 at the Intercontinental Hotel in Hong Kong. The event will provide an opportunity for both international and independent law firms already established in Asia or with an eye towards the path to Asia, to congregate and learn among peers.
As a peer-driven event, 2nd Legal Leaders Asia Forum will reflect the needs and issues of Managing Partners across Asia. The content of the programme has been strategically researched and produced with the delegate in mind, and offers current and topical sessions relevant to all law firms across Asia. In particular, Matthew Bubb, Managing Partner, Ashurt and Nick Seddon, Partner, Beaton Capital, have helped design the event in conjunction with organizer Chilli IQ.
In anticipation of the event, here’s a special Q&A with Nick Seddon, Partner, Beaton Capital to preview what’s to come later this month in Hong Kong:
“Dentons and Dacheng recently merged to create the world’s largest law firm. What do you see happening in the future with China-Western law firms mergers?”
“I suspect the Dentons Dacheng hook up is something of a one off. The question I think it is interesting to contemplate is if you were designing an international law firm from scratch what would its China offering look like and I’m pretty sure it wouldn’t be 4,000 lawyers. Of course China is a key world economy and no one can afford to ignore a market of 1.4 billion people. But China is an immature legal market which is only worth US$7.6 billion compared to US$169 billion for the US. I know that the big play is for the outbound work but for that you need a handful of senior rainmakers in territory and your thousand strong army of foot soldiers out where the money is going. But this certainly will not be the last deal. Many of the Chinese firms are actively looking for tie ups or mergers or just reviewing their international strategy. Many internatinal firms are losing patience with losing money in China and are looking at alternative ways of servicing the market. The result will be more deals but I suspect they will be more conservative than this one. It is also worth mentioning that the verein structure that Dentons already had (King & Wood and Mallesons had to establish one to do their deal) lends itself to deals like this. It sort of removes the financial risk from all the parties. Most international firms do not have a verein structure but also are passionate about single profit pool. This will lead to smaller more conservative deals. That is my prediction (although the Jun Hes and Zhong Luns of the world still might do something).”
“US law firm Fried Frank recently announced plans to close their Shanghai and Hong Kong offices citing the competitive pressures in the region. What do you see as the future for US law firms in the region prospectively? And what if any changes might they consider to increase their competitive capabilities in the region?”
“Its reporting season in the US and the greatly improved profitability of the majority of US firms has one of two effects. If the firm is a black box firm as far as office profitability is concerned the partners will pat themselves on the back and say “job well done”. For those firms that report office or regional profitability, however, it is likely to focus the attention of the partners on those parts of the business dragging the PEP figure down. Asia is a tough market to make a profit in and almost impossible to make as profitable as the US core market when it’s firing on all eight cylinders as in 2014. For some firms, and Fried Frank is clearly one of them, the value of having offices in Asia (sometimes intangible) doesn’t make up for the dilution to profitability.
For the future I don’t see much change from the majority of US firms. Many have been here a long time and will be here for eternity. As the world globalises I don’t see they have much choice. You couldn’t imagine a bulge bracket bank pulling out of Hong Kong or a big four accountant closing up shop. It’s one of the worlds top three financial centres and a hub for all sorts things. And this has been dubbed the Asian Century. Lets talk again in a decade’s time and see if Fried Frank is back!”
“One of the concerns foreign law firms have when entering or expanding in the region, is the cost of attracting and retaining talent. What if anything can law firms do to ameliorate these costs?
“In a word “nothing”. The issue is that the guys commanding the big bucks are often just as capable of plying their wares in New York or London and I don’t believe they would be any cheaper to hire or retain in those centres. The only issue here is that the seam of talent is perhaps a little thinner but then the market is currently a lot smaller. I really hope there aren’t any firms out there that are still treating Hong Kong as a hardship posting with the attendant juicy benefits package. There is pretty much nowhere in the region now that merits that approach. The only solution is plain old good management and a strong culture that partners identify with and enjoy but that’s true the world over.”
“Are the acquisition of local practices a strategy foreign law firms should be paying more attention to in 2015?
“There is no one size fits all answer to this question. It varies from firm to firm and jurisdiction to jurisdiction. Some firms are in the region just to chase the major capital markets or infrastructure transactions and additional local capability won’t add much to their chances of winning that work. Others are here with a view to being full service. For those firms I can see acquisitions being relevant for some jurisdictions but not others. For Hong Kong, for instance, I think organic growth will be the path those firms will continue to follow but where the regulatory playing field is not flat deals may be the best way of getting capability quickly and efficiently. There seems to be a flurry of activity in Singapore.”
The 2nd Legal Leaders Asia Forum is being organized by Chilli IQ. For more information please see the event website or contact Chilli IQ’s Jenny Katrivesis on 02 9818 6566 or 0402 021 089.