Childs: CC will not get big in Australia
21 February 2011 | By Gavriel Hollander
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Clifford Chance took few in the legal market by surprise when it announced last week it was following the march of UK firms into Australia.
The double merger - with Chang Pistilli & Simmons in Sydney and Cochrane Lishman Carson Luscombe in Perth - will create a 14-partner presence for the firm across the two cities.
Clifford Chance nearly became the first to take a punt on an Antipodean operation when in 2008 talks with Mallesons Stephen Jaques were at an advanced stage (The Lawyer, 8 December 2008). But that was before post-Lehman Brothers market conditions rendered the tie-up unworkable.
While that merger would have given the magic circle firm an instant full-service Australian presence, last week’s announcement demonstrates the changing attitude of the Clifford Chance management.
“What we’re not going to do is be full-service in Australia,” says managing partner David Childs decisively. “We decided some time back that if we were going to do something in Australia it was going to be focused.”
That focus is will be on high-end M&A and cross-border financings, with other practice areas used strictly in support roles.
What is more important for Clifford Chance - and something that the firm’s communications machine has been at pains to portray as at the centre of the decision to move into Australia - is its ambition in Asia.
Childs talks freely about his “aggressive growth plan in the region”, saying that he wants revenue to double by 2014. That would mean total fee income of around £250m, equating to around 15 per cent of firmwide turnover at its current level.
For Childs, Asian growth on that scale means a strong M&A presence in Australia, even if the scale is vastly different from what would have been the case if the Mallesons deal had come off.
“The reason we’re going into Australia is that, when you’re looking at doing something in the Asia-Pacific region, it’s become an important jurisdiction. In the past five years the M&A market has become one of the largest in the region.”
He adds that he has no intention of stepping on the toes of the major Australian firms nor of A&O, whose presence is expected to stay targeted on its financing group.
“We don’t plan to be competing in that space,” admits Childs, adding that Clifford Chance’s entry into the market is not a response to what other UK firms have done in recent months.
Norton Rose - the first firm to launch in Australia when its merger with Deacons created Norton Rose Australia at the start of last year - and A&O have also both been keen to stress that the Australia play is part of a wider regional strategy.
But not everyone is convinced about the need to have a presence on the ground. Neither Freshfields Bruckhaus Deringer nor Linklaters show any inclination to follow the lead of their magic circle peers.
“We don’t see the need, given that there are some fantastic Australian firms we work with already,” says Freshfields senior partner Will Lawes. “It’s a well-lawyered market, it’s competitive and so long as there are excellent local firms that remain available to us we don’t need to be there.”
In private, senior figures at Linklaters express similar reservations. Some see the differing approaches as indicative of the division of the magic circle into two tiers, with A&O and Clifford Chance described by one partner as “more volume merchants” than their rivals.
That might be a harsh way to characterise Clifford Chance’s move which in truth is more like a series of lateral hires than a bona fide merger, given the ease with which the two bolt-on firms are expected to be integrated.
The 14 existing partners in the two firms will be joined by two others who will relocate from other parts of the network. Restructuring and insolvency partner Scott Bache will move from Hong Kong to the Sydney office, while another partner will eventually relocate from an Asian office to Perth.
Partners who are in the equity at their current firms will join the full Clifford Chance lockstep when the tie-ups go live in May, with salaried partners entering the salaried ranks.
Childs speaks glowingly of the “excellent cultural fit” and rejects the suggestion that moving from a boutique to one of the world’s biggest firms could be disruptive.
However, if the wider Asian picture is the thing to watch, Australia may not be the big talking point for much longer. Child says he has “no doubt” that the firm will open more offices in the next two years.
With several firms sniffing around South East Asia, including the soon-to-be liberalised market in the Republic of Korea (South Korea), it would be no surprise if Clifford Chance reclaims the fabled ‘first mover advantage’ it sacrificed in Australia.