Alliance after alliance: Bird & Bird stakes all on getting Asia right

Bird & Bird’s CEO David Kerr on why the low risk, cost-effective and practical cooperative agreement approach is the best way forward in Asia.

Bird & Bird (2Birds) has just become the latest UK firm to make a move on South Korea, an increasingly important country for outbound investment and a legal services market that is opening up to the west.

But instead of opting for establishing its own foreign legal consultant office, which 20 or so other UK and US firms have done, 2Birds has chosen an alternative route – entering into a cooperative agreement with Hwang Mok Park (HMP), one of Korea’s largest firms (25 February 2014). 

The cooperation agreement is neither a profit-sharing arrangement nor an exclusive strategic alliance. As a result, the two firms say it only took them a short span of time to reach a deal.

According to HMP’s founder and managing partner Mok Kun-su, the deal doesn’t even require regulatory approval. Low risk, cost-effective and practicality easily make this the model an attractive one.

The fact that 2Birds has been working with HMP for a decade on Korea-related matters may have helped the two firms reach an agreement swiftly. 2Birds’ Hong Kong partner Marcus Vass, Greater China head of communications, media and technology group, is the lead relationship partner with the Korean firm. Vass works mostly with HMP’s technology partner Sang-il Park, another founder and managing partner of the firm.

Korea has been an important global technology hub for several years, and there was no regulatory hurdle to strike a cooperation agreement before the legal market opened up following its Free Trade Agreement with the European Union. So why did 2Birds wait and only make a move into the market now? 2Birds’ CEO David Kerr points out one of a number of reasons.

“Because Asia has become the firm’s top priority now,” he reveals.

It is a growth strategy the firm formed about a year and a half ago, when it set a goal to grow its Asia revenue to 20 per cent of the global total in five years. Around that time, the firm relocated long-serving London partner and global board member Justin Walkey to Hong Kong to kick-start its Asia expansion.

At the moment, fee-income from Asia stands at about 13 per cent of the firm’s global revenue, or £32.4m based on 2Bird’s 2012/13 financial results (4 June 2013). Kerr notes the firm is on track to reach its goal.

“We have ambitious plans in Asia and have taken important steps to prioritise growth in Asia,” says Kerr.

Clearly, the latest Korea alliance and last year’s tie-up with Australian TMT boutique Truman Hoyle (22 March 2013) are among the steps taken to achieve the goal. But unlike most other international firms, which prefer setting up their own offices overseas where possible, 2Birds has a different take on Asia. It will go into a market by making a local friend.

Apart from Australia and Korea, the firm also has cooperation agreements with Chinese firm Lawjay Parnters and Malaysian firm Tay & Partners. In Singapore, it also has a long-established joint law venture branded as ATMD Bird & Bird.

Through its local allies, 2Birds can offer clients a fuller range of legal services in many Asian jurisdictions where international firms’ practices remain restricted. There are also other benefits.

“In different cultures, clients usually face different commercial issues and have different business objectives. Our local associate firms can help manage key pressure points of clients from that country. For Asian clients this is especially helpful,” says Kerr. “We have a different approach due to Asia’s diverse markets, which are in different levels of development and have different level of sophistications. We think it is the best approach for our Asia strategy,” he continues.

Benefits aside, it is a well-known fact that making strategic alliances work can sometimes not be a very a smooth sail, not least because in the long term there is no aligned economic interest. The past a few years has seen many strategic alliances fell apart spectacularly, such as Linklaters’ decade long joint venture with Singaporean firm Allen & Gledhill (3 November 2011) and legacy Herbert Smith’s alliance with European firms Gleiss Lutz and Stibbe (24 November 2011).

However, Kerr is confident that the firm is experienced enough to manage alliance relationships.

“We’ve learned our hard lessons at the beginning with our alliances in Europe. But now we know well how to make these relationship work,” he insists.

He highights Denmark as an example. The firm merged with Danish IP/IT boutique Bender von Haller Dragsted just a year after the two had signed a strategic cooperation agreement (11 March 2013).

Nevertheless, what works in Europe doesn’t necessarily work in Asia, as they are two entirely different beasts. But it will be interesting to see whether and when 2Birds will pull off a merger deal in Asia. At least in South Korea, we know it is impossible to do a local merger until July 2016, when the market will be opened fully.

For now, 2Birds shows no sign of slowing down of its expansion in Asia. Kerr hinted that there are further deals in the pipelines. Somewhere in South East Asia could be the next target. Don’t bet against seeing 2Birds fly off to Indonesia in the not-too-distant future.