A&O’s raid on Clayton highlights birth of Perth as Asia gateway and mining centre
15 February 2010 | By Gavriel Hollander
The Australian legal fraternity has been spending much of the past week mulling over the consequences of Allen & Overy’s (A&O) sudden encroachment into its backyard.
A&O’s coup in poaching 17 partners from Clayton Utz to become the first magic circle firm with a major presence in the country has forced the other leading players to look at their international reach.
Although the majority of those who have jumped ship are based in Sydney, the defection of three partners to set up an office in Perth is a significant development and a clear sign of the growing importance of the Western Australia capital.
Perth’s role is twofold. The city is an important jumping-off point for the lucrative markets of South East Asia, but it is also an energy and mining hub.
“Perth’s an important market in its own right,” says Freehills managing partner Gavin Bell. “It’s the fastest-growing economy in Australia.”
Minter Ellison Perth managing partner John Poulsen believes A&O’s move is a sign of a shift in emphasis in the country.
“We’ve been expecting a move from someone for quite some time,” says Poulsen. “You need a significant presence in Asia, and Perth has become increasingly important strategically in the past couple of years.
“Sydney is still the financial centre, but the interesting thing we’re seeing is big construction firms opening up in Perth.”
Freehills has the largest practice in Perth with 27 partners. This means the firm does not see itself as a candidate for a UK tie-up, although Bell stresses that it has “strong relationships” with all the major firms. (See page 9 to read about Freehills’ relationship with Weil Gotshal & Manges.)
Mallesons Stephen Jaques is another of the quintet of firms - Allens Arthur Robinson, Blake Dawson, Clayton Utz and Freehills being the others - traditionally seen as leading the pack in Western Australia, particularly in the mining sector.
A&O’s move has fuelled speculation that Mallesons will seek to renew its interest in Clifford Chance.
“I think every Australian law firm has been thinking about what to do about their international position,” says Mallesons Perth-based head of resources Alan Murray. “This just means everyone will be looking at it more.”
Last week’s news, along with the arrival of Norton Rose through its merger with Deacons, has made Australia more of a target than ever before, with mining and energy key sectors.
“What you’re seeing now is a continuation of the process of the world getting smaller and our companies playing on a world stage,” Murray adds.
Such a statement is backed by the facts. A$180bn (£102.16bn) of oil and gas and iron ore investment is expected over the next few years in Western Australia alone. A glance at Thomson Reuters’ data for Australian mining M&A shows that the sector has gone from strength to strength, with Perth at the centre of the boom.
The US$74bn (£47.29bn) total value of announced mining deals with Australian involvement is almost three times higher than the pre-recessionary peak of 2007, while the number of deals has also grown exponentially, from 134 at the beginning of the last decade to 768 in 2009.
Although the figures are skewed by BHP Billiton’s ultimately unsuccessful bid to acquire Rio Tinto, the presence of two such corporate giants on the scene is a clear sign that Australian mining is now a big consideration for any law firm with genuine international aspirations.
Norton Rose’s tie-up with Deacons offers a sign of things to come, especially given the UK firm’s strength in infrastructure and mining. But while that union means Norton Rose has a ready-made partnership at its disposal, A&O is faced with the task of building virtually from scratch.
“They still have to hire 60-70 more lawyers to accompany those partners,” says a senior Sydney-based partner. “There’s some concern in firms over what will happen next.”
That concern has not yet reached Poulsen. “We welcome the competition,” he says. “It’s a growing recognition of the importance of this market.”
UK firms’ interest in Australia has clearly been piqued. Where A&O and Norton |Rose have led, others are almost certain to follow.