Asia Pacific 150: International round-up: Deep impact
17 June 2013 | By Jonathan Ames
16 December 2013
6 January 2014
12 August 2014
24 September 2013
4 November 2013
International law firms are fighting hard for their place at the Asia Pacific table
Click here to access all the information your firm needs to develop in the region.
During his six years as director-general of the CBI from 2000, Digby – now Lord – Jones was fond of saying that if British governments took their eye off the competition ball, “India will have our lunch and China will have our dinner”. There’s no doubt that the Chinese, over the time since Lord Jones stood down from the CBI top spot, have been getting stuck into a global economic feast.
In 2007, when the rest of the world hurtled towards a catastrophic financial crash, China’s GDP growth eclipsed 13.5 per cent. Of course, the country has suffered a well-publicised slowdown in the fallout from the global financial crisis, dropping to 7.2 per cent growth last year. But it is the sort of slowdown for which Western Europe and the US would give an arm and a leg.
With established economies stagnating, corporations and their advisers are rushing east. There is not a Western lawyer in the region who doesn’t wake up every morning, stare in the mirror and utter the mantra: “This is the Chinese century.”
But Asia Pacific is more than China. While that huge country cannot be ignored in the regional business plans of Western law firms, the region is more complex and potentially more rich in opportunity.
Our research shows there are 9,207 lawyers at the offices of the top 50 international law firms on the ground in the region, with the total number at all global firms in Asia-Pac probably closer to 9,500. Some 80 per cent of that number are at the offices of the top 20 firms in the region, 7,359 in total.
The biggest property-holders in the region include, somewhat typically, Anglo-US giant DLA Piper. Never knowingly shy of an office opening, DLA has 12 outposts in the region. Chicago-headquartered Baker & McKenzie has a presence in 14 regional jurisdictions, but seven of those are classed as associated offices. The most discreet office portfolio among the top 20 belongs to Pittsburgh-headquartered Reed Smith, which has four regional outposts.
In the nationality race between the US and English firms, the former are winning, but only by a slight margin. In the overall top 50 there are 26 US firms, 20 English, two Anglo-US and one each of Anglo-Australian and Anglo-German. At the cream end, nine of the top 20 firms are US-based, seven are English, two are Anglo-US while the Anglo-German Freshfields Bruckhaus Deringer and Anglo-Australian Herbert Smith Freehills round out the list.
Greater China – the conventional term for the triumvirate of Beijing, Shanghai and Hong Kong – is by no means the only game in the region, but it is still the collection of offices that most of the biggest players want to have; only two of the top 20 don’t have a presence in all three. But Singapore – now seen as the gateway to South East Asia – is
even more popular; 19 of the top 20 have an outpost in the city-state. Not least because they see it as a launching platform into the huge, natural resource-rich jurisdiction of Indonesia.
Indeed, many a regional managing partner salivates openly over the prospects in an archipelago that stretches nearly the width of the US and is home to a population of some 250 million, many of whom are rapidly joining the glorious ranks of middle-class consumerism.
However, there is a problem with Indonesia – the local bar association and profession is inclined towards protectionism, meaning the best that global law firms can do in the jurisdiction is strike highly regulated, exclusive association deals with local players. Often, those practices are set up with the sole intention of having that role and so far nine of the top 20 players in our international ranking have associated deals in Jakarta.
Tokyo is the third most popular office venue for the top 20, 16 of which are camped out in the Japanese capital despite the local economy having been in the doldrums for the best part of a decade. The global firms – in particular the Americans – point out that Japan is still the world’s third biggest economy and local corporates remain keen on outbound investment.
Thailand and Vietnam remain acquired tastes – seven of the top 20 have so far planted flags in Bangkok, while five have ventured to both Hanoi and Ho Chi Minh City, jurisdictions until recently more associated with two decades of
war between a variety of Western
powers and communist revolutionaries than law firm office opening parties.
But the jurisdictions du jour for international law firms are South Korea and Australia. The Seoul authorities have only within the past 12 months dropped a long-standing ban on foreign firms opening offices, and a long queue of players has formed at the licensing bureau. So far, five of the top 20 have cut a ribbon on gleaming Seoul offices and more are expected shortly.
Others, however, are sitting back and waiting. Several regional managing partners of the global elite
express concerns over rushing into having a physical presence in Seoul, suggesting that the jurisdiction could rapidly become over-lawyered as some firms chance their arms without having an existing solid client base to rely on.
And on the subject of over-lawyering, not a weekend round of golf in Sydney, Melbourne or Perth passes without the phrase being chewed over at the 19th hole. Australia is all about mining and natural resources, and so far nine of the top 20 have set up in the country to grab a slice of the action. Some have launched organic offices, others have gone for high-profile mergers or associations.
Either way, there are suggestions that the Australian market won’t bear many more and even those that are there could find they’ve got in too deep.
But when fighting to keep a share of your lunch and dinner, some might argue there is no such thing as being in too deep.
So who’s making all the money?
For all the high-minded talk of servicing client needs, global law firms are in Asia-Pacific for the money, but only a smattering of them are prepared to disclose just how much they are making – or losing – in the region.
Our survey asked specifically for Asia Pacific turnover for the most recent financial year, the percentage that turnover formed of the firms’ global revenue and, likewise, the percentage of firmwide profit. In total, only five global firms supplied any financial figures at all and not one responded to all the queries.
The biggest global firm in Asia Pacific – Anglo-Australian giant Herbert Smith Freehills – said providing financials for the region so soon after its October 2012 merger “would not be beneficial” as it would “give a distorted view”. However, the firm followed another recently merged regional player – Sino-Australian King & Wood Mallesons – in telling us that it will enthusiastically provide financial figures for next year’s survey.
Of the five global firms that played ball with our cash queries this year, London’s Bird & Bird provided the scratchiest. While it coughed up a revenue figure of HK$105m (£8.7m) for its greater China offices, it omitted numbers for its Singapore outpost. Also, the figure forms only 3.4 per cent of the practice’s worldwide turnover, according to our most recent UK 200 research.
The other firms supplying Asia Pacific regional figures for this inaugural survey are doing much bigger numbers. Leading the pack is Chicago’s Baker & McKenzie, which had a revenue figure of US$648m (£417m), forming 28 per cent of the firm’s global turnover.
Next is another firm with a massive global footprint, Anglo-American DLA Piper, but even so, its numbers are less than half Bakers’ figures. DLA turned over $313.5m in Asia Pacific last year, forming nearly 13 per cent of firmwide revenue.
Clifford Chance, the only London magic circle player to produce regional figures, produced a turnover of £185m last year, which formed slightly more than 14 per cent of the firm’s global turnover. Indeed, CC’s turnover in the region has more than doubled since 2006/07, when it just eclipsed the £86m mark.
The final global firm to contribute financial figures to our survey was a regional stalwart, London-based Stephenson Harwood. The firm’s turnover for the last financial year was £22.2m, which represented an impressive 20 per cent of global revenue, illustrating just how important Asia Pacific is to the practice.
We wait to see whether the Asia Pacific survey for 2014 sees Herbert Smith Freehills and King & Wood Mallesons live up to their promise of regional financial transparency – and indeed, whether any of the vast swathe of currently reluctant global firms lose their shyness.
And if you haven’t got your copy of The Lawyer Asia Pacific 150 yet, what are you waiting for?