Focus: Ashurst - Asian pairing
3 October 2011
4 July 2012
11 March 2013
26 September 2011
21 January 2013
1 February 2012
In their first interview since the Blake Dawson deal, Ashurst senior partner Charlie Geffen and managing partner Simon Bromwich claim that the tie-up will open
up Asia and transform their firm into a major global brand
For a firm traditionally averse to mergers, last Monday’s (26 September) confirmation that Ashurst was going ahead with a tie-up with Australia’s Blake Dawson was a sign of an ambitious change of tack.
Details of the deal have trickled out over the past few months. Ashurst confirmed last week that the arrangement would kick off in March next year with a combination of the firms’ Asian operations, following a vote on 23 September. A full merger, to include Australia, will be up for consideration in early 2014, according to the terms of the initiative.
The initial combination nearly doubles Ashurst’s Asia partner count, from 18 to 35, by adding in the Australian firm’s 17 partners across offices in Shanghai, Singapore,
Port Moresby, Tokyo and Blakes’ associated office in Jakarta.
The deal rewards Blakes with a stake in the Ashurst brand – indeed, it will be renamed firmwide as Ashurst. But the financial integration will only involve the non-Australian offices, where revenue and costs will be shared. Ultimately, the firms hope to have a single global profit pool.
The deal is a bold move for Ashurst, which traditionally prefers to expand organically and through lateral hires rather than via major deals. It previously turned down mergers with Fried Frank Harris Shriver & Jacobson and Latham & Watkins, decisions that prompted accusations of a lack of ambition and a propensity to miss opportunities.
Ashurst managing partner Simon Bromwich acknowledges that the Blakes deal represents something of a breakaway from the firm’s usual way of working, but adds that the new stance reflects the difficulties associated with the Asian market.
“I think it’s a bit of a change, but it’s a change tailored to our requirements in Asia,” stresses Bromwich. “It’s very hard for us to grow far and fast in Asia on our own. It’s a solution that’s fit for the challenge at the moment.”
But why the change?
“We’re very pleased with the way we developed in Europe organically,” says senior partner Charlie Geffen. “Originally we thought we’d do the same thing in Asia, but it was pretty clear the pace of change was very rapid. The region’s vast. We’ve been behind the competition.”
Although Geffen claims that “we’ve done really well at hiring”, he also concedes that “it’s hard to get very good-quality people [in Asia]”.
But Geffen is keen to bat off any suggestion that Ashurst is not currently a major global player.
“We’ve pitched for more global panels in the past 12 months than in any period before then,” he states.
Ashurst also claims that, in Blakes, it has found the perfect match. In securing a union with one of Australia’s ‘big six’ firms – the others being Allens Arthur Robinson, Clayton Utz, Freehills, Mallesons Stephen Jaques and Minter Ellison – the UK firm has won a prize tie-up with an elite firm. Blakes becomes the first of the big six to enter into a deal with an international firm, putting Ashurst in a privileged position.
That is not to mention the Australian firm’s stellar corporate practice, as well as its strong finance and energy and resources offerings, which present the chance for a London firm looking to capitalise not only on Blakes’ Asian scale, but also on the opportunities it offers in the buoyant Australian natural resources sector.
“We have similar visions for growing the Asian practice together. It will be easier for us to go to market together,” explains Bromwich.
The Blakes deal gives Ashurst the scale element that it apparently lacked, as well as enabling the UK firm to have a much higher opinion of itself on the global stage. For Geffen, this puts Ashurst in a league of strong international outfits in the tier just behind the giants.
Ashurst is both following and setting a trend towards consolidation through mergers and joint ventures, Geffen implies.
“I’m sure all other firms will do what they choose to do. The trend’s in that direction. It does seem to us that that’s the trend,” he points out. “From a market perspective, the consolidation of the legal sector is clearly underway. We do think that quality with scale is going to be important.
“There’ll certainly be exceptions, such as Slaughter and May and [New York firm] Wachtell [Lipton Rosen & Katz]. The rest will be global ones with global reach.”
He argues that Ashurst can now consider itself in the next tier down from the magic circle and US giants such as Latham & Watkins and Skadden Arps Slate Meagher & Flom. Ashurst and Herbert Smith, he claims, are now the only two UK-headquartered firms in their class, which internationally, he argues, also includes Sullivan & Cromwell.
A long time ago in a market far, far away
The impression is that, while Ashurst’s forays into the US have been as muxh influened by internal politics on occasion, this project is a much more thought-out, strategic initiative.
Ashurst Morris Crisp, as the firm was known at the time, broke off merger talks with Latham in the approach to 2000, reportedly over a mismatch of profitability, a decision widely seen as an example of the UK firm chickening out of a game-changing deal and a mistake that it is said to have suffered from to this day.
It then ended negotiations with New York firm Fried Frank in spring 2003 following a year of speculation played out rather publicly, saying at the time that there had been “too many uncertainties in the path of completing a combination of two partnerships of substantial size and histories”.
Bromwich dismisses any idea that those talks were relevant to what Ashurst has just announced and that the firm has learnt applicable lessons from the processes that took place “a long, long time ago”.
It is clearly hard to compare US firms such as Fried Frank and Latham with an Australian firm, and, as Geffen says, “Latham was 1999. The world was a very, very different place then. Fried Frank was 2003. The market’s changed very significantly since then.”
More recently the firm hired 13 partners from McKee Nelson in New York and Washington DC in 2009, including 10 structured finance partners, at the time when the structured finance market was in crisis.
The UK firm had previously been in alliance with the US structured finance boutique, which has since taken over by Bingham McCutchen. The growth spurt in the US was masterminded by Ashurst’s former securities and structured finance head Erica Handling, who left the firm last year to become general counsel at Barclays Capital.
Insiders saw the latering hiring spree from McKee Nelson as a bizarre strategic move, smacking of politics rather than vision, as US growth was understood to be Handling’s pet project.
The Asia plans, however, are right in line with market needs and if anything are behind the times. Asia has become a hotbed for funds and equity capital markets work: Kohlberg, Kravis Roberts, for instance, announced in late 2010 that half of its new 2011 investments would be in Asia. The magic circle realised this a long time ago; the silver circle firms, meanwhile, are still playing catch-up.
“Last year more money was raised on the Hong Kong Stock Exchange than London and New York combined,” Geffen points out.
Ashurst will look to leverage its finance and private equity relationships.
“We have a strong finance practice [and] strong relationships with financial institutions,” reiterates Geffen. “We want to push forward in Asia and we’re going
to do that with Blake Dawson.”
But the crux of the deal is the plan to build up the Asian network in time for 2014, when it plans to consider a full merger to enable it benefit from the dealflow between Asian investors and the Australian resources industry.
In fact, the next stage could come earlier. “Possibly, we don’t know,” muses Bromwich when asked if the merger could be considered in advance of early 2014.
“We think [early 2014] is a realistic and sensible target date,” he speculates.
So is the period between now and then too short to set up a credible Asian network in time?
“It’s a pretty long time,” Geffen surmises. “We’ll look at a merger in the early part of 2014. I’d say that’s quite a long time. We’ll achieve a huge amount in that period.”
Geffen and Bromwich will not be drawn on how long the plans had been in senior Ashurst partners’ minds, but the firm’s Asia push saw a real boost in early 2009 when then senior partner Geoffrey Green relocated to Hong Kong to launch the firm’s first China office. The presence of a big-hitter such as Green, who will be running the joint operation with Blakes, certainly gave the Asian practice credibility and was surely an impetus. Rumours of a tie-up with Blakes have been circulating since late last year.
Strong in Hong Kong
Hong Kong is central to opportunities in Asia, as Ashurst well knows. The firm first surfaced in the hub in November 2008, when it entered into an association with local firm Jackson Woo & Associates (JWA). Chinese law allows foreign firms to merge with local firms after a three-year formal association, meaning that from November Ashurst will be able to settle properly in the city.
Bromwich confirms that JWA will take up the Ashurst name, although he does not think of it as a merger.
“As far as the marketplace is concerned, we [already] have a local Hong Kong capability,” he stresses.
After all, JWA is effectively Ashurst but with a different name – and the change of name is administrative rather than intended to have any bearing on the firm’s operations, he says.
“To describe it as a merger is… you have to be careful really. Jackson Woo’s the local law arm of the office,” he continues. “As of November we’ll have done our time in the market, which allows us to absorb Jackson Woo into the rest of Ashurst. It’s a purely procedural thing.”
There are plenty of reasons for market commentators to give Ashurst the benefit the doubt, despite what some see as a long record of bad management moves when it comes to decisions on a macro scale.
This is especially so in one area where rivals have attracted criticism: financial integration – or the lack of it. Unlike firms such as DLA Piper and Norton Rose, Ashurst is committed to full financial integration and intends to operate a single profit pool when the full merger goes through.
Bromwich certainly feels that this is the best plan and basically the entire point of a merger, if it is achievable.
“If you’re able to do it, you’ll do it. It aligns the partners. That’s not to say there aren’t good firms that would do things differently. There are four very successful international accountancy firms that aren’t [financially integrated],” he notes.
The firms will also aim for a combined global lockstep, a topic of constant debate at Ashurst, which voted to start managing its equity ladder in 2007 so that partners could moved up as well as down. How it will work in practice has yet to be finalised.
Neither has Ashurst announced which partners will be sent to which offices, but Geffen has confirmed that there will be some people swaps between London and Australia.
Given the scale of the scheme and the emphasis on integration, some high-profile transfers would not be surprising. And given that Ashurst has just announced one of the boldest projects in its history, nothing is worth ruling out.