Freshfields on Australia: the A&O way is not for us
Signs emerge of strategic divide in the magic circle over how to target the key markets in the Asia-Pacific region
Konstantin Mettenheimer
Freshfields Bruckhaus Deringer and Linklaters will not follow Allen & Overy (A&O) to Australia, as signs of a strategic divide emerge within the magic circle over the best way to target Asia.
A&O announced last week that it was launching two Australian offices to tap investment flows between that jurisdiction and China and Japan, improving its Asia-Pacific reach (The Lawyer.com, 8 February).
The growing strategic importance of the Asia-Pacific region has been underscored by magic circle firms’ decisions to send senior partners there, obtain local practising licences and make Australian lateral hires. A significant proportion of the magic circle firms’ total revenues now stem from Asia (see table, right).
But Freshfields joint senior partner Konstantin Mettenheimer argued that opening in Australia was not necessarily the best way to tap the potential of the wider area.
“[Australia’s] a strong economy with a very good existing legal infrastructure,” he said. “However, the domestic market is relatively small and it’s very well-serviced by sophisticated and competitive local firms. It’s also difficult to position Australia as a gateway to Asia due to the distance and differing timezones.”
Linklaters will not be following in A&O’s footsteps either. A partner at the firm said the main obstacle was the supply of local lawyers and the lower levels of profitability.
“It’s a good opportunistic move for A&O, but you’ll not see Linklaters following suit,” said the partner. ”Australia’s very well-served by lots of very strong local firms. It’s not going to move the needle for A&O’s profit.”
But Clifford Chance, which held merger talks with Australia’s Mallesons Stephen Jaques in 2008, until the recession aborted plans that would have doubled its Asia offering (The Lawyer, 8 December 2008), was less resolute in its opposition to an Antipodean launch.
Managing partner David Childs said: “Australia’s an interesting market - it’s very competitive with very high-quality law firms. We employ a lot of Australians [so we’re aware of the quality]. It’s clear that things are moving eastwards. We’d never say never to anything.”
A&O’s decision to launch in the country through making 17 lateral hires will see its Asia-Pacific footprint grow to 64 partners, overtaking the rest of the magic circle and placing it in second place behind Norton Rose (see graph, above).
But while Norton Rose chose to open through a full-scale merger with Australian firm Deacons (TheLawyer.com, 23 June 2009), A&O ruled out a tie-up with a local outfit.
A&O Asia head Tom Brown said: “From our perspective, I don’t think a merger would have been right. [It would have involved] too many locations and been too full-service, when our model is to focus on high-end cross-border work.”
He added that if Clifford Chance or any other competitors were to open in Australia it would “probably be an endorsement that we’ve got the strategy right”.
He added: “We’re in pretty uncompetitive territory. I’d expect that people would be looking. The fact has caused such a stir.”
Readers' comments (7)
David Lancaster | 15-Feb-2010 3:40 pm
An interesting counter point to the A&O Aussie foray.
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Perthite in London | 15-Feb-2010 8:54 pm
"It’s also difficult to position Australia as a gateway to Asia due to the distance and differing timezones.”
From Sydney and Melbourne maybe, but Singapore, HK, Kuala Lampur, Bangkok, Jakarta, Beijing (and indeed all China) operate on the same time zone as Perth. Aside from Beijing, the others are 5-7.5 hrs flying time away.
A&O has tapped into the Perth growth bubble - as The Lawyer has noted in a related article. The Australian government has also relocated a large part of its foreign affairs department to Perth to take account of the shift.
Not just waving the flag for my hometown, though, as I agree with the other statements in the quote re local competitors and legal infrastructure.
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Ami de Chapeaurouge | 16-Feb-2010 9:32 am
The Virtues of the Morphogenetic Field Unifying the Hong Kong, Singapore, Sydney and Wellington Legal Marketplaces
It's always been fascinating to me how certain London-based intellectual virtues have been maintained, refined and preserved with a greater degree of purity by the Hong Kong, Singapore, Sydney and Wellington marketplaces from a legal point of view. I have always admired how these distant places interconnect to form a morphogenetic field of sorts echoing and taking ideas and legal precepts that originating once in London and Oxbridge, taking them from there. This conceptual transmission band transcends geography and gives these four markets a distinct voice. Additionally, plenty of local knowledge about Asia is enshrined in these walls. But from a practitioner's point of view advising as counsellor in cross-border matters, next to the New York perspective, plus the European-continental, it is the distinct voice of the London legal community reverberated and mirrored oftentimes so capably by the legal profession in Singapore, Hong Kong, Sydney and Wellington all at the same time, which proffers a third dimension to looking into things and at closure of legal argument. Each of the BRIC nations either borrows from such distinguishable New York, Paris/Frankfurt and London/Singapore/Hong Kong/ Sydney/ Wellington respective perspectives. This interconnection is embodied in case law that to the date looks to the London High Court, the Lords of Appeal in Ordinary and now, since several months, the Supreme Court of the United Kingdom for precedential guidance. Konstantin von Mettenheim is a man with considerable erudition, but even in the recent debate on stealth takeovers in the German home market, pathbreaking precedents were cases from New Zealand (Perry 2003) and Australia [Glencore, 2006] that in their intellectual rigour surpass the quality of the more recent CSX/TCI (2008) decision by a Southern District of New York federal judge.
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perplexed | 16-Feb-2010 5:19 pm
Ami de Chapeaurouge what the hell are you on about?
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Ami de Chapeaurouge | 17-Feb-2010 11:24 am
to: Perplexed
Fair enough, this is democracy - give me a call or write to me, I'll attempt to explain my train of thought and clarify my appreciation of the quality of legal work out of Australia and New Zealand, exemplified by a couple of recent decisions on cash settled equity swaps, and their interconnectedness with Asia rendering them as suitable conduits for an Asia-practice.
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Dirt | 4-Mar-2010 1:56 pm
This is a banking/corp split. CC will finally shack up with Mallesons at some point presumably.
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Expat Sandgroper | 8-Mar-2010 10:32 pm
okay some of what Mr Mettenheimer says is reasonable, but I agree with my fellow Perthite that the differing timezones/distances comment is plain silly - on the contrary this is one of the real strengths of Perth, and even Tokyo is only 1 hour ahead.
Other firms are making it work, betcha Freshfields are going to make the move or tie-up and just don't want to show their hand..
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