AXA Asia GC: The end game
9 April 2012 | By Yun Kriegler
12 February 2014
24 December 2013
9 September 2013
30 August 2013
18 November 2013
Asia regional general counsel Johnny Cheung hopes his ambition to see a deal through to conclusion will stand him in good stead for AXA’s life insurance JV with ICBC
Regional general counsel for Asia, AXA Group
Position: regional general counsel for Asia
Reporting to: Group general counsel in Paris
Number of employees (global): 214,000
Annual turnover (global): €91bn (11 per cent from Asia)
Annual legal spend (Asia): $4m (estimated)
Legal capability: more than 600 globally, including 30 lawyers in Asia
Main external law firms: Baker & McKenzie, Linklaters
Play hard and work hard is an appropriate motto for Johnny Cheung, the Asia general counsel for AXA Group based in Hong Kong.
Cheung is set to put the latter part of that motto into practice as the French issuance group sets its sights firmly on growing business in Asia. But whenever change is brewing, Cheung likes to prepare for the forthcoming challenge by indulging in his idea of play - travelling. So far, he has been to 72 countries, with Antarctica being his latest adventure.
After returning to Hong Kong several months ago, Cheung immersed himself in his company’s latest landmark transaction in high-growth markets - the $494m (£314m) acquisition of the property and casualty insurance businesses of HSBC in Hong Kong, Singapore and Mexico.
Through the deal, AXA will also become the exclusive provider of general insurance products distributed by HSBC in Hong Kong and mainland China, Singapore, India and Indonesia.
While the deal was mainly driven out of AXA’s Paris headquarters, Cheung and his team provided important on-the-ground support for the Asia side of the transaction.
Cheung says the main challenge was the negotiation process. “HSBC, a strongly positioned bank, was very tough in negotiations,” he recalls.
However, leading tough negotiations have become part of Cheung’s job ever since his days working at Mobil’s Hong Kong office as an in-house legal counsel back in 1998, an exciting time due to the $81bn merger between Exxon and Mobil. He was an integral part of Mobil’s legal team, working on the Greater China part of the global merger.
“I’ve always been interested in the business side of things. At the early stage of my private practice, I decided my ideal career would be in-house,” he says. “Law firms usually don’t get involved in the entire process of a transaction, solely for cost reasons. I want to focus on the commercial aspects of the transaction and see the whole deal through.”
With this in mind, Cheung broke into in-house practice in 1997, after working as an associate with Clifford Chance for four years and a further two years at Linklaters in Hong Kong. “Now I see myself as a business person with legal knowledge and experience, rather than as a pure lawyer,” he adds.
As regional general counsel, Cheung oversees the legal affairs of the group’s life and general insurance businesses in China, Hong Kong, Singapore, Malaysia, Thailand, India, Indonesia, Taiwan, Japan, Korea and the Philippines, and manages a team of 30 local counsel across the region.
M&A transactions form a significant part of Cheung’s responsibilities, while managing major litigation cases and advising the Asia executive team on strategic issues are also among his priorities.
“AXA is a relative latecomer to Asia. But it has ambitious plans to expand here, and compared with other financial institutions, AXA is in a stable position with healthy cashflow,” says Cheung. “Therefore, my main focus at present is advising and driving the group’s M&A deals and expansion in Asia.”
In fact, his first major task after joining the group in March 2009 was a complex cross-border M&A transaction - the $13.1bn takeover of Australian Securities Exchange-listed AXA Asia Pacific Holdings by AXA and Australian wealth manager AMP.
The transformational deal, which took almost two years to complete, has allowed AXA group to take full control of the Asia businesses, while exiting Australia and refocusing on its growth strategy in Asia.
“Most of the M&A transactions involve a number of jurisdictions. We work closely with the corporate development department in Hong Kong, the Paris headquarters and external counsel in getting the deals through,” says Cheung. “Working with teams across a range of time zones, managing the logistics of the deals and negotiating with strong opponents can be very challenging.”
Given the strong M&A focus, the Hong Kong-based legal team consists of four senior in-house counsel, all of whom are experienced M&A lawyers.
Aside from the acquisition of HSBC’s general insurance, a deal with China’s largest bank, Industrial & Commercial Bank of China (ICBC), is also crucial to the French group’s growth in the region. In October 2010, AXA and ICBC agreed to form joint venture (JV) ICBC-AXA Life Insurance, which will be the vehicle for AXA’s growth in theChinese life insurance sector. The deal is still pending regulatory approval.
“If it’s approved, the JV with ICBC will be AXA’s icebreaker to China,” says Cheung. AXA has been in China for decades, but its presence remains small. “China is such an important market, but it’s tough for foreign players. Foreign investment in its insurance sector is still heavily regulated, the approval procedures are stringent and can take several years to obtain.”
When it comes to China-related issues, Cheung works closely with the local in-house counsel in Beijing.
Navigating the group’s development in a large number of jurisdictions across Asia, each with its own unique dynamics and vastly different from one another, is a major challenge to all regional general counsel.
“Different markets have different levels of maturity. What you experience in Hong Kong and Singapore doesn’t apply in the developing markets,” says Cheung. “The same legal issue in different markets will need different approaches and solutions. You have to cope with the differences and shift gears constantly depending on the relevant jurisdiction.”
In addition to relying on the local knowledge and skills of his 30-strong pan-Asia team, Cheung turns to external law firms for support. AXA Group has a legal panel comprising major international firms such as Baker & McKenzie, Clifford Chance, Dewey & LeBoeuf, Freshfields Bruckhaus Deringer, Norton Rose, Sullivan & Cromwell and White & Case. The AXA Asia team also selects its external counsel from the panel.
Cheung singles out Baker & McKenzie and Linklaters as firms to which he has given a lot of work.
“These firms treat us as their VIP clients. It’s a much better experience working with firms that attach great value to our relationship,” he says. “Baker & McKenzie’s extensive presence and local capabilities across Asia and its ability to provide a ’one- stop-shop’ are particularly appealing to companies seeking growth in the region.”
Value for money
US firms’ aggressive expansion in Hong Kong and other parts of Asia has not gone unnoticed with the local in-house legal community, but Cheung questions their chances of success. “I’ve received a large volume of marketing calls from US firms. One main problem is that the price gap is too big between US firms and our panel firms,” he says. The difference in the hourly rates between a US firm’s partner and a big City firm’s partner can be as high as 50 per cent, according to Cheung.
“If a firm can’t justify its higher price, I can’t justify my decision to make a switch. Apart from service and expertise, reasonable price is key to win clients,” says Cheung.
Nevertheless, with more law firms coming to Hong Kong, general counsel such as Cheung will have more options than ever. Increasing competition will also drive down price while pushing up quality standards. Having spent 22 years practising in Hong Kong and visiting 72 countries, Cheung still regards Hong Kong as the best place to be, and an ever-more exciting international legal service hub.
Jonathan Boswell, regional GC Asia-Pacific, Barclays Wealth and Investment Management
Private banking in Asia is growing quickly, with significant investments being made. This reflects a greater demand for wealth management expertise in Asia, where client characteristics and investment objectives may differ from those of clients with established wealth in more developed markets.
Asia has a mixture of common law- and civil law-based legal systems and the evolving local regulatory environment seeks to balance global developments with country-specific experiences, often driven by social, economic, political and cultural factors.
Many private banks in Asia operate an offshore booking model and it is important to understand the rules that apply to cross-border activities.
The risk that a client will claim that a bank should make good the loss suffered on an investment on the basis that the product was not suitable or was mis-sold is hardly unique to Asia, but the approach of the regulators - and the courts - to ensure the right products are sold to the right clients, along with the response to mis-selling complaints, investigations and enforcements, again varies from country to country.
With regard to Western concerns about corruption and bribery, the degree of transparency and predictability in legal and regulatory systems varies within Asia, but the US Foreign Corrupt Practices Act and the UK Bribery Act have extraterritorial reach.
The rise of private banking in Asia presents an interesting legal and regulatory challenge plus an opportunity for in-house lawyers to show the value they can bring.