International firms: here to maturity

Fewer lawyers covering more territory is the theme this year, as international players take a more realistic view of prospects in the region

One of the world’s most ubiquitous law firms – Baker & McKenzie – has established the largest global practice presence in Asia Pacific, overtaking recently merged Anglo-Australian challengers Herbert Smith Freehills (HSF) in The Lawyer’s exclusive rankings.

The jockeying for position at the top of the international section of this year’s Asia Pacific 150 headcount table falls against a backdrop of consolidation in the region, as UK and US law firms assess positions following an initial rush to put boots on the ground.

Bakers illustrates the case. The firm went to the top of the footprint table while reducing its regional headcount, albeit not significantly, by slightly less than 2 per cent.

Other firms in the Top 10 maintained their positions while shedding headcount. For example, Ashurst, Norton Rose Fulbright and DLA Piper held steady at third, fourth and fifth place respectively, but they too did so while reducing numbers – by 8.6 per cent, 9.2 per cent and about 3 per cent respectively.

But arguably the biggest cuts in the leading group of five came at HSF. The firm’s drop to second place was caused by a dramatic reduction in lawyer numbers – nearly 13 per cent, according to the firm’s submission.

international

There were some notable exceptions to the consolidation trend. Clifford Chance held its sixth position while increasing its numbers on the ground by more than 10 per cent. But the biggest move up from an English player came from Freshfields Bruckhaus Deringer, which boosted its regional footprint by 51.5 per cent.

On the US side, K&L Gates benefited from its 2013 merger with Australian firm Middletons to leap from 31st position in last year’s table, to seventh in the 2014 rankings.

But Davis Polk & Wardwell was the biggest mover that was not merger-assisted. The New Yorkers increased their regional presence by nearly 29 per cent, moving up the table from 25th to fifteenth place.

Eyes on the prize 

“People aren’t looking over their shoulders at what the other firms are doing as much as they used to,” says Thomas Brown, an asset finance partner at Allen & Overy’s Hong Kong office. He says global firms have ditched the keeping-up-with-the-Joneses approach to focus on their specific business plans.

“That’s the sign of a maturing market.” Brown argues, acknowledging that global law firms are bedding down in Asia Pacific, a process that translates, in many cases, to reining in numbers. 

“Anyone who’s going to come to the region is probably already here,” he says. “And the firms that are here are going through a period of slight consolidation, as they have now stepped back and assessed their regional headcount needs.”

Other senior global players from offices across Asia Pacific agree. Indeed, one casts aside any pretence of law as a vocation at this level – instead it is all about hard-nosed commercial decisions: “The reality is that law firms are businesses and this is an industry,” comments the regional managing partner of one of the top 10 global firms in Asia Pacific. “And what is happening here isn’t that different from what has happened in other industries. You see a market opportunity, create a strategy, go in and see what happens, and then you may have to adjust your strategy. I wouldn’t necessarily make any negative assumptions about firms that have trimmed numbers considerably.”

Realism

Indeed, a theme among the top international players is that the gushing enthusiasm for the region has been replaced with a sense of restrained and realistic confidence.

“Business is quite strong,” says Baker & McKenzie partner Winston Zee, who is a member of the firm’s global executive committee and chairman of its Asia Pacific regional council. “While it’s not really vibrant, it is still a growth area.”

Indeed, his firm is rumoured to be moving into Brisbane. About three months ago, The Lawyer reported it had poached a partner each from renowned Australian practices Clayton Utz and Allens, with an eye on cutting a ribbon in the Queensland capital.

But Zee remains tight-lipped. 

“We’ve been looking at the market regularly for some time but we’ve not yet announced an opening,” he says. “There have been some leaks in the market about our supposed plans but I can’t say anything more than we are looking at that market with great interest.”

Back on the wider Asia Pacific canvas HSF – which signed its ground-breaking merger deal in autumn 2012 – describes the market as “increasingly positive”, despite a string of high-profile departures over the past year. Waving goodbye to the firm have been:

–  corporate and M&A partner Betty Tam, who joined Mayer Brown JSM in Shanghai;

– Asia disputes head Gavin Lewis, who bailed to Linklaters;

– financial services regulatory partner Tim Mak, who went to Freshfields’ Hong Kong office;

– South-East Asia litigation chief Maurice Burke, who went to Hogan Lovells;

– commercial litigation partners Michael Mills and Michelle Fox, who were lured to US firm Quinn Emanuel Urquhart & Sullivan to launch that practice’s Sydney outpost;

– and partners Darren Perry, Chris Gardner, Justine Turnbull, Ben Dudley and Luke Edwards, who all went to US firm Seyfarth Shaw as part of its expansion into Australia.

But arguably the biggest hit came last November, when the bulk of the legacy Freehills’ Singapore team dashed for the exit, capped by former managing partner John Dick, who was picked up by EY Law in the city-state.

Jason Ricketts, HSF’s managing partner for Australia, concedes there has been a “slowdown in the resources boom” in that country that has affected legal work. However, he argues that phenomenon has been countered by “a definite upswing in the corporate M&A and equity capital markets in the past six months, while the disputes practice continues to perform strongly”.

Ricketts describes HSF’s Asia Pacific dispute resolution offering as “unparalleled, with class actions being a strong area in Australia and financial services regulation and investigations work very strong in Hong Kong”.

Hong Kong is also the spur for Davis Polk increasing its Asia Pacific presence, as the office’s managing partner William Barron explains. 

“We decided three to four years ago that to maintain our level of success, capitalise on the opportunities out here and remain relevant, we should add Hong Kong law capability,” he says. 

That triggered Davis Polk’s move last year to add a Hong Kong litigation and enforcement capability. “It allows us to capitalise on global regulatory trends,” he adds.

Barron insists that his firm’s Asia Pacific expansion should be seen in context and not exaggerated. 

“To compare Davis Polk to UK and certain other firms in the region would not be accurate – most of those firms have many more offices around the region than we do,” he says, pointing out that Davis Polk covers all “non-Japan” Asia from just two outposts, in Hong Kong and Beijing.

Bakers’ experience 

Which is certainly not Bakers’ approach. The Asia Pacific global kingpin last year celebrated half a century in the region and promotes that experience at every
opportunity.

“We’ve invested over a long time in developing relationships and market profile,” says Zee. “We didn’t just drop in, form an alliance with a firm in Australia and then hope somehow to get the deals. It doesn’t work like that.”

Zee maintains that the European sovereign debt crisis forced the withdrawal from Asia Pacific of many European investment banks and other financial institutions that had driven the market by arranging syndicated loans, project finance, and capital markets work. However, he claims, the gap is now being filled by locals.

“Asian players have started to fill the void,” says Zee. “We are focusing on building relationships with major companies headquartered in Asia Pacific – China, Japan and Korea initially, and now Thailand, Indonesia and Australia. These companies are learning to compete globally. Therefore, when recruiting laterally, we’re focusing on bringing in people who can strengthen those relationships.”

Zee points to ASEAN as being an increasingly “encouraging story”, explaining why the firm recently opened in Myanmar. 

And while A&O may have slightly trimmed its regional headcount, the firm agrees that Myanmar is important, also opening in the jurisdiction within the last year.

“There are only two jurisdictions of note where we don’t have a presence – Korea and Malaysia,” says Brown. “And we’re looking at both of those seriously.” 

Which is a fair reflection of the mood of many global firms when it comes to the Asia Pacific region – fewer boots on the ground covering a wider geographical footprint.

Int Table 300614

HFW bigshot moves in, but many global firms cut headcount

International law firm movement in the Asia Pacific region was by no means limited to fluctuations in the top 10 spots in our table – there were significant moves lower down, with one English firm making a ground-breaking personnel decision.

London-based maritime, aviation and insurance practice Holman Fenwick Willan (HFW) became the first English firm to relocate its senior partner to the region outside of a merger arrangement. Richard Crump packed his bags in April and headed permanently for a desk in the firm’s Singapore office.

Fellow English firm Ashurst and Anglo-Australian Herbert Smith Freehills have UK-Asia Pacific management structures as part of merger integration programmes, but HFW is understood to be the first non-merged UK firm permanently to relocate a leader to Asia.

Asia accounts for about 20 per cent of the HFW’s total practice by headcount. In the past year the firm has risen four places, to 16th, in The Lawyer’s Asia-Pacific 150. While it only increased headcount by a single lawyer, the firm benefited from contraction at firms placed higher than it in
last year’s inaugural table.

In announcing his move, Crump told The Lawyer: “It’s sensible to have one of the team based in Asia Pacific – first, to be closer to our clients and understand and respond to their needs, and second, to demonstrate to our international partners the commitment of the firm to this region.”

Other English players spent last year solidifying alliances in the region. At the end of March, fellow shipping and aviation specialist practice Stephenson Harwood cemented an existing informal deal with Singaporeans Virtus Law.

The two had been in an exclusive association since May 2013 after the Londoners failed in a bid to bag a qualifying foreign law practice licence. The formal arrangement should go some way towards salving that disappointment. They will create a “formal law alliance”, which allows the firms to share up to 33 per cent of profit and work more closely to provide English and Singapore law advice.

Stephenson Harwood also moved up the regional headcount ranking – from 30th to 21st – despite shrinking its numbers by nearly 4 per cent.

A few weeks earlier TMT practice Bird & Bird cut a co-operation deal in the highly competitive South Korean market. 2Birds became the first international
firm to link with one of Korea’s top 10 players by headcount when it inked an agreement with Hwang Mok Park. Although the alliance is non-exclusive, 2Birds will become the preferred referral UK firm for Hwang Mok Park, and vice versa.

2Birds continued the trend of English firms improving their ranking position on the back of fewer lawyers in the region. It went from 26th to 23rd, while contracting its headcount by nearly 13.5 per cent.

Also in February RHTLaw – a member of Anglo-German firm Taylor Wessing’s international group – cut an exclusive alliance with PBC Partners, a Vietnamese firm with offices in Ho Chi Minh City and Hanoi. And in May, the firm dived into the crowded pool that is Seoul, doing an association deal with South Korean firm DR & AJU International Law Group.

Taylor Wessing reduced regional headcount by more than 15 per cent during the year, but climbed four places to 25th position in the table.