UK firms eye opportunities down under as Aussie quartet muscle in

Australia is flavour of the year with UK firms, and given that a number of Aussie firms are rocketing up the deals tables, it is no wonder. A year ago not one Australian firm could claim a place on the list of the top 25 firms ranked by the combined value of the worldwide deals they had worked on.

Only Allens Arthur Robinson, which was ranked 28 by deal value in the period from January to September 2008, came anywhere close, although its instructions on deals worth a combined total of $80bn (£48.27bn) was small fry compared with the $423.12bn worth of deals that top-ranked Sullivan & Cromwell was instructed on. Fast forward a year and the picture is completely different. According to data from Thomson Reuters, Allens is ranked fifth in terms of worldwide mandates, having been instructed on 55 announced deals with a combined value of $197.15bn and sitting just behind elite firms Freshfields Bruckhaus Deringer, Linklaters, Skadden Arps Slate Meagher & Flom and Shearman & Sterling respectively. Aussie counterparts Freehills, Blake Dawson and Mallesons Stephen Jacques also make it onto the list, with respective rankings of 21, 23 and 24. This does not mean that Australian firms are about to overtake the transatlantic elite.

 Although Allens is ranked fifth in terms of the value of deals announced, in respect of deal numbers it is still a long way behind Shearman, with instructions on 55 deals compared with Shearman’s 104. And, as pointed out by Richard Lewis, a corporate partner at Melbourne firm Corrs Chambers Westgarth, which is listed in Thomson Reuters’ top 25 firms to have worked on completed deals with a UK involvement, all law firms working on a deal get credit for the full deal value regardless of the role they played.

Rio Tinto’s sale of packaging business Alcan is a case in point. A raft of UK and US firms featured on the deal, with Sullivan London M&A partners Tim Emmerson and Nikolaos Andronikos advising Rio Tinto with input from firms including Freshfields. SJ Berwin took the lead for purchaser Amcor, while in Australia Allens advised Amcor on the A$3.1bn (£1.7bn) equity and debt funding package it used for the acquisition. Similarly, Allens partner Jeremy Low acted for Aberdeen Asset Management on its acquisition of parts of Credit Suisse’s Global Investors business in Australia. Dechert and Maclay Murray & Spens also advised Aberdeen, while Cleary Gottlieb Steen & Hamilton, Freshfields and Willkie Farr & Gallagher acted for Credit Suisse.

 Allens chair and M&A co-head Ewen Crouch says: “Despite the vast difference in the market conditions in which M&A deals have been undertaken in recent years, the clear trend is that they’re multinational, often involving consolidation of operations in a number of jurisdictions with consequent corporate and antitrust issues.” When it comes to deals with UK involvement, Allens, Corrs, Clayton Utz and Freehills all feature. Freehills corporate head Richard Loveridge says it is not surprising that Australian firms are appearing on these tables given that the biggest Australian deals have been driven by foreign bidders. “A recent report by Freehills, the ‘2009 Public M&A Report’, found that all seven of the Australian- based public takeovers and schemes of arrangement over $1bn announced in the last financial year involved a foreign investor, spread across the UK, China, Japan, US and Canada,” says Loveridge.

Freehills won roles acting for Cadbury on the £550m sale of its Australian beverages business to Japan’s Asahi Breweries; for Commonwealth Bank of Australia on its A$2.1bn acquisition of Bankwest from HBOS; and for Bupa on the merger of its Australian arm with MBF. Despite this, Loveridge remains cautious about heralding Australian firms’ ascendancy on international deals tables. “Freehills has a strong relationship with a number of UK firms and has advised on many significant deals with UK involvement,” he says. “However, it remains to be seen the extent to which UK firms are actively forging links with Australia and at this stage it’s far from certain that this constitutes an emerging trend.”

That said, a solid Australia presence is certainly moving higher up many UK firms’ wish lists, especially with the Holy Grail of a successful US merger proving evermore difficult to attain (with the exception of Lovells, of course, which is on track to pull off its proposed merger with Washington DC’s Hogan & Hartson). Norton Rose blazed a trail earlier this year with its tie-up with Deacons, while Clifford Chance, which is trying to put its 2008-09 profitability woes behind it, is thought to be seriously reconsidering a union with Mallesons. Even DLA Piper, which already has an Australian presence via alliance firm DLA Phillips Fox, is bolstering its ties in the region, with Dubai head Tony Holland taking over as chief executive of the Australian firm and London projects partner Alex Guy relocating to its Brisbane office.

With the economic situation in Australia looking better than that in the UK and US, it is natural that UK firms would want a piece of any deal action in the region.

As Allens’ Crouch says: “Australia has weathered the global recession remarkably well. House prices and retail sales have actually increased in the past eight months thanks in part to low interest rates and government stimulus packages. Australia’s big four banks are now all rated among the top 20 in the world for financial soundness, and demand for Australian commodities, natural resources and energy sources has picked up considerably.”

Although Crouch tempers these comments by stressing that Australian corporates have not escaped the ravages of the downturn entirely, his sentiments are sure to strike a chord.

margaret.taylor@thelawyer.com