Dipping a toe into the Asia Pacific

Associations are the way in for Western firms to dip a toe in the Asian market

Everyone knows how much potential the Asia Pacific legal services market has, but it is also widely acknowledged that many Asian jurisdictions are stringently regulated, high-risk and low-fee.

Sailing into these uncharted territories, although increasingly attractive, can be daunting. Therefore, market entry via local association is gaining in popularity among international firms looking to expand in the region.

Stephenson Harwood is the latest firm to forge deals in Asia. The firm has associations in Indonesia and Singapore, and now Myanmar, with local firms Christian Teo Purwono & Partners, Virtus Law and U Tin Yu & Associates respectively. In Myanmar, the firm says the exclusive relationship could lead to a merger. Although Stephenson Harwood has taken the association route, foreign firms have the right to launch their own offices in Myanmar.

For jurisdictions that remain closed to international firms, establishing an association with a local outfit is the only way to tap into the market. Indonesia is a typical example. For now, firms are barred from opening offices on the ground, but its strong growth and vast energy and resources sectors have driven the likes of Ashurst, DLA Piper, Hogan Lovells and White & Case to set up associations with local firms. Others, such as Clyde & Co, are in the process of finding the right locals to link up with.

It is also a route firms have taken to enter already saturated markets such as Australia. Bird & Bird, for example, recently signed up to an alliance with Sydney TMT boutique Truman Hoyle.

In this uncertain world it is perhaps more acceptable to use the alliance or association approach to test the water before committing to a significant investment and new risks. Moreover, it is a good way for firms to get a foot in the door, so when markets open up they can quickly convert to a merger.

So, it can provide that first-mover advantage firms are after, but they should be mindful that associations don’t always work out. Honeymoons don’t last forever.