The news that Allen & Overy (A&O) is to launch in Australia next month with the hire of 17 partners – most of them from national firm Clayton Utz – has caused ripples not only in the Australian market, where recruiters have reportedly been ’inundated’ with phonecalls and emails, but also as far afield as London and New York. Clients in the latter jurisdictions have met the news with “rapture”, according to A&O Asia head Tom Brown.
A&O global managing partner Wim Dejonghe is equally positive about the repercussions. However, he is not normally given over to such hyperbole, and so it is with emphasis on what he terms the “strategic rationale” that he talks of A&O’s expansive Asia-Pacific move, which in terms of total number of partners will make it the second-largest UK-headquartered firm in the region.
Doing the rounds
“I’ve been travelling around Asia for the past three weeks,” he tells The Lawyer over the phone from a Sydney restaurant, where he is dining the HR and finance teams that helped bring the whole thing off. “And what’s quite clear is that, while investment flows typically used to be from Europe and the US, they’re now much more intraregional.
“It fits nicely into our desire to grow our Asia practice.”
It was a similar series of points that he underscored just under two weeks ago to the firm’s current 458 partners ahead of a partnership vote. This was the culmination of “many years” of looking at the jurisdiction, he says.
“First, we need a domestic [Australian] offering for the inward-bound work to China and Japan,” he enumerates. “Second, we want to be closer to Australian clients for outward-bound work; and third, there’s a resource issue – the lawyers are top-quality, they’re Anglo-Saxon trained and they understand the Asian market.”
While others may dispute the logic of attempting to access Asia via an already well-supplied market (see front page), the economic case for intraregional growth is compelling.
Australian government figures reveal that, while the UK and US still dominate the total stock of investment in the Australian economy, Japan, Hong Kong and Singapore between them contributed A$188m (£105.31m) in 2008. Japan was Australia’s largest export market, accounting for 19.3 per cent (A$55bn) of total exports, followed by China in second place and South Korea in third. Similarly, China was the largest source of Australian imports. The bulk of the outward flows relate to East Asia’s thirst for Australia’s commodities, particularly coal, iron ore and gold.
It is no coincidence, then, that A&O has chosen to create a niche practice spanning banking and finance, corporate, M&A and technology, media and telecoms expertise, with a focus on the energy, mining and natural resources sectors.
“[Raw materials] is a hot sector,” argues Brown. “The expectations are that less natural resource-rich countries, such as China and Japan, will try to secure those resources in jurisdictions that are both politically stable and rich in those resources. There are opportunities to do more for clients, but also create new clients by having something different to sell from our competitors.”
The new faces
The firm is coy when it comes to specifying exactly which clients the 17 new partners will bring along. Between them they have acted for a number of globally recognised names, including Brookfield Asset Management, Macquarie Media Group and UBS, together with a string of companies that are extremely active in Western Australian mining.
“When we look at a business like this, we don’t necessarily ask, ’which clients are we going to bring over?’” Brown points out. “First of all, people are bound by covenants; second, people can’t guarantee they’ll deliver on any one client.”
Instead the decision to open with this particular group was driven by their individual skills. “They’re all pretty seasoned, serious operators, proven business winners and runners of a business,” says Brown, adding that the cultural fit was also important. “They’re attracted by the international platform.”
A Sydney-based Asia-Pacific manager for an international recruiter agrees on the quality of the people. “They’ve been very strategic in terms of the people they’ve taken on,” he says. He immediately singles out banking partner Grant Fuzi as “one of the young, dynamic rainmakers” who was one of the ”better-known” individuals in the domestic banking world.
The firm ruled out a merger with any single Australian firm, according to Brown, because it would have involved “too many locations” and been “too full-service, when our model is to focus on high-end cross-border work”. There is speculation, then, that it was Fuzi’s initiative, as a respected A&O alumnus, that helped convince the global management that it should open through poaching a team.
Every single one of the team will join the firm’s equity and the Australian business will profit-share with the global network from day one. The firm’s management claims this is important in terms of creating the best possible client service.
A sole managing partner for the Australian office has yet to be appointed. Fuzi’s name comes up again and again, partly by way of his putative aspirations. It is thought that he had his heart set on the Clayton Utz CEO role and that, when he did not get it, decided to leave, eventually pursuing the A&O venture. Although A&O senior partner David Morley says that even if this was the case this was ”unrelated” to the A&O launch. He will not confirm any names for the managing partner role.
The firm is similarly tight-lipped on how much the group is estimated to bring in to the global practice – and it does not publish regional turnover figures anyway.
However, recruiters in both Sydney and Perth concur that charge-out rates for senior equity partners tend to be in the A$550-A$700 per hour range, compared with £750-£900 for magic circle firms in London.
Revenue per partner for Clayton Utz stood at A$2.26m (£1.25m) last year, according to Australian Legal Business, which is substantially lower than the £2.3m (A$4.2m) global average at A&O. Morley admits that A&O will have to adapt to local conditions. “We have to be competitive in every market in which we operate,” he states. However, it is fair to say that the focus on cross-border work will see it targeting premium clients.
Interestingly for a firm targeting the banking, telecoms and natural resources sectors it will be absent from Melbourne, home to companies such as BHP Billiton and Rio Tinto, Australian banks ANZ and National Australia Bank and national telecoms company Telstra. Brown, though, says Perth and Sydney provide sufficient coverage.
Around 40 associates will join the two locations over the next few months. According to local recruiters not much hard-sell will be needed. The high proportion of Australian lawyers who have worked abroad (Dejonghe claims that even with a domestic office A&O will probably still have more Australian lawyers in its non-Australian offices) means the firm enjoys a high level of brand recognition locally. In addition, a longer-lived recession in Europe led a number of Australians to move home, where despite higher levels of economic growth partner promotion levels have been slow to pick up. As a result the Sydney-based recruiter thinks the firm should be able to “cherrypick” some “reasonably disillusioned senior associates” aiming for partnership in the short- to medium-term.
The perfect fit
Integrating the 60 or so lawyers and their associated support staff into the global network will be a key challenge. Dejonghe, who joined A&O following its merger with Benelux firm Loeff Claeys Verbeke in 2000, is more schooled in this, perhaps, than many.
“We’ll have A&O people available at all levels to make sure there’s no misunderstanding,” he says, before adding that the forthcoming Australian managing partner will report into Asia head Brown to ensure “integration to our Asian offering”.
The impression that is reinforced constantly is that, despite the impact on the local legal market, A&O is thinking more broadly. This launch is not so much about Australasia itself as it is about Asia.
THE 17 PIONEER PARTNERS
Jason Denisenko,corporate/funds and financial products
Angela Flannery, banking
Grant Fuzi, banking
Sonia Goumenis, banking/structured capital markets
Jason Huinink, banking
Barry Irwin, corporate/energy & resources
Aaron Kenavan, corporate/M&A
Grant Koch, corporate/private equity
Michael Parshall, corporate/M&A
Karolina Popic, banking/structured capital markets
Michael Reede, corporate/private equity
Chris Robertson, banking
Andrew Stals, corporate/tax
David Wilkie, corporate/funds and infrastructure
Meredith Campion, corporate/energy & resources
Geoff Simpson, corporate/energy & resources
Peter Wilkes, corporate/energy & resources/ banking