A&O announced last week that it was launching two Australian offices to tap investment flows between that jurisdiction and China and Japan, improving its Asia-Pacific reach (The Lawyer.com, 8 February).
The growing strategic importance of the Asia-Pacific region has been underscored by magic circle firms’ decisions to send senior partners there, obtain local practising licences and make Australian lateral hires. A significant proportion of the magic circle firms’ total revenues now stem from Asia (see table, right).
But Freshfields joint senior partner Konstantin Mettenheimer argued that opening in Australia was not necessarily the best way to tap the potential of the wider area.
“[Australia’s] a strong economy with a very good existing legal infrastructure,” he said. “However, the domestic market is relatively small and it’s very well-serviced by sophisticated and competitive local firms. It’s also difficult to position Australia as a gateway to Asia due to the distance and differing timezones.”
Linklaters will not be following in A&O’s footsteps either. A partner at the firm said the main obstacle was the supply of local lawyers and the lower levels of profitability.
“It’s a good opportunistic move for A&O, but you’ll not see Linklaters following suit,” said the partner. ”Australia’s very well-served by lots of very strong local firms. It’s not going to move the needle for A&O’s profit.”
But Clifford Chance, which held merger talks with Australia’s Mallesons Stephen Jaques in 2008, until the recession aborted plans that would have doubled its Asia offering (The Lawyer, 8 December 2008), was less resolute in its opposition to an Antipodean launch.
Managing partner David Childs said: “Australia’s an interesting market – it’s very competitive with very high-quality law firms. We employ a lot of Australians [so we’re aware of the quality]. It’s clear that things are moving eastwards. We’d never say never to anything.”
A&O’s decision to launch in the country through making 17 lateral hires will see its Asia-Pacific footprint grow to 64 partners, overtaking the rest of the magic circle and placing it in second place behind Norton Rose (see graph, above).
But while Norton Rose chose to open through a full-scale merger with Australian firm Deacons (TheLawyer.com, 23 June 2009), A&O ruled out a tie-up with a local outfit.
A&O Asia head Tom Brown said: “From our perspective, I don’t think a merger would have been right. [It would have involved] too many locations and been too full-service, when our model is to focus on high-end cross-border work.”
He added that if Clifford Chance or any other competitors were to open in Australia it would “probably be an endorsement that we’ve got the strategy right”.
He added: “We’re in pretty uncompetitive territory. I’d expect that people would be looking. The fact has caused such a stir.”