Freshfields Bruckhaus Deringer last week became the latest firm to cut back its presence in Asia. As first revealed in The Lawyer (19 April), the magic circle firm’s decision to bring down the shutters on its Bangkok office comes hot on the heels of Denton Wilde Sapte’s (DWS) shock announcement that it is quitting Asia altogether.
Freshfields’ decision to pull out of Bangkok is part of a major review of Asia, which has also seen Singapore quietly downsized, with retiring partners not replaced and others returned to London.
As reported in The Lawyer (13 April), DWS’s decision to axe offices in Beijing, Hong Kong, Singapore and Tokyo is also a result of an ongoing strategic review, which was launched 18 months ago.
The timing of the two firms’ withdrawals shocked many local lawyers. Hong Kong-based Greg Terry, Lovells’ Asian head of corporate, says: “The timing of both moves is just extraordinary given that there are signs the Asian economy is starting to pick up again.”
Both reviews were motivated by a desire to bolster profitability. It is understood the withdrawal from Asia could add an estimated £2m to DWS partners’ profit pool.
In Freshfields’ case, managing the firm’s pure lockstep in Asia was also becoming very difficult because Bangkok’s turnover is only sufficient to cover operating costs.
“Lockstep attracts the best legal talent, but maintaining this model
in emerging markets is expensive relative to the market opportunity,” said a well-placed source.
In stark contrast to Freshfields’ and DWS’s strategies, Lovells, which currently has offices in Hong Kong, Japan, the People’s Republic of China (PRC) mainland, Singapore and Vietnam, is planning to bolster its Asian practice to exploit the prevailing economic recovery in the region.
Already, Lovells has made a strategic decision to commit more resources to its Tokyo office by boosting the number of partners based there from two to around five or six.
But Lovells is not alone in strengthening its Tokyo office. Freshfields said it would continue to strengthen its Japanese practice. Indeed, bengoshi partners Nobuo Nakata from Asahi Koma Law Offices and Akihito Katayama from Atsumi & Partners joined the firm’s joint venture, Freshfields Law Office.
Meanwhile, as reported on www.thelawyer.com (17 March), Linklaters has held talks to merge its Japanese practice with local firm Mitsui Yasuda Wani & Maeda when new laws come into force next summer.
Freshfields and DWS are not the only firms to fall victim to the perilous Asian economy. In the last 18 months alone, firms including City-based CMS Cameron McKenna, US firms Dewey Ballantine, Orrick Herrington & Sutcliffe, Simpson Thacher & Bartlett and Bryan Cave, and Canada’s Stikeman Elliot, have either scaled back their Asian presences or withdrawn from the region altogether (see table).
Despite this, the mood in Asia is surprisingly optimistic, with firms reporting an increase in business. For example, Herbert Smith, which recently landed an instruction to act for China Construction Bank in what could be the largest initial public offering seen in the global equities market this year, said its Hong Kong and PRC offices
are currently operating at maximum capacity.
“We’re optimistic about the outlook in Asia, particularly in the PRC and Japan,” says Herbert Smith corporate partner Jim Wickenden.
“Absent unforeseen factors, current economic growth and plans for capital-raising in China should make it one of the most active IPO [initial public offering] markets in the world over the near to medium-term.
“There’s also been a marked pickup in activity in India, and the Asean [the Association of South East Asian Nations] countries are showing signs of increased activity.”
Lawyers now see the PRC as the key jurisdiction in Asia, so it comes as no surprise that foreign firms are continuing to pile in. As revealed last week on www.thelawyer.com (23 April), White & Case has won a licence from the Chinese Ministry of Justice to launch a second office on the mainland. The US firm plans to grow a new office in Beijing to focus on corporate and capital markets work. Last week, Salans also won approval to practise in the region after receiving the go-ahead for the office it took over from Altheimer & Gray last year. Other firms understood to be seeking to bolster their presences in the PRC include Latham & Watkins, Sullivan & Cromwell and Weil Gotshal & Manges.
While firms continue to exercise caution, there is quiet optimism among most partners, who argue that the future prospects, notably in the PRC, remain good.
|FIRMS THAT HAVE SCALED BACK OR WITHDRAWN FROM ASIA|
|Freshfields Bruckhaus Derringer||April 04||Bangkok office to be closed; Singapore significantly downsized.|
|Denton Wilde Sapte||April 04||Axing offices in Bejing, Hong Kong, Singapore and Tokyo; 12 partners, 50 lawyers and a total of 100 staff bear the brunt.|
|Skadden Arps Slate Meaghre & Flom||March 04||Operating in Singapore without a partner for three years.|
|Dewey Ballantine||January 04||Closed Hong Kong office, which consisted of two partners and five associates.|
|Bryan Cave||January 04||Full-scale review of Far East practice; expect significant downsizing.|
|Strikeman Elliot||January 04||Scaled back five-strong Hong Kong office to a representative office with only a managing partner.|
|Cravath Swaine & Moore||March 03||Abandonded Hong Kong; two partners and five associates relocated to New York; four locally-hired lawyers made redundant.|
|CMS Cameron McKenna||January 03||Abandonded Hong Kong practice into an insurance boutique, losing 40 lawyers; abandoned four-associate Beijing office.|
|Orrick Herrington & Sutcliffe||January 03||Closed Singapore practice, ending joint venture with Rodyk & Davidson.|
|Simpson Thacher & Bartlett||January 03||Closed Singapore office; managing partner Alan Brenner returned to New York; one counsel and four associates transferred to Hong Kong office.|