Pacific Rim mergers: oceans apart?

Will cultural differences introduce a spanner to the King & Wood-Mallesons deal?

All eyes are on Australasia this week, with 1 March slated as the date when the unions between the UK’s Ashurst and Australian firm Blake Dawson and Chinese firm King & Wood and Australia’s Mallesons Stephen Jaques will finally go live.

Initially Ashurst and Blake Dawson will combine their businesses in Asia under the Ashurst brand, with Blake Dawson rebranding as Ashurst in Australia. If everything goes as planned the firms will be fully merged by 2014.

The potentially game-changing King & Wood-Mallesons deal will initially comprise three separate partnerships in Australia, China and Hong Kong, with the latter
the only office to be integrated financially.

It seems, though, that the first-ever Sino-Australian marriage will have to overcome more challenges than the average international tie-up if it is to be a success.

Mallesons partners are not obliged to move in with King & Wood in Beijing and Shanghai, but the firm is encouraging them to do so with internal campaigns and incentives. These include offering attractive bonuses to make up any financial shortfalls. Early indications, though, are that the incentives are not enough, with a number of associates and partners leaving to join other firms.

While there are ways to overcome differences in culture and remuneration, the firms have a bigger issue to grapple with: the ruling Chinese Communist Party.

Under Chinese law, lawyers in domestic firms are obligated to hand over any client information the party may ask for. Understandably, this is making Mallesons partners – and clients of the firm – more than a little uneasy.

But such issues seem to be doing nothing to dampen international firms’ fervour to make it big in Australasia.

Look at Herbert Smith. The firm has been pursuing a link with Australia’s Freehills since last summer and is on the cusp of inking a deal.

Rumour is that several Freehills partners have been spotted at the UK firm’s Hong Kong and London bases in the past few weeks.

There is nothing like testing the waters with a bit of cohabitation for ensuring the marriage is a success.