Accounting firm Ernst & Young (EY) is in the process of launching a legal services unit in China through the acquisition of Shanghai-based Chen & Co.
The move will be seen as significant for marking the global accoutancy firms first reach into China’s vast legal services market, a route that remains closed to international law firms.
The ‘big four’ accountancy firms have enjoyed a dominant position in China’s accounting and auditing industry for decades without many restrictions.
Accountancy giants, EY, KPMG, PWC and Deloitte, have expanded extensively in the country by acquiring Chinese accounting firms. By expanding into legal advisory work they aim to build on the amount of work they are already doing for top Chinese companies.
The trend will inevitably increase competitive pressures on local and international firms operating in the country.
It is understood that under the deal Chen & Co will remain a licensed Chinese firm but will become a member of the EY global network.
Chen & Co is a Shanghai-based outfit, which focuses on corporate and capital markets. It was founded by Frank Chen in 1998, who previously worked in legacy Herbert Smith’ Hong Kong office for a short stint and took a short-term work experience in Slaughter and May’s London office.
The Shanghai firm has more than 40 lawyers including seven partners and is currently led by managing partner Chen Mingxia. In addition to Shanghai, the firm also has a small branch office in Beijing and a liaison office in Hong Kong. It is particularly known for its track record on advising privately owned Chinese companies in their IPOs and listings both in China and overseas.
Sources noted that the entire team of Chen & Co would soon move into EY’s Shanghai office, which is located in the city’s landmark tower Shanghai World Financial Centre.
EY is the second of the ‘big four’ accountancy firms to expand into China’s legal services sector.
In early 2013, Deloitte opened its own law firm in Shanghai by hiring a team of lawyers from several Shanghai firms, including local tax partner Clare Lu from Llinks. Branded as Qin Li, the firm is a licensed Chinese law firm and introduces itself as part of Deloitte’s global network on its website. The legal services unit is overseen by Vivian Jiang, Deloitte’s greater China managing partner for tax, business and legal services.
EY’s recent China move comes two months after the firm hired former Herbert Smith Freehills’ Singapore managing partner John Dick in a bid to launch a legal services unit in Singapore (10 December 2013).
Elsewhere in Asia Pacific, EY already offers legal services in several jurisdictions through locally registered law firms, including Australia, India and Japan.
The accounting firm is also considering launching a legal arm in the UK and is mulling to apply for an ABS licence (9 September 2013).
Chen & Co could not be reach for comment and EY did not return a request for comment.