Singaporean firm Rajah & Tann’s managing partner Lee Eng Beng says staying local and being flexible is the way forward in the increasingly competitive South-East Asia region.
“Things have been moving quite quickly over the last 12 months,” says Singaporean firm Rajah & Tann’s managing partner Lee Eng Beng.
This is a perfectly fitting summary not only for his firm but also the marketplace in Singapore. Since last March, Singapore has seen four more qualifying foreign legal practices (QFLPs) (19 February 2013), a number of new international entrances, such as Simmons & Simmons (8 May 2013) and Dechert (24 February 2014), and a raft of new initiatives by the government to further enhance the city state’s role as a regional hub for legal services.
At Rajah & Tann, meanwhile, its regional expansion has picked up pace during the same period. It recently expanded its Bangkok office with the hire of a 14-lawyer team from US firm Hunton & Williams (4 March 2014) and recruited the former IndoChina head of Linklaters’ Australian ally Allens in Singapore (13 March 2014).
A few months earlier it expanded its Vietnam presence by entering into a partnership with local firm LCT Lawyers (18 February 2014). Last year, it launched into Cambodia and Myanmar, both via local tie-ups (1 February 2013), before it enlarged its Malaysian member firm with a three-way local merger (11 July 2013).
Many lawyers and local firms that have recently joined Rajah & Tann’s regional network used to work with or at international firms. Lee says that the firm’s vision to stay local and zero in on building its capability in the South-East Asian region has attracted these new recruits.
“Our claim is that we want to be a specialist in South-East Asia, which is our home turf and where we have more offices than even the biggest international firms,” he says.
All firms on Rajah & Tann’s regional network are locally registered and have a full capability on the ground. Currently, there are 500 lawyers in nine countries across South-East Asia.
Indeed, having a full-service, local law capability in each of the Association of South-East Asian Nations (ASEAN) countries is important to clients doing business or wanting to invest in the region. That’s one of the reasons why the past year has seen several international firms adopting a similar approach by building an independent, regional network.
Just last week BLP launched its Asia network, adding Myanmar’s Legal Network Consultants as its first network member (12 March 2014). Other UK firms such as Clyde & Co and Stephenson Harwood have also been operating this model in the region for some time.
Singaporean firms are facing increasing competition from their international rivals not only in Singapore but also across the ASEAN region. However, Lee claims that Rajah & Tann has a different proposition.
“We don’t service all the same clients, but we do have clients that are big global companies operating in the region. A lot of the global conglomerates have headquarters in Singapore and a general counsel for South-East Asia. Sometimes, the regional general counsel is a lot more confortable working with a pure South-East Asian firm,” says Lee.
Lee also claims that the firm’s vision to stay local and give local member autonomy is also important to lawyers who are aspiring to develop a regional following.
“I have to admit that international firms have better branding, management systems and IT infrastructure, but we’ve managed to persuade some of the best lawyers to subscribe to our platform,” reveals Lee. “The idea of practising as part of a law firm based in the region and run by local lawyers is attractive. Local managing partners and executive boards in our network are given a large amount of autonomy to allow them to run the firm with the best local know-how.”
More importantly, it is difficult for the local firms and lawyers in an international firm-backed network to develop their own practices and clients.
”That’s simply because international firms’ branch offices are there to service and support global clients. Good local lawyers can do a good piece of work, but the international firms’ set up has less flexibility on fees and client relationship building which hinders them from building up their own clients,” Lee adds. “In many ways, international firms are not interested in building up local clients, and for good reasons. But we also need to realise that we are entering into an age in which Asian corporates are getting bigger and stronger. It’s always good to work for global clients, but there are also plenty of good work just for regional clients.”
As a deal highlight, Rajah & Tann recently advised Singapore’s OCBC Bank and its insurance arm Great Eastern in a deal involving the sale by the group and Lee family of their stakes in Fraser & Neave and Asia Pacific Breweries to Thai Beverage for S$3.8bn, one of the highest-profile M&A transactions in the region in 2013.
The firm is also advising the liquidators of MF Global Singapore as well as the liquidators of various Lehman Brothers entities in Asia in respect of insolvency-related issues.
Since Rajah & Tann kick-started its regional expansion in 2010, the total revenue of its network has grown by 50 per cent, while the number of lawyers has increased from 300 to 500. For the Singapore base, its 2013 revenue also saw a roughly 40 per cent rise from 2009.
Profitability is also said to have increased year-on-year, even though the firm has made significant investments in growing its regional footprint.
But Lee is not content with what has been achieved. As he says, “there’s a lot more work to be done”.
Given that the firm’s network already covers nine of the 10 ASEAN countries, further office openings is not on top of Lee’s agenda.
“In terms of scaling up, it’s much easier and makes more sense for us to build up our practices and ties with Singapore and the South-East Asia,” Lee admits, adding frankly, ”once we go beyond South-East Asia, I wonder if we will have any advantages all at.”
His top priority right now is to enhance the network firms’ quality and services in existing practices and locations. In addition to that, he is also planning to strengthen the network’s management and organisation structure.
Due to complicated local regulatory regimes, firms in Rajah & Tann’s network can’t merge to make a single full partnership.
”It also doesn’t make a strong commercial sense nor business case,” adds Lee.
In essence, the current model means each firm in the network has signed a strategic alliance or cooperation agreement individually with Rajah & Tann in Singapore.
“We need to evolve to a strong platform through which the whole group can operate together and make sure all members’ interest are aligned. Some organisational restructuring is expected in the next a few months,” says Lee. “We’re looking at set up an international partnership, which could be an umbrella entity under a Singapore holding entity or a Swiss Verein. But no matter what structure we choose, it needs to have the economy of scale and be compliant with regulations with all jurisdictions.”
So far, Rajah & Tann hasn’t put in place a formal schedule or a regional forum for members of the network to gather and network regularly. But all lawyers from the entire network will meet annually during a four-day retreat somewhere in South-East Asia.
This year, 500 lawyers will gather together in September in Bali. It may be a critical event that could decide whether Rajah & Tann’s South-East Asia empire will truly rise to become a regional power house or not.