Following the announcement last week that Eversheds Sutherland has entered into a formal cooperation agreement with Chinese firm King & Wood Mallesons (KWM), Legal Business spoke to Eversheds’ chief executive officer Lee Ranson about the arrangement and the implications for both firms.
Under the terms of the deal, KWM will exclusively refer all its clients requiring legal advice in the UK, Europe, Middle East, Africa and South America to Eversheds, while Eversheds will refer all its international clients in need of PRC legal counsel solely to KWM.
Ranson clarified the types of clients that the arrangement gives Eversheds access to: ‘It opens up all of KWM’s outbound work from China into Europe, the Middle East, South America and Africa. KWM is a very sophisticated firm in China and there is a close affinity between its practice group structure and our own.
‘There is an overlap between Eversheds and KWM with some joint clients, as well as a lot of clients that we haven’t been instructed by yet in all the main sectors we operate in, such as TMT, financial institutions and energy, as well as large corporates who are involved in cross border M&A. These are prime examples where there will be overlaps and opportunity for us both.’
On the rationale behind the agreement, Ranson said: ‘We are a global law firm, so not only does this agreement strengthen our global offering, but it also strengthens our Asian offering. If we have clients inbound to China, we will now work with KWM to deal with the local PRC aspects. KWM’s mainland Chinese offering is substantially better than any other international firm operating in that market, which is becoming increasingly complex and sophisticated with new regulations that impact how deals are structured, so this deal has strengthened our ability to act for clients in the Chinese market.’
Ranson gave an indication of when talks regarding the agreement began: ‘Several months ago. We have been working with KWM to see the extent of the opportunity, as well as the cooperation agreement in the background. There haven’t been intensive negotiations for all that time.’
He elaborated on how international firms build a foothold in China: ‘No-one has managed to build out of the key locations and gain a foothold that way. Dentons has a local tie-up, but beyond that it is a small presence there for international firms.’
Asked why KWM wanted to enter into a cooperation agreement with Eversheds, Ranson responded: ‘Because of the depth of our relationships and offices across Europe, the Middle East, Africa and South America. KWM had relatively small offices prior to this deal, now it has a deal with one of the largest firms internationally. It is attracted to the sophistication of the offering and what we bring in terms of servicing its clients across the various sectors and practice areas.’
He continued: ‘We are a full-service law firm and have very developed capabilities in many jurisdictions that the Chinese are interested in, such as the Middle East, which Chinese investment is increasingly focusing on. To put it into perspective, we have seven offices in the Middle East, but before this deal KWM had one in Dubai. KWM wants to be able to carry out deals outside of China so that it can strengthen its own relationship with its clients and sell a deeper offering across Europe.’
As part of the new agreement, KWM will terminate all its operations in the UK, Europe and the Middle East by 31 October 2024. It is anticipated that KWM’s partners and staff will be able to integrate with Eversheds’ relevant offices ‘subject to practice needs and other considerations’.
Probed on the long-term logistics of the agreement, Ranson confirmed: ‘The intention is that KWM will effectively come out of its six locations in Europe, including London. We said a longstop date at the end of October 2024, a number of offices may be sooner than that.’
On whether KWM and Eversheds, which does not currently have and a presence in Australia, have any plans on expanding the deal to other parts of Asia and Australia through KWM’s Hong Kong and Australian Vereins, Ranson said: ‘Not at the moment. We are focused on the deal we have agreed, which is the largest agreement of its type, and we are going to put a lot of resources and infrastructure into it so that is creates as many opportunities for us and KWM as possible.’
Ranson summarised: ‘It goes back to the question of how do global law firms ensure they have true global coverage? The Asian market is evolving, and firms must come up with ways to create a client offering that reflects the opportunities and complexities in the various markets.’