King & Wood Mallesons (KWM) has enjoyed a successful first six months as a single firm, according to Handel Lee, head of the firm’s East China offices, who added that Africa could be the next destination for the firm en route to London and New York.
The firm, which went live in March, topped mergermarket’s Asia-Pacific (excluding Japan) M&A league tables for volume for the first half of 2012, placing it ahead of Baker & McKenzie, Freehills and Clifford Chance in the table. The firm did 35 deals worth a total of $9.2bn.
Recent hiring sprees also leave little doubt that the firm means serious business in China and beyond. It added a three-partner energy and resources team in Beijing in June, led by former Dewey & LeBoeuf partner Dirk Walker, and will be joined soon by Herbert Smith’s former head of M&A, Simon Meng, in Shanghai.
Since KWM was formed through the seminal tie-up of leading People’s Republic of China (PRC) and Australian firms King & Wood and Mallesons Stephen Jaques, speculation has been rife as to where the firm’s ambitions lie next. It has been reported to be on the lookout for a US or UK partner, with Nixon Peabody and SJ Berwin among the names being touted. Even prior to the merger, the new firm was thought to be looking at further expansion in Asia, specifically with the WongPartnership in Singapore.
Lee would neither confirm nor deny any of the rumours doing the rounds, but suggested that while Asia is the priority, in fact, Africa could be the next step.
‘Africa is very important to us,’ he said. ‘Mallesons has a strong legacy there and so we have the ability to either lead or follow our clients into Africa.’
‘We are considering the most appropriate expansion while focusing on our own integration and position right now,’ he added. ‘We are certainly assessing the next stages of expansion, and looking at other markets as well. We want to be a leading global law firm and as such certainly we are contemplating UK/Europe and then New York in the long term.’
Lee played a key role in the initial negotiations with Mallesons last year, along with other managing partners Rupert Li and Wang Ling. The rest of the partners were then told to vote anonymously on the firm’s intranet and, according to Lee, were virtually unanimous in sanctioning the deal.
Ling also confirmed that internally the first six months have lived up to expectations. ‘On the practice side, it is quite exciting,’ she said. ‘The lawyers on both sides have been working together, managing transactions, or doing joint pitches. For operations, systems, IT, business development and marketing, at each level, we are moving forward swiftly with integration.’
‘Mallesons has a strong legacy in Africa and so we have the ability to either lead or follow our clients into Africa.’
Handel Lee, King & Wood Mallesons
The deal has exposed the China lawyers to some meaty new work, such as advising China Development Bank (CDB) and Bank of China on the $751m corporate refinancing of China Minmetals Corporation. CDB is also using the firm on the Extension Hill Magnetite Project in Australia, and the Taurus Refinancing in Hong Kong.
Lee pointed out that PRC clients have reacted positively to its tie-up with an Australian firm. Given that a significant proportion of King & Wood’s client base includes state-owned enterprises (SOEs), particularly within dispute resolution and capital markets, critics of the deal suggested that they could be unsettled by the idea of a move towards western-style thinking.
Not according to Lee. ‘Clients have been very enthusiastic and positive,’ he says. ‘We are now able to bring SOEs and others a deeper scope of services – this is why we did the merger, to stay in front of the market.’
‘Asia as a whole is dynamic, and China is at the heart of it,’ he added. ‘Clients are going into Asia aggressively, so it’s natural to combine the leading firm in China with the leading firm in Australia to equal leading firms from the USA and UK.’
There has also been much speculation as to whether other Chinese firms will follow King & Wood’s example but future expansion depends on the success of the Chinese economy going forward. While much has been made of China’s position as a rapidly-growing major economy, the country’s growth recently slowed to its lowest rate since the onset of the global financial crisis.
However, Lee says: ‘The economic outlook for China remains positive. Double-digit growth is projected for the service industry and consumer retail spending. Both of these are evidence that the economic reforms already in place have boosted domestic consumption.’
A change in the country’s leadership towards the end of the year will, according to Lee, be the single biggest influence on the economy. KWM is hopeful that this will result in ‘the gradual opening up of opportunities that were previously closed’.
However, he added: ‘There’s no doubt that continued market volatility in the West, uncertainties over European sovereign debt, and availability of funding are having an impact. Domestically, the debt overhang from the stimulus programme and the property price bubble are a focus of attention.’
Unperturbed by any market uncertainties, US and UK firms continue to shift their focus east at a rapid pace. Hill Dickinson has announced plans for a new office in Hong Kong, having opened in Singapore in 2009, while Ince & Co recently expanded its China footprint with a third office in Beijing to add to its existing complement in Shanghai and Hong Kong. And of course, Herbert Smith Freehills, when it launches as a newly merged firm on 1 October, is set to become another powerhouse in Asia. In order to compete, domestic Chinese firms need to be bold, brave and bullish. King & Wood has bitten the bullet, and got off to a flying start.