Mallesons Stephen Jaques outlined the strategy behind the firm’s merger with Chinese firm Kwok & Yih to David Hovenden
Mallesons’ merger with Kwok & Yih has moved the firm from being a world top-30 player by size to a top-10 player. This highlights one of the key reasons for the move — to achieve critical mass in Hong Kong and China. “Size is relevant, quality is obviously more important, but [Kwok & Yih] is a quality outfit so we’re very comfortable with that,” says Tony D’Aloisio, chief executive partner at Mallesons.
Although only now in the top-10, D’Aloisio points to surveys conducted over the past few years as indicators that the firm is making “quite significant headway” in finance and asserts that it has always been well regarded in construction and projects work. “We’re very pleased with the way that the international credentials are building. We are more and more being seen as a player in international legal. Realistically, we know that we’ve got a ways still to go to be seen as better than or as good as some of the Magic Circle firms in that part of the world. However, with this acquisition we’re a real credible alternative to them.”
Robert Milliner — managing partner of Mallesons’ Hong Kong office prior to the merger, and one of the deal’s chief architects — says the intention is to extend the firm’s resources into China. “Where [the merger] takes us to is it gives us the right platform for that growth in that we’ve now got the full service capability that we wanted to develop. We’ve got the corporate service capability locally and in China we’ve got the true China capability. We’ve almost trebled the number of Mandarin speaking lawyers. We’ve also added to the resources in Beijing. We’ve always wanted to expand our on-ground capability in Beijing because we’ve been getting a lot of feedback from clients that they actually want the on-ground capability.”
Mallesons can now boast three lawyers in Beijing and, with the Kwok & Yih practice, three lawyers in Shanghai. Along with a number of partners who travel extensively in China it gives the firm “the right platform as the client demand grows to really add to those resources both in Shanghai and Beijing and out of Hong Kong as well,” Milliner.says.
D’Aloisio adds to these thoughts: “What’s really good about this positioning is that we don’t know at this stage: Is it going to be Hong Kong? Is it going to be Beijing? Is it going to be Shanghai? Is it all three? How will the resources shift? What this does is that it positions the firm in all three of those markets and it will allocate its resources depending on how client demand builds.”
Like everyone else, Mallesons is unsure just how big the Chinese market will one day be and just when it will start to grow. “The big macro economic indicators all tell you that China is a force in terms of it as a consumer of the world’s energy and resources. It’s huge given the sort of projections and growth forecasts. That has implications for the regions, has implications for investment out of Australia into China and so on. So yes, long term definitely a force,” D’Aloisio said.
“For the next five to 10 years Australia will remain one of the largest economies in the region; it does over half of the M&A transactions in the region. You’re not going to see a huge shift on that. Australia for us will remain important for a long, long time. It will remain important for the type of work we do. But over time, from five years on, you will see the operations in Hong Kong and China growing at a faster rate than the Australian offices.
“This operation now puts Hong Kong and China for us at the size of our Perth office, which means effectively it’s the third largest office behind Sydney and Melbourne. I expect that five years from now, Hong Kong and China will rival the size of our major offices in Australia, but that’s a long time off,” D’Aloisio says.
Milliner says that while the M&A tables show a heavy bias towards Australia, he suggests that what is not evident in the tables is the amount of investment in Australia that is Asia-based. “A lot of the M&A activity over the past few years has been in the energy- and infrastructure-related areas. It would be interesting to break down the figures from the bigger of those M&A activities to see how much of it has been sourced from investment from Asia. I think you would see that there is an increasing trend towards investment coming out of Asia rather than most of it being either US or UK-based.”
Similarly, he argues that global investment is making up a lot of the money represented in the league tables and that much of that investment is being directed towards Asia. “From our point of view, the play still very much is that there is a trade flow of investment from Asia into Australia and then we’ve also got the Australian investment into Asia.”
With a focus on corporate and finance work that is “top-end, complex, difficult work”, D’Aloisio says that more and more this requires regional and international capabilities. “You’re competing head on with the major US and UK firms. To succeed in that market and to continue to succeed in that market you can’t just remain in Australia. You have to also be working in the region.”
The objective for Mallesons is therefore clear, he says: “Where you want to be in 10 years time is to have the same leading position in the market as we have in Australia in the region. That would then be a very powerful international player.”
However, the regional aspirations of the firm are yet to expand to a global scale. “My successor may take a different view, but we have no intention to compete in the mature, well established markets of the world in Europe and the US. They are very well serviced, with the top law firms in the world operating in those markets. At this stage, we’ve still got a lot to do in Australia and this region and you can’t do everything. You’ve got to focus on what you’re good at and where you can succeed and that’s the kind of footprint that we’ve chosen. There’s no aspiration to go and set up in London, Frankfurt, New York or LA,” D’Aloisio says.
Apart from moving into new premises, the firm is confident it has the measure of any post-nuptial difficulties. “Different businesses grow up with a different way [of doing] things, so we’re working through a number of programs so that all staff in the merged entity are clear on how it will conduct itself moving forward,” D’Aloisio says. “There’s a high level of awareness of the need to get the integration right.”