This prompted us to contact Freehills on the issue, to which a spokesperson responded (29/8):
Philippa Stone is committed to Freehills.
We now think Ms Stone and several other headline Freehills partners agitating for recalibrations in profit distribution have been appeased by plans for expansion, with the firm eyeing a formal tie-up with its associated China-based firm TransAsia Lawyers.
The Scoop
We’ve received a handful of reports in recent weeks that Freehills is seriously assessing its Chinese expansion options. First this from a Freehills spy:
Hey FS, anything through on Freehills in China? Hearing through the grapevine that Gav [Bell] is there on “business” (read: merger talks). Investigate please!
We later received this from another spy:
Not sure how the structuring will work, but talk is circulating inside Freehills that our China-based referrer trans-asian lawyers is a merger possibility. A couple of partners have confirmed that something is happening, but apparently its being handled by the executive so nothing concrete yet.
Pretty sure it would be endorsed by all partners and other lawyers as everyone agrees that theres not enough of an Asian footprint.
We put the substance of those rumours to Freehills yesterday, asking for comment. A spokesperson for Freehills said:
We don’t comment on any merger rumour or speculation.
Geee… that sounds familiar. In fact, it’s almost exactly what a Blake Dawson spokesperson said to us on 31/08 when we enquired about a merger with Ashurst which, for the record, was officially announced on 26/09.
The Business Case
It’s interesting indeed that Freehills currently has just one international office, that being in Singapore. On the one hand, Freehills arguably has the strongest market position in Australia at this very moment. If we look at the firm’s Perth presence, for example, we see a strong footing. Here is a list of major domestic firms with a Perth office and the breakdown of fee-earners:
- Freehills: 27 partners; 125 other fee earners
- Blake Dawson: 22 partners; 86 other fee earners
- Squire Sanders: 14 partners; 65 other fee earners (estimate)
- Clayton Utz: 18 partners; 75 other fee earners
- Corrs Chambers Westgarth: 16 partners; 48 other fee earners
- Mallesons: 15 partners; 77 other fee earners
- Allens Arthur Robinson: 12 partners; 64 other fee earners
- Gadens: 11 partners; 18 other fee earners
- Gilbert + Tobin: 8 partners; 26 other fee earners
- Middletons: 7 partners; 23 other fee earners
On the other hand, Freehills has comparably poor Asian presence, and, as any remotely informed legal affairs commentator will tell you, this isn’t good news with booming tiger economies exporting capital with feckless abandon. A link-up with a Chinese firm makes perfect sense.
Unless, of course, you accept the prevailing sentiment at Clayton Utz, where CEP Darryl McDonough has eschewed an Asian expansion. He told the AFR (16/09/2011):
An international firm has a different offering to us. We operate within an Australian context. They offer expertise drawn from an international market. For a lot of clients, that’s of no benefit. … There’s a future for independent domestic Australian firms that are prepared to maintain their independence.
We invite your views in the comments as to the more appropriate business strategy.
TransAsia Lawyers
We don’t know much about TransAsia Lawyers, other than to state that they are considerably smaller than Mallesons’ merger target King & Wood. In its own words:
We are generally considered to be one of the leading law firms licensed in the People’s Republic of China, and were founded nearly 20 years ago by attorneys who have been advising on investments into and out of China since the early 1980s. We have a legal team of approximately 70 fee earners, with the majority of our lawyers being admitted to practice in the PRC, whilst others are qualified in the United States, Australia, France and Malaysia.
Crucially, the firm has a presence in Hong Kong, Shanghai and Beijing – locations conspicuously absent on Freehills’ “contact us” webpage. With only 70 fee-earners, Freehills could make a relatively cheap investment to get feet on the ground with local knowledge and contacts, building on its already existent “association” with the firm (we think that means “referral agreement”).
Freehills Current Reach
We asked Freehills what it says to graduates who want international exposure in their legal career when the firm has only one overseas office. A spokesperson responded:
Freehills works with clients across Asia, the Americas, Europe and Africa. For example last year Freehills successfully concluded one of the largest tort cases in US history advising Bovis Lend Lease on its World Trade Centre litigation. More recently Freehills advised Roc Oil on its South-East Asian and African transactions. In addition, we have strong relationships with leading law firms throughout the world and regularly place our lawyers on secondment in all of the major legal centres.
Sounds good, but it is certainly a far cry from having a broad spread of international offices with formal intra-firm secondment opportunities such as those that exist at other Australian firms.
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I wouldn’t be surprised to see firms like Frehills go it alone.
I suspect that the current obsession with having a Chinese presence, for instance, be a passing fad. Users of legal services engage different firms depending on (among other things):
1) The type of work; and
2) The strengths of the particular firm in that market.
If having an international footprint (via offices in multiple jurisdictions) truly was essential to success, then why are firms like Baker & McKenzie also-ran’s in the legal marketplace.
I suspect that informal ‘best friends’ and work referral relationships will stand the test of time.
As to staff secondments, the same issue arises. Just because Blakes will soon have a formal link with Ashurst, that is not to say that either Ashurst will have vacancies when Blakes people want to have their stint in London, or that the Blakes people would want to go to Ashurst (or vice versa).
All a storm in a tea cup.
Regardless I what Freehills does, it’s pretty laughable to suggest that it will take grad secondment opportunities into account as a factor!! “it may not be profitable, but think about what we can print in our brochures!”
I don’t understand why firms feel the need to have offices overseas — as though it makes them look stronger in Australia. I’d rather be in a top-tier Australian firm than be the “down under” outpost of an international firm. No one respects you any more because you work at the antipodal A&O office; it’s not NY or London end of story. Instead, they’ll respect you for being good at your job, regardless. Frankly, from a domestic point of view it’s still the big 6, no matter how much FS wants to see them all (esp Clutz) fail. And if you really want a secondment overseas, just go. You don’t need to have an inter-office swap. If you’re good enough to be swapped then you’re good enough to strike out and find a job on your own (probably pay you more anyway).
Secondments are mentioned in graduate information sessions, glossy brochures and at recruitment cocktail parties.
And then never again. Or rarely.
Don’t believe the hype. The opportunities are few. Why would your office spend so much time and money recruiting you to send you somewhere they don’t get to control your activities and may not derive any profit from your work?
TransAsia’s principal is Jesse Chang, an ANU graduate and NSW-qualified lawyer. http://www.transasialawyers.com/professionals/jesse-t-h-chang
It may be easier for Freehills to ensure good culture fit with a Chinese firm that is small, but established, and led by someone who understands both countries. However, the firm’s speciality appears to be Chinese media law, not big-ticket M&A or energy deals.
This ‘merger’ fad is just a branding fad. Pushed by empire builders who are keen to leave a mark. It will fade… but not before a few more jump on the bandwagon. I doubt it significantly increases profits for either of the merger partners… but does allow the execs to go on more overseas junkets than they might otherwise be able to.
If you work at any of the big firms, I would imagine it would be easier to just find a job through a recruiter than negotiate a secondment and deal with the associated internal politics. But graduates don’t know or realise this – they are (mostly) rabbits in the headlights when it comes to this sort of stuff. If the lies they print in the grad recruitment brochures didn’t work, they wouldn’t continue to use them.
Unsurprising except in that Freehills is actually going to go through with it. Freehills has danced the dance with Transasia for close to a decade. The MP from Transasia went to school in OZ with a big wig Freehills partner so it shows it does matter where you went to school.
Investing in China is not just about opening up an office or two, make a trip or two here and there a year and hope work will come flooding in. The market has moved well beyond that. Transasia is not that well known in the market and I haven’t heard about Jesse having anyone in the Politburo on speed-dial (but could very well be wrong). It will also be interesting to see how this affects Transasia’s other strategic alliances…
If you don’t buy into the premise that business is global and that international investment is a source of legal fees – then you won’t see the sense in having an internatIonal presence. Head in sand approach.
There are a lot of good lawyers out there, especially in Australia. Why would a multi-national choose to work with you over others? Capability, brand and connections.
International firms do invest in secondments moreso than domestic firms. Why? Because they can.
“If having an international footprint (via offices in multiple jurisdictions) truly was essential to success, then why are firms like Baker & McKenzie also-ran’s in the legal marketplace?”
Except that Bakers is the world’s largest law firm. I never knew being number 1 was being an also-ran?
And highest grossing the in USA.
Want an overseas stint? Just move.
Marco – but not the most profitable or even close to being in the true top tier – wlrk, cravath, dpw, skadden, etc.
Macro –
You missed my point – Anon (and most other posters) understood what I said.
Here is a list (accrodingly to Wikipedia) of the largest law firms in the world: http://en.wikipedia.org/wiki/List_of_100_largest_law_firms
The implication of your comments is that you could replace largest with best and retain the ranking list as it is. If you would rather work for/be a Partner of DLA Piper (number 17) than Slaughter & May (number 48) then I think you would in a club of 1.
Agree with Marco, not sure what Aussie “top tier” dav008 works at.
“In August B&M posted a global revenue that confirmed its position as the world’s largest firm by revenue” reported in The Lawyer Annual Report 2011 recently. Bakers was also listed 1st of international firms by UK revenue in 2010.
BTW I am not a B&M staffer and have never been, just in the “real” world. Stop swallowing the marketing hype people, if the last 12 months has taught us anything surely it is that the Aussie term “top tier” is reaching its used by date.
Thanks for your comment Anon: “Marco – but not the most profitable or even close to being in the true top tier – wlrk, cravath, dpw, skadden, etc”
It may not be the most profitable, but it probably wouldn’t be too far off (I don’t have the figures…feel free to share).
I note that you have used the term ‘true top tier’ liberally, but have not actually described what you think that is. I think revenue and profit are the main two considerations, alongside a strong international presence. Having the highest revnue in the world’s largest economy is similarly indicative of being ‘top-tier’.
Dav008:
“The implication of your comments is that you could replace largest with best and retain the ranking list as it is. If you would rather work for/be a Partner of DLA Piper (number 17) than Slaughter & May (number 48) then I think you would in a club of 1.”
The firm with the most revenue (and, on a related note, profit) is the best firm – this is commerce, after all.
Additionally, I’d love to be a Partner at Slaughter & May, but not an employee…who get royally shafted to line the pockets of the partners. I wouldn’t compare being a partner at S & M to being an employee there (especially a junior employee!).
DLA Piper would be great (and better than Slaughter and May) in the USA, Europe or Middle East. They would be a nice choice for complicated cross-jurisdictional deals.
Macro,
A firm that has the largest revenue and profit, doesn’t mean that it is more profitable on any measure of revelance – that is, profit per Partner.
For the top US firms by revenue, see this link:
http://www.law.com/jsp/tal/PubArticleTAL.jsp?id=1202489360193&slreturn=1
For the top 8 US firms (profit per Partner), see this link:
http://www.law.com/jsp/tal/PubArticleTAL.jsp?id=1202491847439
Baker & McKenzie have the highest reported revenue ($2.104 billion vs $2.100 billion reported by Skadden), but with 287 more equity partnes than Skadden, it is far, far less profitable per Partner ($2.93 million vs $4.88 million)… perhaps biggest isn’t best after all…
Marco – you’re miles from the mark mate.
Talking up highest grossing is like saying you’d like to be the fattest bloke in the 100m sprint.
Answer this: would you rather be a partner at B&M taking home c. $1m p/a or at Cravath, WLRK or S&C, taking home $3m p/a.
B&M is the MacDonalds of law firms.
Would you like fries with your gross revenue?
Agree with most of the others in that revenue is not the proxy for “best” in the legal world. Case in point: Minters has been 1st in terms of revenue since I can remember, but they have about 50-70 more partners than the next law firm, so have to spread that revenue between those people.
On the other hand, profit isn’t the lone proxy for “best” either. Firstly, profit figures aren’t capable of being verified because most law firms are private and don’t disclose their accounts. Secondly, profit can be “inflated” by being tight/ruthless. A firm like Freehills would suffer on profit figures alone because their lawyers get paid more and they don’t do mass layoffs (according to FirmSpy). Case in point: Corrs probably has a higher profit per partner figure than Freehills, but Freehills surely has a “better” brand overall.
Let’s just agree that B&M is a decent and famous international law firm. Might not be the most “prestigious”, but whatever. You could end up running the IMF if you get to the top.