At various times in the last year we have reported rumours that Clifford Chance and Mallesons have been toying with the idea of a major international merger. As recently as May we reported the rumour that Mallesons was in renewed discussions with Clifford Chance, following the breakdown of merger talks in late 2008 by reason of the then emerging GFC.

Today, we can report the most compelling (and in our opinion most logical) rumour yet - that Clifford Chance will open shop in Sydney later this year, on its own terms.  And yes folks, the bidding war for profitable Australian partners is set to begin.

We received the following anonymous comments from a Clifford Chance spy a couple of days ago:

‘which magic circle firm is now well past the due diligence phase of orchestrating it’s very own Aussie assault? Allen & Overy? Wrong. As an employee working very closely with the project, I can tell you that Clifford Chance is coming to Australia, sooner rather than later.”

We then received the following comments from another anonymous Clifford Chance spy yesterday:

Rumours wildly circulating London offices this week that Clifford Chance will soon go public with its plans to make a foray Down Under. Investigate.

The Firm Spy’s immediate gut reaction to this news was, well, wouldn’t a magic circle firm considering an assault at least wait for further clarity on the RSPT? Sovereign risk in Australia is being blamed for a recent weakening in domestic markets, so wouldn’t they wait to see if the “Mad Monk”, Tony Abbott, has the mettle to take out the election and reverse Krudd mining tax policy?

Perhaps not, if the European economy is facing a prtotracted economic struggle and Australia is seen - at least by one of it’s major competitors - as a profitable destination (albeit a conclusion reached pre-RSPT).The rumour is also buttressed by the very credible report penned by our friends at RoF.

So where will the Clifford Chance partners come from? RoF speculates that Corrs will be targeted. We beg to differ.

As early as February we have heard credible reports that Clifford Chance is targetting young, dynamic Mallesons partners to head up it’s Australian office. Given the close affiliation existing between the firms, this is not hard to believe.

But the primary hurdle to getting these partners across, in our view, is the likelihood that access to the Clifford Chance equity pool will not represent a major economic windfall in the same way A&O did to the defecting Clutz partners (the weakening Euro doesn’t help either). However, this “hurdle” is tempered by the fact (we think, at least)that the Mallesons lock step model is exasperatingly long and populated by regular “performance reviews”.

So if Clifford Chance either promised prospective Mallesons defectors a set wage for, say, three years, or guaranteed quicker ascension (compared with that at Mallesons) up the equity pile, it might suddenly become an attractive bargain.

The appeal of Australia to magic circle firms is a topic which has been overwrought by commentators (including us) in 2010. But now, more than at any other stage in this year or during the GFC, the urgency is clear. And if you’ve already exhaustively considered the prospect, got ready access to the top talent who’ll be enticed by the right bargain, then why not?

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