Stuart Fuller
Photo by David Hartung
It's been a year since a groundbreaking merger between China's King & Wood and Australia's Mallesons Stephen Jaques produced a new giant with nearly 1,600 lawyers and revenues of almost $800 million. Since then, there has been plenty of speculation, in the media and at law firms, about the combined firm's next move. Some press reports have identified Rochester-based Nixon Peabody and London's SJ Berwin as potential merger partners.
But King & Wood Mallesons is trying to get Asia right first. "We've made no secret of our strategy to be a global firm based in Asia," says Wang Junfeng, one of the founding partners of King & Wood and now chairman of the combined firm. "We're focused on integration and maximizing our footprint in the world's economic growth zone. Asia is our front- and backyard. We're dominant in that space, and our strategy will keep us dominant." King & Wood Mallesons doesn't want to be the umpteenth international law firm trying to land a spot on a City of London panel or competing to defend big shareholder suits in New York. Not when it sees an opportunity to become the leading law firm of the Asian Century.
That will be harder than it sounds.
China is at the core of King & Wood Mallesons's ambitions. Under Wang, King & Wood had long set a goal of becoming the first international Chinese law firm. Wang's reasoning is that rising Chinese companies will increasingly look abroad to expand and invest, and they will want a "Chinese" firm to help them. To get ready, he pushed for reforms to the firm's internal processes and hired more lawyers with international firm experience, including many Western expatriates ["Outward Bound," The Asian Lawyer, Winter 2011].
In Mallesons, Wang found an eager partner. The top Aussie firms have long faced the dilemma of being large and sophisticated firms servicing a relatively small home market. To expand their natural client base, some have allied or merged with established international firms, mainly from the United Kingdom. Five years ago, Mallesons itself had merger talks with Clifford Chance, and the past year has seen three of its top Australian competitors—Freehills, Allens, and Blake Dawson—ink deals with Herbert Smith, Linklaters, and Ashurst, respectively.
In tying up with a Chinese rather than a Western firm, Mallesons sees itself as embracing the future over the past. "We had the benefit of looking at where we thought the world was going to go over the next 50 years," says Stuart Fuller, the former executive partner of Mallesons, now the Hong Kong–based managing partner for the combined firm. "The rise of China, the rise of the region, the global capital flows, the outbound investments, the inbound investments—we thought there was a unique opportunity to create a firm that was at the center of all that and had depth in those markets."
Given that both King & Wood and Mallesons were leaders in their home markets, China-Australia deals should play to the combined firm's strengths. Fuller says he now regards the market for such work as a "must-win." The former Mallesons had already handled major deals for such companies as Aluminum Corporation of China Limited, better known as Chinalco. Last fall King & Wood Mallesons advised Chinese wind power company Shenhua Clean Energy Holdings on its acquisition of a 75 percent stake in two wind farms in Tasmania for $87 million in cash and $208 million in assumed debt. The firm has also represented China Development Bank on financings for several projects involving Australian companies.
The broader goal, though, is to advise Chinese firms heading to other markets as well. There have been some encouraging signs. Fuller says the combined firm has already been named to the international panel at Chinese state-owned oil giant China Petroleum & Chemical Corporation, also known as Sinopec—something he doesn't think would have happened before the merger. Partners from the former Mallesons and the former King & Wood have already worked together on 100 matters and have jointly pitched on 40 outbound China deals.
But Xu Ping, the Beijing-based cohead of the firm's China corporate practice, says it's clear the large state-owned enterprises (SOEs) that have done the biggest outbound deals don't need handholding by a Chinese firm. "The top ones have done a lot of deals, and they are comfortable working with international firms and investment bankers," she says. Tony O'Malley, King & Wood Mallesons's Australia managing partner, notes that Mallesons and other Aussie firms have frequently been left at home when major Australian corporations move into the United States or Europe. He doesn't expect that to change soon. "What we've done hasn't repositioned us in those markets," he says.
And there's a reason why the top international law firms have heretofore all been British or American. "Certainly U.S. and U.K. law are key currencies of the global legal market and will be for the next 50 years," says O'Malley. The former Mallesons contributed a London office and U.K. law capability to the combined firm, while the King & Wood side brought New York and Palo Alto offices and many U.S.–qualified lawyers. Nonetheless, it is hard to see it becoming anyone's first choice for major transactions in the U.S. or the U.K.
