Place your bets: decision time looms in Asia
Alex Novarese on why A&O's merger talks with Allen & Gledhill marks a key moment for the development of Singapore Inc as a key strategic hub for Asia...
November 09, 2011 at 07:03 PM
3 minute read
With every passing week the feeling from Asia is that the wheel is spinning faster and faster. Take the hugely significant news that Linklaters' joint venture partner Allen & Gledhill is in merger talks with Allen & Overy (A&O). The local firm is widely regarded as Singapore's leading law firm and one of the strongest practices in Asia. With a rapidly liberalising Singapore in recent years establishing itself as a key hub to Southeast Asia and an increasingly potent threat to Hong Kong, it's obvious that Allen & Gledhill could be an enviable strategic asset to an international firm.
But there is a wider context to the talks than Singapore's success as a business centre. With Australia's Blake Dawson recently agreeing a tie-up with Ashurst and King & Wood currently pursuing a union with Mallesons Stephen Jaques, this year has seen a string of leading Asia-Pacific firms attempt major international deals. And the underlying logic in all these deals is the same: a booming Asia will be crucial to leading law firms, but contenders must be ready to position themselves for a region-wide play.
As with the rapid shake-out in Europe more than a decade ago, this accelerating market will soon force the key protagonists to make some far-reaching bets about how to develop their practices as firms weigh up competing options.
And in many ways, Singapore seems a microcosm of the wider Asia region. Singapore has already had huge success building its position as a strategic hub by using its strong infrastructure, prime location and business-friendly environment. But the same liberalisation that has helped it compete despite its small local economy has awkward implications for local lawyers. With much of the premium work handled in Singapore carried out under foreign law, there is essentially limited demand for Singapore law advice.
With the market expected to soon liberalise further, local firms face their domestic business being opened up while having limited scope to expand internationally. Allen & Gledhill has already come to the conclusion that it should seek a merger with a foreign partner and – Linklaters having been reluctant to move to closer integration – is pursuing a union with A&O.
Securing a tie-up with A&O raises the possibility that the local firm will restructure itself ahead of a deal. A 300-lawyer practice will be hard to integrate with a foreign partner, and foreign firms remain restricted from handling the litigation work that remains key to local firms. But with the right structure, the union could provide a major boost to A&O's global ambitions.
The proposed merger will also need the support of the local Ministry of Law, which will try to balance the competing aims of developing its regional standing while also supporting its national champions.
Either way, it will be a key moment for Singapore Inc. And you can expect similar calculations – among regulators, independents and global law firms – to play out across the Asia-Pacific region for years to come.
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