Clifford Chance Asia-Pacific managing partner Peter Charlton sets out the firm's regional strategy to Elizabeth Broomhall

Talking about the importance of Asia, Peter Charlton, Clifford Chance's (CC) Hong Kong-based regional managing partner, points across Victoria Harbour in the direction of mainland China. "We are on the edge of the soon-to-be largest economy in the world," he says, turning in his seat to look across the water. "I can't imagine Asia-Pacific not becoming more important, and not becoming a larger proportion of Clifford Chance, in this century."

The Newcastle-born leader is certainly optimistic about CC's growth in the region, which currently contributes 14% to global revenues, surpassed only by London and Europe where it has a far longer history. However, in the financial year ending 30 April 2013 the magic circle outfit recorded a 3% drop in earnings from the region, which it attributed to depressed transactional markets.

But as one of the best-known and longest-serving international firms in Asia, Charlton remains confident about the future. "It is quite possible in my view to get to 25% [of the firm's global revenues] in Asia-Pacific," he says. "Let's say, within a decade or two, Clifford Chance might see 25%-25%-25%-25% across London, Continental Europe, the US and Asia. That means growth in the US and growth here."

Back in business

The market has changed significantly since I last met Charlton. Then, he talked of doom and gloom in the capital markets but he now says they are busier than ever. "2013 started slow and finished fast," he explains. "The M&A and capital markets slowdown lasted about 12 months, in particular on the initial public offering (IPO) side. But capital markets came back in March 2013, and now we are pretty busy on a large number of IPOs – more than we have ever had going on at one time. This has continued into 2014, but Southeast Asia softened around the turn of the year." 

So far in 2014 CC has already closed five Hong Kong IPOs, including the $1bn (£594m) listing of China's Harbin Bank, where it acted for the issuer opposite Linklaters, and the $316m (£187.7m) IPO of Haichang Holdings, where it represented the banks while Milbank Tweed Hadley & McCloy was the issuer's counsel.

Speaking about regional revenues, Charlton says the firm will likely fall slightly short of its original target of reaching £250m by the 2014-15 financial year; a goal that was set before the Asia slowdown. 

"We have recalibrated and are still aiming to get close to our target, but I suspect it will undershoot a little bit – maybe something like £230m, it all depends on the market," Charlton speculates. "The plan is to grow in a profitable way. Revenue growth implies people growth, but productively – so we aren't just adding bodies but more productive people." 

He says that the focus will be on adding partners across all four core practice areas: litigation, finance, corporate and capital markets.

Litigation was CC's most profitable practice in 2012-13 in Asia, partly because of the capital markets slump during the period and partly due to a surge in disputes work. However, in December 2012 the firm saw the departure of top Hong Kong litigation partner Martin Rogers, who left for US rival Davis Polk & Wardwell along with his number two, James Wadham. The impact on CC's local litigation revenues is yet to be seen, but Charlton denies the exits have been a blow to the practice.

"We brought out Matthew Newick from London to lead the Asia-Pacific practice. He is a match for anyone in the Hong Kong market; if you're outstanding in London you'll be outstanding in Hong Kong. We've been here for 30 years and so we have an established reputation. We needed additional top talent and the best option was to bring in one of our best litigators from London."

Despite the shift towards litigation in recent years, Charlton maintains that all four practices are equally important and, as such, the firm has no plans to downsize in any area. This contrasts with some of its rivals – such as Allen & Overy (A&O) and Fried Frank Harris Shriver & Jacobson – which have opted to scale back on Hong Kong IPO work in response to the slower market conditions. 

"Litigation has been particularly strong in the past five years, which reflects the global climate, and that has been very significant for us in Asia-Pacific. But it changes every year," explains Charlton. "Our aim is not only to have a profitable Asia-Pacific practice but a balance [everywhere] in terms of the range of what we do to ride out the volatility in the market."

Since he took on the role of Asia chief in 2008, CC has increased its Asia-Pacific partner headcount from 50 to 99. A considerable amount of this growth has been driven by partner promotions in Asia but, according to Charlton, efforts to boost partner ranks going forward will come through a mix of promotions, lateral hires and relocations.

In keeping with other firms he expects CC will become more local in its make-up across Asia, where Mandarin speakers are increasingly in demand. "The market is becoming much more localised – culture sensitive, language sensitive – so more and more we're having to fulfill our needs with an Asian player," he explains. "We think it is inevitable that the Asia offices will be managed, staffed, lawyered, developed and grown with local people."

Building a broad base

Geographically, CC is among the more diverse of the international firms in Asia, with its current network of offices in the region covering Greater China, Japan, Singapore, Thailand, South Korea, Indonesia and Australia – in total accounting for 10 of the firm's 36 global bases. Those in the latter three jurisdictions have all opened in the past three years; in 2012 CC became the first UK outfit to gain approval to launch in Seoul, while it opened bases in Sydney and Perth in 2011 through mergers with local outfits Cochrane Lishman Carson Luscombe and Chang Pistilli & Simmons respectively. Indonesia was the most recent addition to the network in January, coming about through a tie-up with the newly formed local firm Linda Widyati & Partners (LWP).

"Looking around the region there aren't many places left where we have a current strategic interest to be," Charlton comments. "In addition to the organic growth of the business we've created potential revenue streams by merging with two boutique firms in Australia, and we've opened in Korea, which is aimed at adding revenue though it's not really a profit centre in itself; it's a window for CC to advise the Korean companies investing outside of Korea. We were also very pleased to have established an association with LWP in Jakarta."

But he admits that the Australian offices have come under some pressure amid difficulties in the country's domestic economy. "We had a pretty tough time in Australia throughout 2013 because of the slowdown in Asia-Pacific, which was connected to the end of the commodities boom, a slowdown in Chinese demand and the impact on the M&A market and the devaluation of the dollar. However, it is starting to stabilise. The election and change in government is now out of the way, and I believe the Australian economy will also benefit from the devaluation of the Australian dollar, which has been historically overvalued."

Current strategy will see the firm continue to focus on high-end M&A in Sydney and projects work in Perth, as well as looking to grow its litigation and finance capabilities in both cities, with the possibility of developing a separate capital markets practice. Charlton clarifies: "We may think about developing a capital markets practice to compliment the finance and corporate M&A practice, but we're not aiming to be a big capital markets firm in Australia."

Keeping an eye on the rest

Quizzed about the possibility of opening in other jurisdictions in Southeast Asia, he says CC is always watching the markets but has no current plans – despite rival A&O launching in Myanmar earlier this year.

"We are continuing to monitor Malaysia, which has started to liberalise its legal market. At the moment I don't think we're planning to do anything. We have a lot of Malaysian clients and we do a lot of work relating to Malaysian businesses, but we haven't felt the need to be on the ground in the past. We're also watching Myanmar, but it's very new and very much emerging and we aren't going to rush to be on the ground there."

Another important country in the region is Vietnam, where A&O and Freshfields Bruckhaus Deringer each have two offices. But Charlton says that for CC the market doesn't fit with its business model. "We had two offices in Vietnam and closed them. That was more than 10 years ago. Vietnam in the '90s was an interesting growth market but it then became quite difficult. The challenge in a small office in a small market is ensuring that you have succession to build the business. It was hard to find the next generation to take our Vietnamese offices forward so we decided reluctantly to close them. We spun off our existing operation, which is now associated with us. We're not expecting to go back into that market."

A bigger question of course is whether CC will expand more deeply into China in the near future, as more firms set their sights on the Shanghai free-trade zone and smaller cities continue to grow at a fast pace. So far Linklaters, Herbert Smith Freehills and Simmons & Simmons have all expressed an interest in tying up with a local Chinese outfit as a means of tapping the market for local work, while in October Clyde & Co became the first international law firm to launch an office in Chongqing.

Charlton says there are no immediate plans for CC: "The major commercial centre in China continues to be Shanghai and the major government regulatory centre is still Beijing, and so we don't need a network bigger than the two offices in mainland China at the moment. But it depends how the country develops. We might end up with a Shenzhen office. But that is all very long term." 

So what changes are likely for CC in Asia now that Matthew Layton is in the global driving seat? "Currently the firm's strategy is to grow in Asia-Pacific as a priority," he says. "Matthew will reveal what he wants to do now that he has taken over as global managing partner. He worked closely with David Childs at the beginning of the year to ensure a smooth transition and my guess is that we are not going to see any change to our strategy in Asia-Pacific."

He concludes: "The aim over the next couple of years is to invest in different ways, focus on what we've got and keep on building in a sensible way across the practice." 

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Peter Charlton's CV

2008 – becomes Asia-Pacific regional managing partner

2005 – made global head of corporate

1999 – appointed as London managing partner

1986 – becomes a partner

1979 – joins Clifford Chance