Last week, former Paul Hastings partner Nan Li, a star lawyer who focused on initial public offerings in Hong Kong, started a new job at China's Tian Yuan Law Firm. He was the third Hong Kong IPO partner to leave Paul Hastings since September.

Bonnie Yung left in April to join Big Four accounting giant EY's growing affiliated Hong Kong law firm, LC Lawyers; and Steven Winegar, Paul Hastings' former Hong Kong office chair, joined China's Ping An Insurance as international general counsel last autumn.

The departures mean Paul Hastings, one of the more successful U.S. firms doing IPO work in Hong Kong, is now left with only two partners that most regularly advise on Hong Kong listings – Greater China chair Raymond Li and Hong Kong office vice-chair Zhaoyu Ren.

While Nan Li, Yung and Winegar left for their own reasons, the departures occurred at a time when Paul Hastings wanted to pull back from Hong Kong IPOs and focus on more lucrative work, such as mergers and acquisitions, according to former Paul Hastings lawyers.

"They deliberately want to keep a relatively smaller IPO team so that they can work on deals with better quality," said one former Paul Hastings lawyer, who did not wish to be identified. "They are trying to manage the deals with the team they have on hand."

Another lawyer who previously worked at the firm in Hong Kong and also asked not to be identified, agreed. "It's not a secret that IPO work is competitive in pricing, whereas M&A work, especially outbound, can charge premium rates without fee caps," the lawyer said.

The IPO team that remains is still led by some of the best. Raymond Li and Ren are both known experts in the field, and the former is considered a rainmaker for China-based deals. Also, the firm isn't hurting: last year, Paul Hastings, which was 25th on the Am Law 100 in gross revenue, ranked 18th in profits per equity partner, reporting a PEP of $3.25 million, up 12% from 2017, and nearly a 25% increase from just two years ago.

Hong Kong office chair Neil Torpey said in an emailed statement that Paul Hastings' Hong Kong IPO practice is "robust and growing", and listed eight partners working on related matters. In addition to Raymond Li and Ren, he named IPO specialists Samuel Ng and Jason Kuo, and also pointed to Hong Kong capital markets partner Vincent Wang, corporate partner Bonnie Kong and debt capital markets partners Vivian Lam and James Ma.

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But it is a well-documented fact that several U.S. firms are moving away from Hong Kong capital markets work, pressured by higher profitability targets. Firms including Cadwalader, Wickersham & Taft and Troutman Sanders shut down their mostly Hong Kong capital markets-based China practices and left Asia entirely. Others, such as Orrick, Herrington & Sutcliffe and Shearman & Sterling, sought to trim down their IPO presence.

And Hong Kong's IPO market, after a boom last year, is showing signs of cooling down. During the first four months of this year, Hong Kong saw 43 new listings, according to data compiled by Hong Kong-based research firm RyanBen Capital – down from 70 in the same period last year.

"The market conditions in Hong Kong are compatible with Paul Hastings' new strategy," one of the former Paul Hastings lawyers said.

Still, the departures left a visible void in the firm's Hong Kong capital markets practice. For several years, the team regularly advised property developers and commercial banks in China on Hong Kong listings. Last year, Nan Li and Ren teamed up on Midea Real Estate Holding Ltd.'s $392 million Hong Kong IPO. Both lawyers also worked, alongside Raymond Li and Yung, on a 2017 $1 billion IPO by Zhongyuan Bank Co. Ltd. Also last year, Winegar and Nan Li advised on a $400 listing of Ascletis Pharma Inc., the first pre-revenue biotechnology company to list in Hong Kong under new listing rules.

Raymond Li, the rainmaker, is mostly responsible for bringing in the business, while the work generally has been executed by Nan Li and Yung on the Hong Kong law side and Winegar and Ren on the U.S. law side. Now, with Li, Yung and Winegar gone, Ren, who is qualified in both U.S. and Hong Kong law, is more or less the only one left from this group to execute the deals.

The firm needs someone to focus on the Hong Kong law side of IPOs, former lawyers said.

Before leaving the firm, the five core IPO partners had been practising together at Paul Hastings for more than seven years. With the exception of Raymond Li and Ren, the firm's remaining Hong Kong IPO partners are relatively new to the firm. Vincent Wang, who is also dual qualified, joined the firm in 2015 from Clifford Chance and became a partner earlier this year. Ng, a Hong Kong law specialist, and Kuo, a U.S. lawyer, both joined the firm last year, from Morrison & Foerster and Troutman Sanders, respectively.

Despite the departures, Paul Hastings maintains a sizeable office in Hong Kong with about 40 lawyers, including 14 partners, focusing on corporate, real estate and capital markets. The IPO team will likely be kept busy, former lawyers said.

Indeed, Torpey said the firm is "currently working on a dozen offerings, including three that just kicked off".

"Deals will flow Raymond's way," said one of the former Paul Hastings lawyers. "I think he will hold the fort well."

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