Auckland, New Zealand. Photo: Shutterstock

New Zealand generally doesn't feature on the expansion plans of international law firms, but Dentons says it expects to pick up more work from Australia when it expands to the small South Pacific nation.

Dentons announced late last month it is planning to set up shop in New Zealand by merging with 113-lawyer local firm Kensington Swan, and will become only the second global law firm there, after DLA Piper.

Should the New Zealand firm partners approve the merger, the new entity will become Dentons Kensington Swan and have offices in the commercial centre Auckland and the national capital Wellington.

Doug Stipanicev, Dentons' Perth-based chairman and chief executive officer of the Australia region, said the firm expects its New Zealand arm will refer local clients with legal requirements outside of their own country to the international firm. Likewise, Dentons globally will refer work to New Zealand.

Most of that work is likely to flow across the Tasman Sea, which separates Australia and New Zealand.

The two nations have had a free trade agreement since 1983, and Australia is New Zealand's largest export market after China.

"We just find that New Zealand and Australia have cross-investment synergies. Companies in Australia that we act for are looking to expand into New Zealand because they understand the economies and the people," Stipanicev said. "Equally with New Zealand, with its manufacturing and technical base, the logical first step for global expansion of their clients is across to Australia."

Forming alliances with a firm in another country is a more attractive option as corporations take more legal work in-house and automation carries out some of the processes traditionally undertaken by lawyers. "The pool of work that you can pick from gradually reduces in your internal market as it gets divested elsewhere," he said.

Firms also benefit from Dentons' global management, shared services and global buying power for items such as professional indemnity insurance and software licences.

The Law Society of New Zealand said it does not allow local law firms to share profits with non-New Zealand firms and non-New Zealand lawyers, and Stipanicev said the rule has deterred foreign firms from setting up there. "Obviously the model of Dentons assists that process, where each country in the Dentons region continues to own and operate and manage its own business," he said.

The New Zealand plan was the first in a string of recent expansion announcements from Dentons, which has more than 10,000 lawyers globally. It also announced it would combine with a South Korean firm and with a firm in Honduras.

In October, it will combine with existing associate firm Fisher Jeffries in Adelaide, adding 13 new partners with expertise across financial services, corporate, dispute resolution, construction and engineering, employment, manufacturing and real estate.

Joel Barolsky, of Barolsky Advisors, who advises law firms in Australia and New Zealand on business strategy, said those international firms that have come, and do come, to New Zealand will do so as part of their efforts to support multinational clients everywhere they do business and provide a one-stop shop in every country.

They are not seeking the work on huge deals and huge transactions that other global firms usually look for. "It's not bet-the-company, but run-the-company kind of work," Barolsky said. "If you're pitching to be a legal supplier to a big multinational for the run-the-company work, the more flags you can put on a global map, the better."

Other firms could follow Dentons and DLA Piper, as a defensive strategy to try to get as many flags as Dentons has on the map, he said.

However, a rush to New Zealand is unlikely.

Barolsky said there isn't the same flow of corporate M&A and cross-border deal work in New Zealand as there is in Australia.

There has been no particular event to bring international firms to New Zealand in the same way that the opportunity to participate in the M&A and project work associated with the mining boom attracted many firms to Australia a decade or so ago.

"It's a relatively small market. It also hasn't been a massive growth market," he said.

Additionally, incumbent firms such as Russell McVeagh, Chapman Tripp and Bell Gully are doing high-quality work for corporate clients and have wide international networks.

"It's not like suddenly there's this global firm that's going to land on their shores and show the locals how to do it," Barolsky said.

With a population of a little under five million, New Zealand had a total gross domestic product of $205 billion in 2018, compared with $1.4 trillion for Australia and $20 trillion for the U.S., according to data from the World Bank.

Its main export industries are dairy – which is dominated by family-owned farms and Fonterra, a farmer-owned co-operative that sets farm gate milk prices and produces dairy goods – and tourism, neither of which generally give rise to large deals.

DLA Piper ended up in New Zealand in part because local firm Nicholson Gribbin joined Australian firm Phillips Fox and took on its name. When the Australian firm became part of DLA Piper in 2010, the New Zealand arm maintained the relationship and joined the global firm in 2015.

The merger was many years in the making, dating back to an alliance with Phillips Fox from 1987, said Martin Wiseman, managing partner, New Zealand.

"You can create that alliance on paper overnight, but what you can't do is create operational integration, the free flow of IT, capital, expertise, trust and confidence in all directions around the world. That can only be done with years," he said.

"We have many years under our belt ahead of where Dentons are. There's a whole lot of intangibles that go into creating a truly integrated, effective global law firm – whether it's integration of system and whether there's trust and confidence between partners all around the world," Wiseman said.

DLA Piper New Zealand derives about 30% of its work from being part of the global firm, while the rest comes from the partners' relationships with local corporates.

The firm's clients include the nation's largest supermarket group Foodstuffs North Island, Australian insurer IAG and Fonterra, which the firm has also "exported" as a client to DLA Piper in other countries.

Generally, if a global company has a branch in Australia it will also have one in New Zealand, such as Pfizer and GE, which are both clients of DLA Piper, Wiseman said. The firm also advises multinationals wanting to buy New Zealand startups or tech businesses, particularly agritech.

The work includes advising the corporate venture capital business of Yamaha Motor Co. on investments in two early-stage robotics companies and U.S. tech investor Finistere Ventures on biotech and robotics investments.

Wiseman said global firms have largely stayed away from New Zealand because it's both a competitive market and not part of the G20, which larger firms focus on. "If you're sitting in New York or London, you're probably not thinking: 'What's my New Zealand strategy?'"