Law firms are heading to the Far East in search of capturing an expected growth in buyout business.
New York-based Weil Gotshal & Manges, one of the world’s largest law firms, is set to open an office in Hong Kong in October as part of a larger strategy of pursuing M&A and private equity work throughout Asia. Meanwhile, Boston-based rival Ropes & Gray is setting up a four-attorney office in Tokyo to better advise on the Asian deals of clients Bain Capital, Silver Lake Partners and others, as well as to handle intellectual property work.
They join a flood of firms opening offices in Asia. Over a two-year period ending in May 2006, 25 British and American law firms opened offices in China, according to consultancy Hildebrandt International. The most favored location was Shanghai.
Weil Gotshal already operates an office in Shanghai, with roughly 22 attorneys, and has an affiliate in Beijing, with five attorneys. The new Hong Kong operation, initially staffed by five attorneys, including three partners, will take the firm’s practice beyond China into Taiwan, Korea, Indonesia and, if the plan works out, Japan.
Although the expansion plan has been in the works for months, Weil Gotshal received approval from authorities to open the Hong Kong office only last month.
Weil Gotshal’s expansion strategy is premised on the belief that Asia is shaping up to be the next fertile ground for leveraged buyouts. Already the Shanghai office has taken part in some big deals, including the sale of IBM’s personal computing business to Chinese company Lenovo in 2005 and the $740 million sale of a Chinese brewery to strategic giant InBev NV in 2006.
Akiko Mikumo, a deal specialist who will be the managing partner of Weil Gotshal’s Asia offices, said that the firm plans to start out serving its U.S. clients in Asia, then later capture business from Asia-based clients as the practice matures. Plenty of business awaits. The economic boom under way in Asia has proven an irresistible lure for private equity firms. Just about every U.S.-based mega-firm has in the last two years opened new offices in Hong Kong, China and India, joining others that already planted their flags there more than a decade ago.
But LBOs have yet to become common in mainland China, where tight government control has dampened efforts to initiate control-stake deals, or sometimes any deal at all. In June, for example, the Chinese government rejected a bid by the The Carlyle Group to buy an 8% stake, worth $43 million, in Chongqing Commercial Bank Co. Carlyle Group also is awaiting government approval to buy 45% of a Chinese construction company after initially bidding for 85% of the company.
Japan, however, has proven friendly to buyouts, and Ropes & Gray has already advised Bain Capital on two deals, including the multi-billion-dollar purchase last year of MEI Conlux, which builds machines that read bills inserted into vending machines. —Jeremy Harrel