Fangda Partners’ Jonathan Zhou ()
*Correction, 7/30/14: A previous version of this story stated Beijing partner Gordon Gao advised Apple Inc. on its dispute with Proview. A correction has been made to the effect that while Apple has been a client of Gao’s, he did not represent the company on the Proview case. We regret the error.
As Alibaba Group Holding Ltd. prepares to go public in the United States in September in the most-watched initial public offering of the year, the Chinese e-commerce giant is relying on Fangda Partners as Chinese counsel. This is not a surprising choice. A strong player in cross-border transactions, Fangda has already advised five out of 10 Chinese companies that listed in the U.S. this year.
The 250-lawyer Fangda is one of the few firms from China’s second city, Shanghai, that have emerged as national players, able to hold their own against Beijing competitors King & Wood Mallesons, Jun He Law Offices, Zhong Lun Law Firm and Haiwen & Partners. Fangda has developed a strong reputation in cross-border and disputes resolution practices; most recently, it was looking to beef up its antitrust practice with a high-profile hire, Freshfields Bruckhaus Deringer’s China antitrust head Michael Han.
“Nobody can tell from our size and revenue in Beijing that we are a Shanghai firm,” says Norman Zhong, a Shanghai corporate partner who also spends time in Beijing.
Among its notable deals, Fangda has advised on Alibaba $1.5 billion acquisition of Chinese mapping company AutoNavi Holdings Ltd. in February and on its $1.2 billion investment in Chinese online video company Youku Tudou Inc. in April. Last year, Fangda also served as Chinese counsel to Smithfield Foods Inc. on the company’s $4.7 billion sale to Chinese meat processor Shuanghui International Holdings. Last April, the firm teamed up with Allen & Overy to advise a group of international banks on a $3.5 billion syndicated loan to the state-owned China Petrochemical Corp. Fangda also acted for an independent directors’ committee on the 2012 $3.7 billion take-private deal of Chinese digital advertising company Focus Media Holding Ltd. by The Carlyle Group.
Founded in 1994 by six young lawyers, most of them graduates of Shanghai’s prestigious Fudan University, Fangda had an international bent from the start. “From the very beginning, we wanted to do cross-border work, mostly inbound foreign direct investment then. It was not the most lucrative practice at the time, but we were young and eager to learn new things,” says partner Michael Qi, one of the six. (Three of his cofounders—M&A partners Jonathan Zhou and Kenneth Lu and finance partner William Hu—remain with the firm. Of the other two, Charles Qin left in 1998 to start Shanghai’s Llinks Law Offices and Adam Li left in 2001 to join Jun He.)
The young firm started off by doing operational work, such as compliance, employment contracts and getting government permits, for smaller investors from Taiwan, Japan and Hong Kong. “Later, when big players like Goldman Sachs, Merrill Lynch and Credit Suisse entered, they naturally came to us because we knew the work,” says Qi.
Qi left the firm temporarily to earn an LLM from New York University School of Law in 1996. Returning to Fangda in 1999, he brought back new clients stemming from the dot-com boom. “We became among the first to do technology, media and telecommunication work, especially venture capital financing,” he says.
Fangda had since worked closely with private equity firms Sequoia Capital, TPG, KKR and Blackstone Group, and developed a top-notch private equity and venture capital practice that has landed them VC portfolio clients such as Focus Media, online retailer Vipshop and video-streaming company Youku Tudou. By sharing a similar private equity clientele, Fangda has also developed close working and referral relationship with firms such as Simpson Thacher & Bartlett, its cocounsel in Smithfield Foods’ sale to Shuanghui.
Fangda’s relationship with international private equity firms paved the way for its strong presence in Beijing, says Norman Zhong. Fangda was a latecomer to Beijing, opening there only in 2008. But once committed, the firm made a sustained push, sending cofounder and Alibaba relationship partner Jonathan Zhou to lead the new office. “Many firms just want to have a branch office there, but Fangda wants another head office in Beijing,” says Zhong. Today the firm has 22 partners in Shanghai and 21 in Beijing, with three more splitting time between the cities.
Zhou has also spearheaded the firm’s hiring efforts, a key element of the firm’s growth. In its recruiting, Fangda has targeted many Chinese-born senior associates or counsel at international firms—efforts that have paid off for the firm. “With our clientele and their skill set, the effect is catalytic,” says Qi.
For instance, to build the team for the Beijing office, in 2007 Fangda hired Gordon Gao, former of counsel of Paul, Hastings, Janofsky & Walker. Gao, a litigator specializing in intellectual property law, has since become one of the top practitioners in the country, litigating high profile IP disputes for companies such as Apple Inc. and NEC Corp. He is also representing basketball star Michael Jordan in an ongoing infringement case against a Chinese sportswear maker.*
Partner Richard Guo joined the same year from Debevoise & Plimpton, where he was an associate, and now leads a practice helping private equity firms set up renminbi-denominated funds. He has advised, among others, Morgan Stanley, Blackstone Group, Hony Capital and Carlyle Group on structuring their first renminbi-denominated fund.
Fangda also hires from domestic competitors, especially in Beijing. In late 2012, in a group move that is rare among Chinese firms, the firm hired corporate partners Glenn Su, Ma Chen and Bao Chen from rival Haiwen & Partners. In 2011 it recruited corporate partner Hu Jun from boutique FenXun Partners. A year later, FenXun cofounder Tan Peng also defected to Fangda. At the same time, Fangda has seen no partner-level defections since Li’s move to Jun He in 2001.
Many say they were drawn by Fangda’s culture. Hong Kong litigation partner Peter Yuen, who joined the firm in 2012 from Freshfields, says that Fangda’s resemblance to the Magic Circle firm attracted him. “It’s a small partnership, and everyone was held tightly together,” he says. “The sense of sharing and togetherness is exactly the kind I grew up with at Freshfields.”
Fangda’s model is distinct from the looser organization of many Chinese law firms, where partners lead separate teams sharing the same law firm brand. “They appeal almost like an international firm,” Philips Ding, a Shanghai partner at Broad & Bright, says of Fangda’s more centralized management. Instead of an eat-what-you-kill kind of compensation system used by Chinese firms such as Zhong Lun or Allbright Law Offices, Fangda adopts a model that combines lockstep and the merit-based system, with seniority playing a majority role. And while founders like Zhou and Qi are still involved in the firm’s day-to-day management, important matters are discussed and voted on by all partners after a seven-partner management committee makes recommendations or analysis.
Gary Gao, a Shanghai partner at Zhong Lun, says an equal partnership management is key to Fangda’s success going national. “They are probably the first Shanghai firm [to have] really completed the leadership transition from [founders] to a group of partners.”
The danger for Fangda is that it may not be providing enough incentive for its younger lawyers to develop their own client base, as Broad & Bright’s Ding points out. “Because senior partners at Fangda are so strong, junior partners and counsel have generally been taking work from the firm’s existing clients,” Ding says. “This might undermine their ability to bring in clients on their own. The challenge is, in 10 years’ time, if the firm can sustain what they have today.”
Leo Lou, who made partner in 2011, says that the firm has tried to address the problem by encouraging senior associates or counsel to get involved in client relationship activities before they become partners. “Partners will discuss with you about possible practice focus and help build track records in that area,” he says.
Meanwhile, some of Fangda’s domestic competitors are taking the quick path to growth via mergers. King & Wood merged with Australian firm Mallesons Stephen Jaques in 2012 and British firm SJ Berwin last year. Zhong Lun acquired corporate boutique Kaiwen Law Firm in March and has had discussions with Jun He about a potential merger.
But Fangda intends to stay small. “Combining two firms takes up a lot of time and energy just to adjust to each other,” says Qi. “We run with small steps, but we run fast.”