Singapore’s government has long made clear its ambition to establish the island nation as a major hub for the global legal profession. And it’s hard to argue that they haven’t succeeded. Over the past two years, almost a dozen international law firms have opened offices in Singapore, joining the scores that were there already.
But one elite group of firms seems curiously out of reach.
Neither Davis Polk & Wardwell, Simpson Thacher & Bartlett, Sullivan & Cromwell, nor Cleary Gottlieb Steen & Hamilton has an office in Singapore. Known for their high-end capital markets and mergers and acquisitions practices, these New York–based "Wall Street" firms have so far been conspicuously missing from the Singapore growth story.
"We are continuously evaluating the possibility of a Singapore office," says Kirtee Kapoor, a Hong Kong partner with Davis Polk. "At the moment, there are no concrete plans for that."
Cleary Gottlieb did not respond to requests for comment by press time and Sullivan & Cromwell declined to comment.
Simpson Thacher actually had a Singapore office from 1997 until 2003, when it decided to consolidate its Southeast Asia practices in Hong Kong. Since then, partner Leiming Chen says, the firm has deepened its focus on other markets in the region. "We are extremely busy in North Asia and Tokyo, so the focus is there," he says. "We are not chasing Southeast Asian deals as aggressively as the other firms that are in Singapore."
Chen adds: "It’s not a reflection of how important Singapore is but more of our firm strategy to focus on high-end work primarily."
The work that has drawn some top New York firms like Skadden, Arps, Slate, Meagher & Flom; Shearman & Sterling; and Milbank, Tweed, Hadley & McCloy to Singapore is mainly finance work for major infrastructure projects in neighboring Indonesia. But for most Wall Street firms, high-end work more typically means capital markets, whether large equity or debt offerings or M&A transactions with capital markets components.
In this area, Singapore still notably lags behind Hong Kong, which, despite a sharp downturn over the past year and a half, still saw 257 equity capital markets deals worth almost $60 billion last year, according to Dealogic figures. By comparison, Singapore had 57 deals worth slightly more than $8 billion in 2012.
Such figures reflect the difference in scale between China, Hong Kong’s main source of listed company work these days, and Southeast Asia, for which Singapore acts as a financial center. To target the China market, the Wall Street firms have all expanded their Hong Kong offices in recent years, adding local law to their existing U.S. law capabilities. They also all have substantial offices in mainland China.
Though the need to build market share in a rising China has drawn aggressive expansion by Wall Street firms in Hong Kong, Kapoor notes that such firms are generally more conservative than their peers when it comes to planting their flags. While some large international firms, notably those of the British Magic Circle and a handful of similar U.K. and U.S. firms, aim to be in just about every major market globally, the top New York firms have historically been less interested in building a large network of offices. Most have lockstep compensation, which makes bringing aboard lateral partners a bigger commitment than it is for firms that have performance-based compensations systems.
"Wall Street firms that are not already in Singapore generally follow the ‘selective scale model’ and are less aggressive in expanding globally on a ‘check-the-box’ basis," says Kapoor. "Wherever the firm goes, quality, sustainability, and client service are paramount."
For now, Davis Polk’s Southeast Asia deals are mainly covered from the firm’s Tokyo and China offices. In January, Davis Polk Tokyo partner Theodore Paradise advised Sumitomo Mitsui Banking Corp. on a $2 billion issue of U.S. dollar-denominated bonds on the Singapore Exchange.
International lawyers on the ground say the Singaporean government has long hoped the elite Wall Street firms would open local offices, thereby further cementing the city-state’s status as a global financial center. The belief is that having firms of that caliber in Singapore will attract even more complex and higher-end legal work to the market. Their absence is also a reminder that Singapore continues to play second fiddle to perennial rival Hong Kong as Asia’s financial capital.
"Singapore would love to have them here," says the local managing partner of one U.S. firm.
In the meantime, there is no shortage of firms coming to Singapore. These including Squire Sanders, Mayer Brown JSM, and Morrison & Foerster. Freshfields Bruckhaus Deringer also returned to the market last year after closing a previous office five years ago. Since December 2011 all of Japan’s Big Four law firms— Nishimura & Asahi, Mori Hamada & Matsumoto, Nagashima Ohno & Tsunematsu, and Anderson Mori Tomotsune—have also opened Singapore offices.
But many lawyers in the market saw the Singaporean government’s desire to elevate higher-end practices in its second-round award of Qualifying Foreign Law Practice licenses. Such licenses permit international firms to practice Singapore law in certain areas. In the first round in 2008, the six QFLPs named— Latham & Watkins, White & Case, Allen & Overy, Clifford Chance, Norton Rose, and Herbert Smith—were all firms with large and established Singapore offices.
In the round announced in February, however, the four new firms granted QFLPs included two American firms— Sidley Austin and Gibson, Dunn & Crutcher—with relatively small Singapore offices. Applications from 19 other firms were denied. Linklaters and Jones Day were the other successful applicants.
"I thought the ministry could have been more encouraging by handing out more licenses," says a partner at an international firm that did not apply for QFLP status. "But there are elements in the choices that are reflective of all QFLPs given. These are all firms that are doing much higher-end transactions and have great top-tier reputations."
Stephen McWilliams, Singapore managing partner for Latham, says the Singapore government seems to have made its decision based on the firms’ global reputations rather than just their Singapore operations.
"Some of these firms work on very high-rated transactions, rather than the smaller $30 million to $50 million deals which many of the other international firms here do," he says. "If you look at Sidley and Gibson, I think they are higher on the pecking order when it comes to being chosen for complex and high-end cross-border deals."
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