U.K. firm Ashurst and Australia's Blake Dawson have announced a deal to combine their Asia operations and prepare for a full merger in 2014.
The plan, which was approved by votes at both partnerships Friday, also calls for Blake Dawson to adopt the Ashurst brand in Australia as well as in the combined Asia offices. The integration of the Asian offices and the re-branding of Blake Dawson are scheduled to take effect March 2012, with a vote on a full merger envisioned roughly two years after that.
If the merger took place today, it would give the combined firm more than 1,700 lawyers and revenue of around $850 million.
Ashurst Asia head Geoffrey Green, a former firmwide senior partner, will chair the merged Asia practice, which will number around 150 lawyers to start. The 900-lawyer British firm currently has around 75 lawyers in Asia with roughly 30 lawyers apiece in Hong Kong and Singapore, plus a smaller office in Tokyo. Blake Dawson will also contribute around 75 lawyers to the combined practice, drawing from offices in Shanghai, Singapore, Tokyo, New Guinea and Indonesia. There Australia-based Blake Dawson partners whose practices are mainly focused on Asia will also be part of the Ashurst Asia group.
Leaders at both firms say they saw the deal as a way to ramp up their presence in Asia relatively quickly.
Green says Ashurst sees the deal as a chance to make up ground with Magic Circle firms that have many more lawyers on the ground in Asia. "They have a significant resource base that we don't," he says. "It would be difficult for us to build that organically. We needed to do something that increased the pace of our growth."
Blake Dawson managing partner John Carrington says the tie-up brings similar benefits to his firm. "It provides us with a level of critical mass in the region that would have been hard to achieve otherwise."
The deal between Ashurst and Blake Dawson is the latest in a string of deals between British and Australian firms. Norton Rose kicked off the trend in 2009 with the announcement of a combination with Deacons Australia. Earlier this year, Clifford Chance acquired two small firms in Sydney and Perth, and DLA Piper fully merged with Australian alliance partner DLA Phillips Fox.
But Blake Dawson is the largest and most prominent Australian firm to date to engage in an international tie-up. One of Australia's Big Six firms along with Mallesons Stephen Jaques, Allens Arthur Robinson, Minter Ellison, Clayton Utz and Freehills, Blake Dawson has 828 lawyers. The imminent disappearance of its name from the Aussie legal scene is bound to prompt further soul-searching about international strategy from the remaining five unaligned firms.
For most of the British firms, expanding into Australia has been chiefly about getting in on the booming investment flows between Asia and Australia. Its rich energy and natural resource assets have made Australia one of the top destinations for outbound investment from both China and Japan.
Energy and natural resources are marquee practices at both Ashurst and Blake Dawson. Carrington notes the two firms' practices are actually quite complementary. "We have a very strong hard-rock mining practice," he says. "They have a slightly stronger [liquid natural gas], oil, and gas practice."
But Blake Dawson chairman Mary Padbury says the Australian firm will also benefit from Ashurst's larger capital markets and finance practices. Both firms represent Australia and New Zealand Banking Group Ltd., one of the more international-minded Australian banks.
Australian firms have generally regarded tie-ups with U.K. firms as a means of gaining access to a larger non-Australian client base. Carrington says Blake Dawson hopes to work more with Ashurst's U.K. and European clients but is committed to remaining full-service in Australia as well.
Other U.K. firms have made a virtue of not being full-service in Australia, citing the lower yields on purely domestic work like litigation. Allen & Overy recruited a large group of corporate partners, mainly from Clayton Utz, and entered Australia on its own at the beginning of 2010, stating its intention to focus on high-end, cross-border deals. Clifford Chance, which previously discussed a merger with Mallesons, gave similar reasons in eschewing a large-scale deal in favor of the smaller combinations it ultimately completed.
Green says Ashurst, with its smaller Asian footprint, would have found a similar approach "pointless." "To have people available and in the same time zone will be a real benefit for us," he says.
He also notes the continued growth of the Australian economy in the face of downturns everywhere else may change some British lawyers' views on the market. "Australia is doing extremely well and the expectation is that it will continue to do well as long as North Asia continues to grow," he says.
Though a vote on a full merger is still over two years away, Carrington says the two firms will immediately set up an integration committee to ready the firms for the transition. The firms are aiming to have a single partner profit pool, says Green, adding that Blake Dawson's profits per partner are currently around 10 percent lower than those of Ashurst. Getting the two in closer alignment will be a major goal of the next two years.
No one expects this to be the last deal involving firms in Australia. Mallesons and King & Wood have confirmed talking about an alliance that could likewise see their Asia practices merge. A bevy of other U.K. and U.S. firms are also rumored to be eyeing Australia.
Darryl McDonough, chief executive partner of Clayton Utz, says most Australian firms have already been thinking hard on their options but senses things could become more frenzied still.
"There might be a degree of panic creeping in," he says. "The people who'll do best are probably the ones who keep their heads and think things through in a businesslike manner."