K&L Gates will head into Australia in a big way when it officially merges with Aussie firm Middletons on Jan. 1, but the market is not—and cannot be—for everyone, some analysts have said.
The merger will give K&L Gates an additional 300 lawyers across new offices in Melbourne, Sydney, Perth and Brisbane and a 400-lawyer presence across 11 offices in the Asia-Pacific region. K&L Gates leader Peter J. Kalis said Australia was an attractive market, in its broadest terms, because of its ties and familiarity to other Asian markets while at the same time being an English-speaking territory, as well as the $550 billion in U.S. investment into Australia since 2005 and the Australian legal work being done in the wealthy country by Middletons lawyers.
The Asian market, particularly China, has been very difficult for U.K. and U.S. firms to penetrate, consultant Peter Zeughauser said. Australia has been used by firms in England and, to some extent, the United States as a bridge to Asia.
"A lot of people see this as a way to triangulate the issue of the Chinese market ... [U.S. firms] had been going to Singapore, Korea and China and even Vietnam, but the cultural differences are difficult to bridge," Zeughauser said. "Australians are more familiar with that, and they have the breadth and depth in the region and Western law expertise. So it's a friendly neighbor kind of thing."
Not only have a number of London's Magic Circle firms already entered the market, but so has Chinese firm King & Wood, making official this year its combination with Australian-based Mallesons Stephen Jaques to form King & Wood Mallesons. The new firm is geared toward representing legal needs across the Asia-Pacific region.
DLA Piper and K&L Gates are the first two U.S. firms to join forces with a large Australian firm. DLA Piper officially combined with DLA Phillips Fox in 2011.
"There are a handful of opportunities in Australia," Zeughauser said. "That's why it made sense for DLA and K&L Gates to get on it."
Zeughauser said there are only about five to seven opportunities in terms of larger-scale merger candidates in Australia, and two of them have already been taken by K&L Gates and DLA Piper. There are U.S. firms that are still interested in entering the Australian market. Zeughauser said there probably will be a few more mergers and then that window will close—with the next step becoming alliances between Australian, Chinese and U.S. firms.
Kalis also said the market in Australia was shrinking when it came to merger opportunities.
"Let's just say the opportunities are finite and diminishing," Kalis said.
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