What better Valentine’s Day gift is there than a long-awaited marriage approval? That’s exactly what Eversheds Sutherland and Singapore’s Harry Elias Partnership got on Feb. 14, when the Singapore Ministry of Law granted the two firms permission to merge.
“A huge amount of time and effort had been invested in the arrangements and all believe that we have established a robust, one-of-a-kind platform that will reap rewards for all stakeholders,” said Stephen Kitts, Eversheds’ Asia managing partner who led the merger negotiations.
The long-awaited deal creates a combined firm—Eversheds Harry Elias—with more than 90 lawyers in Singapore and Brunei. Eversheds, which will own 33 percent of the combined firm’s equity, will have full access to all aspects of Singapore law practices.
Approval of the merger comes nearly two years after the two firms first made contact to discuss an alliance. Back in March 2015, both firms were looking for a partner. By that time, Eversheds had been in Singapore for six years, and growth had been slow. With half a dozen lawyers, the Singapore office was significantly smaller than the firm’s office in Hong Kong, which opened after the Singapore office but had four times as many fee-earners.
Part of the problem was that Eversheds in Singapore could not practice local law. In Singapore, foreign law firms are not permitted to practice local law unless they have a joint venture or an alliance with a local firm, or are one of nine firms with a Qualifying Foreign Law Practice license. This meant Eversheds could not provide full-service legal advice to clients in Singapore, which greatly limited the scope of its business.
Meanwhile, Harry Elias, which had been in existence for 27 years, was also looking for a partner. The firm was following the Singaporean government’s call to globalize domestic law firms and the local legal market to compete with others such as Hong Kong. It had its own agenda as well. “We are a partnership with young partners,” said Philip Fong, who has been Harry Elias’ managing partner since 2010. “And we are determined to see [our firm] become a major player in the Singapore and regional markets.”
The firm Harry Elias, which now has close to 80 lawyers in Singapore and Brunei, was founded in 1988 by prominent Singapore lawyer Harry Elias. The firm has worked on landmark Singaporean projects such as the iconic Marina Bay Sands and the Singapore Flyer—the city’s observation wheel. But to break out of the local Singapore market, partners at Harry Elias realized they needed an international platform.
The two firms’ similar mindset helped turn the initial conversations into more serious discussions. The firms also found alignment in clients, with few conflicts of interest. The question then became which format their cooperation would take.
Eversheds’ Kitts said they looked at all the options, including the Joint Law Venture and the Formal Law Alliance—two of the more popular formats used by international firms in Singapore. Around that time in early 2015, local firm Stamford Law Corp. and Philadelphia-based Morgan, Lewis & Bockius announced they were merging—a deal that would produce the first ever financially integrated merger between a Singaporean firm and a foreign firm.
Kitts said that partners from both Eversheds and Harry Elias soon realized that they preferred a fully integrated merger, or a “transformation” as he put it. “When Philip and I sat down and started talking, the benefits of a merger from a client perspective quickly became apparent. It was a win-win for both Eversheds and Harry Elias,” he said.
“Once we made up our mind,” he added, “it was really just how to put our businesses together and not think about the ‘us versus them’ mindset.”
Having agreed on the benefits of the merger, Kitts said the focus quickly shifted to the details of how to combine the businesses. In the summer of 2015, the discussions continued. Partners from both firms held several meetings to get to know each other better, and they started to talk about the structure of a merger. In October, the two firms made a joint presentation about the merger in Hong Kong before Eversheds’ board members. The London partners were impressed. “At that moment, everyone in the room was convinced of the merits of a merger,” said Kitts, who was given the mandate to agree to a deal after that meeting.
Fong also got the go-ahead from his partners in October. The Singapore government was very clear about the policy position, he said: local law firms had to internationalize and become more competitive in the global market. “The international firms in Singapore are winning more of the larger mandates while the local firms are being relegated to a secondary role. We understood this, of course, and heard what the government was saying—the message was very clear,” he said.
“Eversheds came across as a very strong international firm,” Fong added. “Naturally there were some concerns. … But it was clear there were more pros than cons.”
A merger in Singapore between a local firm and a foreign firm, according to a law passed in 2012, has to take a very specific form: The foreign firm can own no more than one-third of the office. It was less complicated when Morgan Lewis merged with Stamford, since the U.S. firm didn’t have a Singapore office at the time. But the requirement meant Eversheds would have to transfer its entire Singapore office to Harry Elias.
The two firms spent the next seven months trying to work out the nitty-gritty of the deal, with Hong Kong-based Kitts making frequent trips to Singapore. The difficulties boiled down to finding common ground between the two firms’ different business models. While Eversheds’ Singapore office is integrated into the global firm, Harry Elias has a more Singapore-centric business.
Fong likens the negotiation to complex human relationships. “It’s not man meets woman and get married; it’s man with children and woman with children, and get married. It’s a bit more complex,” he said.
While most Harry Elias partners were on board, not all of them were convinced that the merger made sense. Some practices such as corporate and arbitration will see more immediate benefit from the merger while others practicing Singaporean real estate and criminal law may not easily see the direct impact, Fong said.
“All my partners appreciated the importance of the merger from a firm wide perspective, regardless of their individual practice. The merger was for the greater good of the firm,” he added.
Both firms signed a one-page memorandum of understanding in May 2016 and worked out all details in the final agreement in July.
But there was one more hurdle: Just as Eversheds and Harry Elias were finalizing their merger negotiations, Singapore overhauled its legal profession regulating regime. The Legal Services Regulatory Authority (LSRA) was launched in November 2015 to oversee all lawyers and law firms—domestic and foreign. That meant an entirely different group of people would be reviewing Eversheds’ application. When Morgan Lewis sought permission to merge with Stamford Law, its application went to the Attorney-General’s Chambers, which at the time regulated all foreign lawyers.
Eversheds and Harry Elias submitted their merger application to the newly launched LSRA in the first week of August 2016. Theirs was the first to go before the new agency, which was being extra cautious about potentially opening the floodgates to foreign mergers. But both Fong and Kitts said regulators were supportive throughout the process. “They wanted this deal to happen,” both partners said.
As they were waiting for a ruling, periodically answering additional questions posed by the LSRA, Eversheds took a leap of faith and signed a lease for office space in the building where Harry Elias is based. “An extra floor became available at the SGX Centre 2 toward the end of November 2016. It was the right size and our lease was coming to an end,” Kitts said. “Even if the merger did not proceed we would still have needed to find new space. Moving to SGX was a no-risk decision for us.”
Everything else was being prepared under the assumption that an approval would be granted. The two firms formed a steering committee composed of people from human resources, information technology, finance and business development to work on the integration plan. Kitts said they wanted to ensure that once the merger was approved, they would be ready.
The likelihood of the Singapore merger also helped Eversheds in its discussions with Atlanta-based Sutherland Asbill & Brennan regarding the Eversheds-Sutherland trans-Atlantic merger, as the U.S. firm didn’t itself have a Singapore base.
“The Southeast Asian region attracts a lot of interest from U.S. companies and there is latent demand from the Sutherland clients to use our expanded capabilities in Singapore and the region,” Kitts said. “We are already seeing a steady flow of opportunities that bodes well for the future.”