Law firm combinations continue to occur at a record-setting pace stateside, but last week a deal finalized overseas demonstrates how geopolitical tensions can change the business relationships that keep some firms together.
On Oct. 1, Kiev, Ukraine-based Asters finalized a deal it had announced in mid-August to acquire the Ukrainian operations of Egorov Puginsky Afanasiev & Partners (EPAP), one of Russia’s largest law firms. The combination, which required the late September approval of Ukraine’s Antimonopoly Committee, increased Asters’ head count to 140 lawyers (26 of them partners) and made Asters the largest firm in Ukraine, according to the firm.
EPAP, whose rise in Russia was covered in a December 2007 feature story by The American Lawyer, expanded in 2011 by acquiring 100-lawyer Magisters, a firm founded in Ukraine that expanded throughout the Commonwealth of Independent States, a group of 10 post-Soviet republics. With the synergies from that 2011 union having dissipated in recent years as a result of deteriorating relations between Russia and Ukraine, the bulk of those legacy Magisters lawyers have now moved to Asters.
“No one is acquiring anyone. This is a merger of equals based on mutually beneficial terms and conditions,” said Asters managing partner Oleksiy Didkovskiy, who also serves as head of the firm’s dispute resolution, tax and regulatory practice. “The best practitioners of both firms have merged and will develop practices together. The association agreement is based on mutual respect and parity.”
In an email, Didkovskiy acknowledged that “geopolitics played an important role” in the merger discussions between both firms, which he said were initiated by Asters. The legacy Magisters partners in Ukraine “responded positively to the proposal,” he said, and as soon as their final decision was made, “our colleagues announced the split off and have terminated their relationship with EPAP Moscow in a very friendly and collegial manner.”
But as Didkovskiy explained in an email, the deal between Asters and EPAP Ukraine was not driven “solely or even primarily by the news headlines.” The New York Times reported this week that ongoing friction between Ukraine and Russia, which annexed Crimea in 2014, could set up the biggest Christian schism since 1054.
Ukraine’s legal market has also taken a hit.
The American Lawyer reported a year ago this month on Squire Patton Boggs becoming the latest global firm to pull out of Ukraine as the country’s economy has struggled since its conflict with Russia escalated four years ago. Myron Rabij, an American of Ukrainian descent and the former head of the energy and real estate practices at Dentons in Kiev, left the global legal giant last month to join McCarter & English as a corporate partner in Newark, New Jersey.
While at Dentons in 2014, Rabij witnessed first-hand the attacks on pro-Western demonstrators who ultimately succeeded in ousting Ukraine’s pro-Russia leader Viktor Yanukovych, himself a one-time client of President Donald Trump’s former campaign manager Paul Manafort Jr. Rabij said he left Dentons—the firm still has an office in Kiev, as do other global firms like Baker McKenzie, CMS and DLA Piper—in order to do more work related to the U.S. side of transactions involving Ukraine.
“My practice is primarily corporate, so I wanted to focus more on the cross-border nature of it and outsource the Ukrainian regulatory work,” said Rabij, who has no plans to set up a Kiev office for McCarter & English. “I can refer [the local legal work] to my Ukrainian colleagues at Dentons or elsewhere. Location these days is less and less of an issue.”
When asked about the Asters-EPAP Ukraine deal, Rabij said the latter’s split with EPAP Moscow was to be expected since there is now “minimal cross-border work” between Russia and Ukraine given the current tenuous state of relations between both former Soviet states, both of which are now skirmishing in the Sea of Azov.
“I think this deal will be good for Asters and the Ukraine-domiciled partners at EPAP,” said Rabij, who as part of his practice keeps tabs on the Ukrainian legal market.
For its part, EPAP said in a statement that it will keep open a small satellite office in Kiev focused on transactional matters and investment projects, but the bulk of its operations in Ukraine will now be part of Asters. That firm is now run by Didkovskiy, its managing partner, senior partner Armen Khachaturyan and former EPAP Ukraine managing partner Serhii Sviriba, all of whom are based in Kiev.
“Our new colleagues are among the best practitioners in Ukraine and have been recognized as such for many years,” Didkovskiy said. “They complement our existing team and enhance our market position. Additionally, the Ukrainian legal market is consolidating as a whole.”
Didkovskiy noted that Ukraine is in the process of overhauling its judiciary, which has had a significant impact on the legal profession in the country. Corruption remains a significant problem in Ukraine, according to Transparency International, although Didkovskiy said his country is making strides in reforms for its public prosecutor’s office and the government’s own investigative powers. Ukraine is also enacting new protocols to professionalize legal advocacy in the country.
The high-end legal services sector in Ukraine is experiencing many of the same pressures facing lawyers and law firms in other countries, Didkovskiy said, albeit in a somewhat more difficult political and economic environment.
“Legal practitioners keep coping with their own problems—tightening competition, the never-ending necessity to refocus on new practices [and the] deflation of legal fees, just to name a few,” Didkovskiy said. “Traditional practices, such as M&A and real estate, gave way to areas like dispute resolution, corporate and financial restructuring and debt recovery. Some industries, such as [information technology], infrastructure and energy—especially in the renewable part—look readier for warming up in 2018 and many law firms [are poised] to expand in these directions.”
Didkovskiy added that global legal practice trends—such as the “packaging of legal services together with other business-related support to create one-stop shop products”—are also increasingly evident in Ukraine, where the legal market is maturing and becoming more capable of reaching sophisticated solutions.
“Legal support is particularly necessary in times of change, as frequent and often inconsistent changes to Ukrainian law and related regulatory practices make business more difficult and legal advice more valuable,” Didkovskiy said. “This is likely to still be the case in the coming year.”
Perhaps most importantly for Asters, at a time when some Am Law 100 firms are contracting their presence in the former Soviet space, Asters is focused on expanding beyond its regional borders. The firm now has a small representative office in Washington, D.C., led by corporate partner Andrew Mac, a former leader of Magisters in Kiev and one of the lawyers joining Asters from EPAP.
Didkovskiy said that Asters’ office in Washington, D.C., works with its “best friend” firms in the U.S. and helps coordinate a growing amount of work in North America for its multinational and domestic clients. Asters also plans to open new offices in an effort to cooperate more effectively with other foreign legal advisers, as well as jointly assist clients in other jurisdictions on cross-border matters, Didkovskiy said.