U.K. firm Herbert Smith has confirmed that it is in merger talks with Australian firm Freehills
“Herbert Smith is holding exploratory discussions with Australian firm Freehills about a possible linkup,” says spokesman Tom Rose. “Talks are still in the early stages.”
According to a source at London-based Herbert Smith, Freehills partners will be attending meetings early next week in both the Hong Kong and London offices of Herbert Smith to discuss a potential combination. If the firms decide to proceed, a vote would be planned for late summer, the source says.
Freehills declined to comment.
A tie-up between the two firms would create an international giant with nearly 2,000 lawyers. Freehills had gross revenues in 2010 of $471 million and profits per partner of $970,000,  according to The American Lawyers’ Global 100 report.  Herbert Smith’s gross revenues in 2010 were $718.5 million and its profits per partner were $1.36 million.
A deal with Herbert Smith would give Freehills greater access to Asian markets. Herbert Smith has offices in Beijing, Shanghai, Hong Kong, Bangkok, Tokyo, and Singapore. Freehills, which has been more hesitant about Asian expansion than many of its Australian rivals like Mallesons Stephen Jaques, only has a Singapore office outside of Australia. Freehills has so far mainly pursued Asian business through alliances with China’s TransAsia Lawyers, Indonesia’s Soemadipradja & Taher,  and Vietnam’s Frasers Law Company.
In an October 2009 feature in The American Lawyer, Freehills chief executive partner Gavin Bell explained that Australian firms faced greater risks than their U.S. and the U.K. counterparts in expanding in Asia due to their smaller natural client base.
“If you look at the reason for most of the big international firms being in China to start with, a lot of it was [about] being there to service their international clients going into China,” Bell said. “Now that makes sense if you’re a large American firm, because you’ve got an American market going into China. An Australian firm going into China only has an Australian market and only a slice of that market.”
Access to a more international client base has been one of the motivating factors for Australian firms to pursue mergers with overseas firms. Mallesons announced last December that it had signed a merger deal with leading Chinese law firm King & Wood. In September, Blake Dawson announced it had inked a combination deal with U.K. firm Ashurst.
For Herbert Smith, a tie-up with Freehills promises access to the Australian firm’s powerhouse energy and resources practice. Australia’s mining sector has been one of the biggest overseas investment destinations for Chinese state-owned enterprises. British Magic Circle firms Clifford Chance and Allen & Overy have both opened offices in Australia explicitly targeting investment flows between China and Australia.
According to Rose, Herbert Smith is also attracted to Freehills’ litigation practice. The Australian firm recently represented Apple, Inc. in intellectual property litigation, winning the U.S. technology company an injunction barring Samsung Electronics Co. from selling its Galaxy Tab, a competitor to Apple’s iPad, in Australia.
Email: jseah@alm.com