Atlanta-based Troutman Sanders will close its three offices in Asia by the end of May.
The U.S. firm announced internally on Monday that it is winding down offices in Hong Kong, Beijing and Shanghai by May 31 this year, ending 21-year-old Asian operations. It confirmed the move in a statement sent to The American Lawyer and The Asian Lawyer on Tuesday.
“As part of a strategic review and after careful consideration, we have concluded that there is not sufficient overlap between our China practice and our areas of greatest focus,” the firm said. “As a result, we have decided to cease our operations in China and close our Hong Kong, Shanghai and Beijing offices effective May 31, 2018.
In an interview from China, Troutman’s managing partner, Steve Lewis, said the firm’s areas of strength and focus are middle market clients, with particular expertise in energy, banking and finance, life sciences, and insurance. These are the areas that are key to the firm’s performance, he said.
“Our China practice has very good lawyers, but their focus is predominately Hong Kong securities and M&A work,” Lewis said. “We believe that there are other firms that do that better than we do.”
Troutman’s decision to cease operating in China was not “financially driven,” Lewis said, but based on strategy.
“The China practice doesn’t really move the needle for us on the firm’s financial performance either way,” he said, adding that Troutman in 2017 exceeded its financial goals for the third year in a row. “In our ongoing review of how we’re doing under our strategic plan, our conclusion is that the [Asia practice] overlap is not strong enough.”
Troutman crafted the strategic plan about six years ago, after Lewis became managing partner. The firm is starting year three of an updated iteration, he said.
The 655-lawyer firm is the latest among U.S. firms to leave Asia entirely. In 2016, New York-based Cadwalader, Wickersham & Taft closed offices in Hong Kong and Beijing, and laid off 25 lawyers. That followed the 2015 exit of Fried, Frank, Harris, Shriver & Jacobson and legacy Chadbourne & Parke.
Several other firms have reduced the size of their Asian teams if not leaving completely. Winston & Strawn closed two of its four Asian offices (Beijing and Taipei) in 2016, while Orrick, Herrington & Sutcliffe switched to a much leaner team in Hong Kong.
Troutman has about 43 lawyers, including eight partners, across the three Asian offices. The office closings will affect 90 people, including staff.
“Our expectation is that all of our people will find positions with other firms based in China,” Lewis said. “Our China practice has great lawyers. This is not a reflection on their performance, but an acknowledgment that the connection between what we’re doing in the U.S. and the great work they’re doing [in Asia] isn’t as strong as we would like.
The Hong Kong office, the largest among the three, was opened first in 1997 to serve a major client, Southern Co., that had acquired a Chinese power company. Troutman head of international arbitration Eric Szweda is managing partner in Hong Kong, where the firm focuses on international arbitration and capital markets work.
In 2007, the firm launched into mainland China by adding a Shanghai office, focusing on foreign direct investments to China from Atlanta-based businesses. The firm hired partner Edward Epstein from legacy Salans in Shanghai.
The Beijing office was opened in 2013 when Troutman recruited former Orrick Hong Kong partner Allen Shyu, a specialist of U.S. securities listings.
Lewis did not rule out future plans for international expansion, noting that Troutman does a lot of work outside of the United States for both foreign and U.S. clients. “Just like in the U.S., we want to make sure we have a strong business case to help us execute our plan and help our clients,” he said.
But other than China, Troutman currently has no offices outside of the United States. It has 13 locations within the U.S., and Lewis said the firm is interested in breaking into the Texas market and expanding its offices on the West Coast and in New York.
“China has wonderful opportunities and we have had a very good experience being over there,” Lewis said. “But ultimately you have to focus on your strengths—and not everyone’s strength is everywhere.”