Increasingly complex capital markets in the Asia-Pacific region are driving demand for M&A and private equity lawyers with commercial acumen. Maurice Hoo, partner, corporate practice and global co-head of M&A and private equity at Orrick, provides an overview of the opportunities available.
How has the landscape for M&As and private equity changed in the last few years? What are the main factors driving the sector in Hong Kong and/or globally?
Deals have become much more multi-jurisdictional and complex. China, in addition to being only a destination for foreign investment, has become a major investor and acquirer in the world in the last few years. As capital now flows in multiple directions, investments can be inbound into China, or outbound to other markets, generating legal needs all over the world.
Meanwhile, many such acquisitions are made by listed companies looking to acquire technology to gain a competitive edge, transform their business or boost their valuation – or indeed all three. As a global technology law firm with a strong capital markets practice, this trend has created good opportunities for Orrick.
It is very important for M&A and private equity lawyers to be able to integrate the laws of different jurisdictions in a single deal, fully understand the strategic and financial basis for a deal, and execute such deals in compliance with the listing rules, securities laws and takeover codes.
How are law firms responding to these changes in terms of recruitment?
The increase in deal volume and complexity has brought about an uptick of demand for M&A and private equity lawyers. However, the pool of truly bilingual – that is, fluent in Putonghua and English – M&A and private equity lawyers in Hong Kong, with the relevant cultural sensitivities, who have experience in multi-jurisdictional deals and strike a good balance between “legal compliance” and “commercial objectives”, is small.
The legal profession has a long tradition of training the next generation, but some firms are changing the way that training is managed. At Orrick, we have moved away from the traditional lock-step “up or out” training model and adopted a “talent model” for our associates.
While the stature of a candidate’s law school and academic results give us an initial sense of the individual, we also encourage diversity of various factors, such as having a multicultural team, in part because our clients are diverse organisations as well.
Are lawyers in this area any more or less likely to make partner or managing partner?
There is a healthy demand for M&A and private equity lawyers and so I would not think it is less likely to make partner in a law firm. Progression opportunities, of course, depend on one’s ability to build and run a successful and profitable practice.
That said, since many private equity or other investments funds, as well as corporates, have a need for M&A lawyers, many associates leave firms for in-house positions (or even to non-legal positions) in these organisations before reaching the stage when they would be considered for partnership.
How does the role differ for lawyers working in law firms versus those who work in-house?
In private practice, you have multiple clients and you are frequently hired for your expertise or for a particular project. You may, however, be less familiar with the inner workings of each individual client.
In-house, you have a much deeper engagement, with the client, but because you may have to handle a much more diverse set of issues, you may need to rely on external counsel who have more expertise in particular areas of law and may have a stronger sense of “market practice” because they come across more precedents as they serve multiple clients.
As an example, most recently, we represented JD.com in its acquisition from Walmart the latter’s online retail business Yihaodian, which involved Walmart becoming a five percent shareholder of the Nasdaq-listed JD.com. Over the last 10 years, however, in-house departments have become increasingly larger and more specialised, and in some ways have become almost competitors of law firms in certain practice areas. Private practice lawyers need to maintain their competitive advantages so that there are good reasons why certain projects should be handled by them rather than in-house departments.
What skills are needed as a lawyer specialising in M&A and private equity? What kind of particular skills differentiate a great person in your field from an average one?
A keen sense of the commercial motivations and bottom lines of the parties, and therefore a healthy understanding of the financial terms, is very important. There is seldom a pure legal issue – a vast majority of the legal issues in a deal boil down to a commercial issue of potential upside or downside, costs and risks.
If a lawyer focuses only on the language in a document and misses the commercial realities of the deal, the client will not find such advice very useful.
For trainees and junior lawyers, if they do not already know it, I encourage them to learn how to use spreadsheets to calculate and express their thoughts on commercial arrangements.
This article appeared in the Classified Post print edition as Mergers and shakers.
