Posted on December 23, 2011 at 9:12 PM
Below, we have outlined some of the hiring trends that we have observed in 2011. In December alone, Cypress has been contacted by more than 8 firms to work on retained partner-level searches and open offices next year. We are expecting the number to increase even more as we enter 2012. Can these firms compete as latecomers? Many firms have done so successfully such as Ropes & Gray and Fried Frank but it's a difficult task and takes a good amount of due diligence and guidance from advisors with local experience. How does a new firm plan to compete with well-established US and UK firms that have been there for years? There are many factors to consider. This is a pivotal point in history as these emerging markets start to play a leading role in a globalized economy. We’re here to share our knowledge, relationships and guide anyone considering a move.
Good Attorneys Are Hard to Find: First Mover Advantage If you have US training and experience at a top international law firm, leverage it now because in a few years you may not be such a rare commodity any longer. Cypress is currently working with more partner-level candidates than ever. Many of our candidates are simply taking advantage of the new opportunities presented by the expansion. The majority of our current partner candidates, however, are seeking a better brand or a more diverse platform in order to expand their current book of business while looking for opportunities to take on a more managerial role. Other partners have simply outgrown their current firm’s existing China platform and need a broader range of services to offer their existing client base. We also represent junior partners without a portable book looking for positions elsewhere to build their business. Whatever the case may be, there was an unprecedented number of partner moves this year, and with more firms opening up shop, the supply is certainly not meeting the demand. Firms are no longer willing to compromise on English language or technical skills, which makes this pool even smaller. That said, partner candidates need to keep their expectations in check and more and more, firm do as well, especially newcomers. Firms should remain flexible and may have to think outside of the box in terms of hiring and ways to bring in the best talent. This can often be difficult for partners and management in Asia to impress upon their domestic colleagues making decisions but this is something that needs to be addressed if a firm wants to be successful in Asia. The protocols, customs, management style and business development techniques can vary significantly and the pool of talent is extremely different and ever-changing. In this increasingly competitive market and current economic climate, there are the sort of considerations that we stress to our partner and associate candidates.
For more junior partners, we typically advise our partner candidates that business plans are more important than ever with firms trying to inspire growth and plan their short- and long-term Asia strategies. A partner needs to have a well-thought-out strategy in terms of growth, business development and cross-selling opportunities. They need to stress their flexibility and both their willingness and ability to be adaptive in this rapidly changing market. The same is true on the flip side of the equation. We also advise our partner candidates to seriously consider a potential firm’s current financials, their firm-wide commitment to the region, and potential for growth. Another frequently overlooked question is who is making the decisions for the practice? More and more we see local offices handcuffed by decisions made by a head office in the US and UK. This could hinder your ability to build a book of business or make concessions for existing clients. For firms servicing small to mid cap clients, this can be a particular concern as competition from local PRC and Japanese Firms are intensifying as clients are very cost conscious. It can be cumbersome and, unfortunately, they may not be as familiar with the various Asian legal markets that are very different than in the west. We recommend broaching this issue as soon as possible. In addition, billable rates are more varied than ever. We highly suggest that a partner candidate talk openly and honestly with a prospective firm sooner rather than later, as we have seen this become a deal breaker at the last minute. Keep in mind that while some firms are now willing to pursue flexible billing arrangements and rates, others are not. If you feel hesitation from your clients, this is a very important factor to address. For those PRC Nationals thinking about moving back, please see PRC Nationals: When is it Time to go Home?
Breaking New Ground: South Korea and Mainland China
It looks like South Korea has finally decided to open its doors to UK and US law firms. There will most likely be some adjusting. At the moment, all of the firms entering Seoul already have a presence in the region and know how to open offices in an emerging market and compete with local firms on both in bound and outbound investment. Firms with notoriously strong Korean practices such as Simpson Thacher, Cleary, Skadden, Paul Hastings and Sheppard Mullin are eager to get their feet on the ground and set up shop. Paul Hastings has already set up shop, noting the increase in M&A and capital markets activity that has been seen in the past few years. The UK firms such as Allen & Overy are set to follow suit but may just let the US firms try it before taking the plunge themselves. Several of these firms have asked us for Korean-speaking partners to service both western and/or Korean clients.
We’ve had yet another year of unprecedented need for guidance in opening a new office onshore, learning local regulations, finding local talent, knowing how to compete with established firms and attracting top talent,. We have been retained by several firms and are very well positioned to assist any firm looking to open an office in Beijing or Shanghai as well as Hong Kong. Cypress will be handling an unprecedented number of exclusive retained searches for partners and office opening in 2011. Cypress will publish a book on setting up a shop in Asia, particularly in China, for US and UK international law firms. These moves are time intensive so if you're thinking about exploring your options, please let us know and will simply let you know of opportunities as they come in. Confidentiality is the upmost importance.
With all of these openings this year in Asia, there are many opportunities for partners. But firms are also becoming more selective and learning from previous mistakes, so the bar has been set much higher now and there’s more of a focus on quality. The year began with the opening of Clifford Chance and DLA in Australia, as both firms formally commenced operations on the first of May. New offices present new opportunities for partners. While firms do make internal transfers, they always need a partner in the office who has on the ground experience and preferably a sustainable book of business. Another notable trend is that firms are requesting partner level candidates who can manage and build an office—which is an entirely different skill set from just lawyering. A firm may not even have an office in a city, yet they have strongly indicated that if the right partner candidate came along, they would build an office around that new hire. Of course, such a hire must have a very sizeable book of business in the $2-4m range. Newer offices do tend to offer strong base compensation/equitable distributions and expat packages to compete for partner candidates and often times offer roles with more hands on experience and leadership than well established offices.
Inbound/Outbound Economic Investment
It is indisputable that China is poised for continued inbound and outbound investment. As Hong Kong and China’s IPO activity booms, Asian and foreign companies seeking to expand internationally will do so and the need for sophisticated legal support is greater than ever. For more experienced transactional corporate partners, the most important criteria nowadays is a sustainable book of business of at least $1.5m and on-the-ground experience with a particularly high demand for M&A, capital markets or funds experience at large international law firms or investment banks. With the hope of capitalizing on Hong Kong’s jump in IPO activity this year and to take advantage of China’s booming deal activity, firms such as Milbank, Shearman, Orrick, Caldwalader and DLA Piper are trying to accommodate this demand and, according to Mel Immergut, Milbank’s Chairman, “this expansion is in direct response to the surge in the capital markets and M&A activity”. In fact, Milbank just brought over Dieter Yeh from Mallesons Stephen Jacques to bolster their corporate finance, mergers, and capital markets in Mainland China. Anthony Root, leader of Milbank’s Asian corporate and China practice, states that their Hong Kong and Beijing offices will add 5 more lawyers by next year. Another good example of the aforementioned trend is the hiring of Jem Li by Winston & Strawn’s Beijing office. Jem Li was offered the opportunity to manage the firm’s Beijing office. He has the ideal skill set: a PRC national with a US JD, M&A, PE and FDI experience from a top-tier law firm and a strong client base including Morgan Stanley, Goldman Sachs, Lehman Brothers, AIG and Merrill Lynch as well as Chinese clients such as the Agriculture Bank of China, China National Aviation Fuel Group, Jinchuan Group Ltd. and Nuctech Company Ltd.
We have also seen several firms try to bolster their HK and US capital markets, M&A and PE practices onshore where expenses are less and PRC clients prefer to be serviced. Several firms have recently asked Cypress to help them locate capital markets (US and/or HK listings) partners for their Beijing and/or Shanghai offices such as Orrick Herrington who built a US and HK capital markets practice in Beijing that will work closely with their capital markets team already in Hong Kong.
Junior Partners: Staying Grounded
Partners with a book of at least $1.5m are still highly sought after, but we are also ushering in a new era. Currently at Cypress, we are working with several firms that are not requiring a portable book of business but are focusing on strong legal technical skills, experience in business development and management and, most importantly, on-the-ground experience. Therefore, prospective partners with bilingual language skills, Japanese/HK qualifications and/or PRC nationals at top US, UK, and local firms are in high demand as firms begin to focus on business development in their local market. Well-established offices looking to strengthen their core practice or diversify their current platform, as well as offices whose existence is mostly driven by overwhelming client needs in the US or Europe, are more receptive than last year to bring on partner candidates with even just the potential of building a book. Cypress has worked on more business plans in 2011 than any other year and placed more junior partners. Firms are looking for junior partners that have the drive, relationships and leadership to network and market the firm’s platform. Firms are open to opportunistic partner hires as well. More recently, we have also seen several firms even elevate attorneys from senior associate/counsel to partner to attract the most attractive candidates with on-the-ground experience. We have been asked by several top international firms to locate senior associates/counsels interested in partnership and are currently practicing at a top Wall Street firm such as Skadden and Davis Polk where partnership can be difficult. They are willing to elevate an outstanding senior associate/counsel to partner immediately upon hiring, something seldom done in the past. As suspected, this has become an increasingly popular trend as more and more firms are competing for a small pool of experienced bilingual corporate attorneys with top international law firm experience.
While transactional corporate and finance practices mature and strengthen throughout Asia, ancillary practices are also surfacing throughout the region. In 2011, we witnessed firms diversify their platforms as additional practice areas surface like litigation, international arbitration, sciences/TMT/biotech and energy/projects, private equity, fund formation and restructuring. US and UK law firms want to compete for new business and take advantage of cross selling opportunities and meet the growing demands of their existing and prospective clients. To that end, firms are diversifying their services to clients by making lateral hires and internal transfers. As we saw this past June, US-based law firm, Paul Hastings, is planning an expansion to South Korea, citing the increase in M&A and capital markets activity that we have seen in the past few years. This diversification has also led to several new hires and certainly brings about more opportunities for partners with or without region-specific experience. Just recently we have seen Kirkland & Ellis hire a group of partners for their Hong Kong office from Skadden, Latham and Allen & Overy in order to create a high-profile corporate team in Hong Kong, where it has had a small office focusing on private equity since 2006. This is where we also see a lot of movement: partners with or without on-the-ground experience who make a lateral move to take on more responsibility and enjoy the challenge of building a new practice. While firms prefer to hire such partners with region-specific experience as they can simply make internal transfers to bring on outside partners, there have been a few partner hires coming from the US and UK.
Recently there has been a trend towards localization in the Hong Kong and Singapore legal markets. In the Hong Kong legal market, the US firms have realized that to be a true competitor, they will have to advise on both local and foreign law issues. US and UK law firms must have at least a 1:1 ratio of Hong Kong-admitted attorneys, the minimum ratio required to seek admission to practice Hong Kong law instead of solely foreign law. This requirement prompted two remarkable trends to surface in 2010 as well as 2011. First, the unprecedented demand for native HK qualified attorneys with large law firm experience in capital markets, finance, and/or international arbitration experience. Second, a record number of US and UK qualified attorneys took the Hong Kong Law Society’s qualification exam to become admitted as a foreign qualified attorney in Hong Kong. While UK firms have offered Hong Kong law capabilities for decades, US firms are striving to build such capabilities through new hires, often from their UK competitors. In May of this year, Simpson Thacher hired Celia Lam, former head of Linklaters' Beijing office, and Christopher Wong, head of Freshfields’ Beijing office, as they expect to open their Hong Kong department in September/October of this fall. Sullivan & Cromwell hired Kay Ian Ng, former Managing Partner of Freshfields’ Hong Kong firm, to run their newly formed Hong Kong practice. Kay Ian Ng led the transaction advising China Everbright Bank on their Hong Kong IPO, potentially raising the bank an additional $6 billion on top of the $2.8 billion they got from their Shanghai Exchange IPO earlier this year while working for Freshfields. Like many US firms in Hong Kong, Simpson Thacher and Sullivan & Cromwell hope the new additions will help launch the firms’ local practice, which both focus on giving the firms’ clients a broader service in Hong Kong, especially in capital markets and mergers & acquisitions matters. (To read more about the raids of Magic Circle Firms, see here.
If you have any questions, we are more than happy to discuss the current market and opportunities throughout the region.
Please feel free to contact us at Dawn@cypressrecruiting.com.
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