ISSUE 8.2
In-house Will 2010 be the toughest year yet?
Law firm websites Is your firm getting it right?
Blake Dawson’s Japan gamble Will it pay off?
M&A
Is the tide about to turn? Allen & Overy:
the day that rocked Australia Grant Fuzi, Allen & Overy
DEALS ROUNDUP
US, UK REPORTS
industry analySis
Appointments
Capital markets, M&A data
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Simple - Login, plug in your headphones, watch the presentation slides and listen to the presenter, all in real time Engaging - Ask questions via a chat box and hear the answers within minutes. You can even network with other delegates Convenient - Gain CPD points without leaving your office. Access a seminar from your office, home or on the road Analysis of unfair dismissal claims under the Fair Work Act Analyse recent unfair dismissal claims under the new Fair Work legislation. Identify what factors Fair Work Australia would consider in an unfair dismissal in order to review and adapt your processes and procedures to minimise risk in
a disciplinary situation. Speaker: Kathryn Dent, partner, Gadens Lawyers Thursday 4 March, 2010 12:30pm - 2:00pm AEDT $110 incl gst – 1.5 CPD points
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ISSUE 8.2
EDITORial >>
In-house Will 2010 be the toughest year yet?
Law firm websites Is your firm getting it right?
Blake Dawson’s Japan gamble Will it pay off?
Will 2010 be the year?
M&A
Is the tide about to turn? Allen & Overy:
the day that rocked Australia Grant Fuzi, Allen & Overy
DEALS ROUNDUP
US, UK REPORTS
INDUSTRY ANALYSIS
APPOINTMENTS
CAPITAL MARKETS, M&A DATA
www.legalbusinessonline.com
U
nion and employer. Conservative and progressive. Law firm and client. What do these three pairings have in common? They each represent a well balanced struggle, played out over years, with the ascendancy alternately favouring one side and then the other. This cycle dictates that a conservative government will eventually be displaced by a progressive one: an overly aggressive union movement will incite an aggressive employer response; and if ALB is reading the signs correctly, the balance of power which law firms have enjoyed for so long is about to shift. Of course, talk about client discontentment with firms and particularly billing practices is not new; general counsel have pleaded their case for improved value for decades. But as we enter the fragile post-GFC era, change is in the air. Australian government legal teams in particular, stung by an Attorney-General report critical of their spending habits, have a point to prove. The implications of Telstra’s innovative fixed-fee deal with Gilbert + Tobin are still reverberating through the industry. GCs report that alternative billing is at the top of their agenda for 2010 and that the in-house profession is invigorated by an unprecedented sense of enthusiasm for reform. And in the US, the Association of Corporate Counsel, perhaps the world’s leading voice for in-house counsel, has been causing intense discomfort to firms with its Value Challenge – a web-based aggregation of in-house counsel feedback and insight that has the potential to remove much of the opaqueness from the legal services marketplace. The stage is set. In an industry where interdependence between firms and clients is a way of life, perhaps change will be mutually negotiated and painless. Lucrative incentives exist for firms that embrace a velvet revolution. The more prescient firms will be mindful that no shift in power is permanent. Perhaps they will find it more expedient to accommodate change rather than resist it. Recovery or no recovery, 2010 will witness the unfolding of this critical stage in the dialogue. Fortune, turn thy wheel.
IN THE FIRST PERSON “To just set up in Australia to tap into the Australian market doesn’t really make a business case... The business case revolves around resourcing Asia with Australians” Don Boyd, Norton Rose (pg 15)
“If [external advisers] understand culture and risk tolerance levels, they can be more effective, particularly on deals which have a quick turnaround time” Annette Spencer, UBS Australia (pg 49)
“It’s unlikely that we’d get much [major] work as a result of the website – but on the other hand, it is unlikely that anyone who is considering using us or working for us would do so without looking at the website” Ian Robertson, Holding Redlich (pg 57)
GCs report that alternative billing is at the top of their agenda for 2010 and that the in-house profession is invigorated by an unprecedented sense of enthusiasm for reform
2
Australasian Legal Business ISSUE 8.2
3
contents >>
contents
ALB issue 8.2
32
52
COVER STORY 42 M&A Top M&A lawyers talk about the big clients and the big sectors for 2010
ANALYSIS
PROFILES
10 Allen & Overy arrives, Clayton Utz bleeds What does A&O’s dramatic arrival mean in the long term for the Australian market, and in the short term for a depleted Clayton Utz?
28 ALB-LexisNexis Managing Partner series: John Weber, Minter Ellison A closer look at the enigmatic firm and its workings
11 Blake Dawson in Japan Blake Dawson is gearing up in Japan – but is Japan ready for Blake Dawson?
48
12 Private equity Lawyers are optimistic that private equity workflows will rebound – but access to credit remains the critical hurdle
FEATURES 32 In-house issues Leading in-house lawyers state their priorities for the New Year and it’s no surprise that cost management is topping the list 52 Dictation and transcription A wrap-up of the latest technology trends 56 Law firm websites How should websites help bring in work for firm?
4
ALB-Kensington Swan In-house Perspective: Annette Spencer, UBS What are the challenges of advising one of the world’s top investment banks?
REGULARS 6 DEALS 16 NEWS • A&O targets 50 lawyers in first year • Former Deacons lawyers fuel Norton Rose’s Asia expansion • Clayton Utz pulls in more than A$30m from Commonwealth in FY09 • Carter Newell lifts recruitment freeze • Kensington Swan chief looks to opportunities ahead of SEM • Kiwi legal market to have ‘mini boom’ in 2010, says Minters partner
28 • Landmark case changes the game for OH&S lawyers • iiNet decision to lead to more legal action • Recent REIT activity boosts beleaguered property practices
COLUMNS 15 In-house Q&A 17 US Report 19 UK Report 21 Legal traveller 62 Capital Markets Deals data 63 M&A Deals data
COMMENTARY/PROFILES 23 Employment law Sparke helmore 25 New Zealand Buddle Findlay
Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australasian Legal Business can accept no responsibility for loss.
australasian legal business ISSUE 8.2
NEWS | deals >>
deals in brief
| M&A |
►► Macarthur Coal – Gloucester Coal acquisition A$1.2bn Firm: Minter Ellison Lead lawyers: John Steven , Bart Oude-Vrielink, Bruce Cowley Client: Gloucester Coal Firm: Corrs Chambers Westgarth Lead lawyers: Teresa Handicott, John Kelly, Andrew MacKenzie, Bruce Adkins, Jeremy Horwood, Franka Cheung Client: Macarthur Coal Firm: Clayton Utz Lead lawyers: Karen Evans-Cullen, John Elliot Client: Noble Group • Deal would create the biggest independent coal producer in Australia • Macarthur Coal has been a Corrs client since 2002/03, when it engaged the firm to advise on the financing for the development of the Moorvale coal mine
| Project Finance | ►► Peninsula Link PPP A$759m
| Banking & Finance | ►► Prime Infrastructure recapitalisation A$1.8bn Firm: Mallesons Stephen Jaques Lead lawyers: David Eliakim, Barry McWilliams Client: Brookfield Asset Management Firm: Russell McVeagh Client: Brookfield Asset Management Firm: Bell Gully Lead lawyers: Clive Taylor, Glenn Joblin Client: Prime Infrastructure Firm: Freehills Lead lawyer: Philippa Stone
6
Client: Prime Infrastructure Firm: Buddle Findlay Lead lawyer: Shane Johnstone Client: New Zealand Guardian Trust • Prime Infrastructure was formerly known as Babcock & Brown Infrastructure until its parent company collapsed
• Freehills also worked on BBI’s A$1.8bn recapitalisation • Mallesons also led the successful action for Brookfield Multiplex on Wembley Stadium class action
►► Eldorado – Sino Gold acquisition A$2.4bn Firm: Freehills Lead lawyer: Tony Damian Client: Eldorado Gold Firm: Fasken Martineau DuMoulin (Canada) Client: Eldorado Gold Firm: Allens Arthur Robinson Client: Sino Gold • Largest Australian scrip deal seen in 2009 • Legal issues crossed jurisdictions, including Canada, China, Hong Kong and US
| Energy & Resources | ►► Wandoan Coal JV Firm: Chang, Pistilli & Simmons Lead lawyers: Mark Pistilli, Jason Mendens, Joni Henry, Liz Humphry, Client: Sumitomo Corporation
Brendan Quinn Freehills
Firm: Clayton Utz Lead lawyers:Marko Misko, Naomi Kelly, Dan Fitts Client: Victorian government David Eliakim Mallesons
| M&A |
A$6bn
Firm: Freehills Lead lawyer: Brendan Quinn Client: Lenders Firm: Mallesons Stephen Jaques Lead lawyers: Jeff Clark, Peter Doyle Client: Southern Way Consortium
• Mallesons has acted for the sponsors on a number of PPP deals, including Metro Trains Melbourne on its tender to operate the Melbourne Metro train system; ABN AMRO and Thiess as sponsors of the Royal North Shore Hospital PPP; and the Pinnacle Education SA Consortium on its bid for the SA Schools project
• Freehills has also acted on the Regional Rail Link and the A$750m Hazelwood Power Plant refinancing • Clayton Utz has advised the Victorian Government on infrastructure projects for 15 years
Firm: Mallesons Stephen Jaques Lead lawyer: Nicholas Pappas Client: Xstrata • CP&S first worked with Sumitomo Corporation eight years ago when it acquired its interest in the project tenements
Mark Pistilli Chang, Pistilli & Simmons
• Mallesons has worked on a number of acquisitions for Xstrata, including the A$1bn acquisition of Resource Pacific and the A$3.1bn acquisition of Jubilee
Australasian Legal Business ISSUE 8.2
NEWS | deals >>
| Property |
►► Your month at a glance Firm
Jurisdiction
Deal name
A$m Practice
Allens Arthur Robinson
Australia, China
Yangzhou Coal–Felix Resources acquisition
3,300 Energy & resources, M&A
Australia
Lane Cove Tunnel restructuring
Baker & McKenzie
Australia, China
Yangzhou Coal–Felix Resources acquisition
Australia, France
Ramsay Health Care–Groupe Proclif investment
142 M&A
Australia
Energy Developments divestment
140 M&A
Australia
Easternwell–Australian Drilling Solutions merger
N/A M&A
Australia
Starhill Global REIT–Perth retail complex acquisition
N/A Property
Blake Dawson
Australia
Aevum–IOR Group merger
• Mirvac has been a client of Minter Ellison for seven years
Bell Gully
Australia/ New Zealand
Prime Infrastructure recapitalisation
1,800 Banking & finance
• Minter Ellison advised Mirvac on its A$500m equity raising in November 2008 and its A$1.1bn equity raising in June last year
Buddle Findlay
Australia/ New Zealand
Prime Infrastructure recapitalisation
1,800 Banking & finance
Chang, Pistilli & Simmons
Australia
Wandoan Coal JV
6,000 Energy & resources
Clayton Utz
Australia
Macarthur Coal–Gloucester Coal acquisition
1,200 Energy & resources, M&A
Australia
Peninsula Link PPP
759 Infrastructure, Project finance
Australia
Mirvac REIT acquisition
365 Property
Clifford Chance
Australia, France
Ramsay Health Care–Groupe Proclif investment
142 M&A
Corrs Chambers Westgarth
Australia
Macarthur Coal–Gloucester Coal acquisition
1,200 Energy & resources, M&A
Australia, China
Yangzhou Coal–Felix Resources acquisition
3,300 Energy & resources, M&A
De Pardieu Brocas Maffei
Australia, France
Ramsay Health Care–Groupe Proclif investment
Freehills
Australia
Peninsula Link PPP
Australia/ New Zealand
Prime Infrastructure recapitalisation
Gadens
Australia
Starhill Global REIT–Perth retail complex acquisition
N/A Property
Gilbert + Tobin
Australia
Lane Cove Tunnel restructuring
N/A Insolvency & restructuring
Hall & Wilcox
Australia
Harbert–Emeis Holdings investment
N/A M&A
Mayne Wetherell
New Zealand
Phaunos Timber Fund–Matariki investment
167 Agriculture, M&A
Mallesons Stephen Jaques
Australia
Wandoan Coal JV
Australia
Peninsula Link PPP
Australia/ New Zealand
Prime Infrastructure recapitalisation
McCullough Robertson
Australia
Easternwell–Australian Drilling Solutions merger
N/A M&A
Middletons
Australia
Harbert–Emeis Holdings Investment
N/A M&A
Minter Ellison
Australia
Easternwell–Australian Drilling Solutions merger
N/A M&A
►► Mirvac REIT acquisition A$365m
Firm: Minter Ellison Lead lawyers: Stuart Johnson, Bart Oude-Vrielink, John Steven Client: Mirvac Group Firm: Clayton Utz Lead lawyers: Matt Anderson, Karen Evans-Cullen Client: Mirvac REIT Management
| M&A, Agriculture | ►► Phaunos Timber Fund – Matariki investment NZ$167m Firm: Simpson Grierson Lead lawyers: Michael Pollard, Peter Stubbs Client: Matariki Forests Firm: Mayne Wetherell Lead lawyer: Michael Harrod Client: Phaunos Timber Fund • Phaunos Timber Fund is listed on the London Stock Exchange and managed by FourWinds Capital Management based in Boston • Matariki has been a Simpson Grierson client since Michael Pollard early 2008 Simpson Grierson when the firm tendered for and won all their legal work • In the third quarter of 2008, Simpson Grierson won a tender to sell Matariki’s entire NZ$1bn estate • Sales process for the whole estate was commenced in late 2008 but was not concluded as price expectations were not met. The current transaction followed that process
3,300 Energy & resources, M&A
70 M&A
142 M&A 759 Infrastructure, project finance 1,800 Banking & finance
6,000 Energy & resources 759 Infrastructure, project finance 1,800 Banking & finance
Australia
Mirvac REIT acquisition
Russell McVeagh
Australia/ New Zealand
Prime Infrastructure recapitalisation
Simpson Grierson
New Zealand
Phaunos Timber Fund– Matariki investment
365 Property 1,800 Banking & finance 167 Agriculture, M&A
Does your firm’s deal information appear in this table? Please contact
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7
NEWS | deals >>
| Agriculture | ►► Yangzhou Coal–Felix Resources acquisition A$3.3bn
| M&A, Private Equity | ►► Harbert–Emeis Holdings investment N/A
Firm: Corrs Chambers Westgarth Lead lawyers: Andrew Lumsden, George Piggot, Claire Jelbart, Sophie Chen, James Shirbin, Shawn Wytenburg, Robert Bradshaw, Stan Lewis, Katrina Sleiman Client: Yangzhou Coal Mining Firm: Baker & McKenzie (Hong Kong) Client: Yangzhou Coal Mining Firm: Allens Arthur Robinson Client: Felix Resources • Corrs has been engaged to assist Yanzhou Coal in the integration stage of the transaction • Largest ever Chinese deal in the Australian coal sector; closed on 23 December
| M&A | ►► Aevum–IOR Group merger A$70m
Firm: Minter Ellison Lead lawyer: Mark Standen Client: Aevum Firm: Blake Dawson Lead lawyers: Stephen Menzies, Carl Della Bosca Client: IOR Group • Minter Ellison have been Aevum’s principal lawyers for more than 10 years • Minter Ellison also acted for Aevum in its A$90m acquisition of the Sakkara portfolio in 2006 • IOR Group is a new client of Blake Dawson
Firm: Middletons Lead lawyer: John Mann Client: Harbert Australian Private Equity Firm: Hall & Wilcox Lead lawyers: Ed Paton, Mark Payne Client: Emeis Holdings Firm: Arnold Bloch Leibler Lead lawyer: Joey Borensztajn Client: Aesop • Harbert gained a strategic stake in Emeis Holdings, which owns premium skin care brand Aesop • Aesop has been a client of ABL since September 2008 • Emeis Holdings is a new client of Hall & Wilcox
• Law firms will manage recapitalisation or sale of the asset
| M&A | | Insolvency & Restructuring | ►► Lane Cove Tunnel receivership A$1.1bn Firm: Gilbert + Tobin Lead lawyers: Duncan McGrath, Tim Castle Client: BNY Mellon Firm: Allens Arthur Robinson Client: MBIA Firm: Minter Ellison Client: KordaMentha • Gilbert + Tobin won Insolvency & Restructuring Deal of the Year 2009 at the ALB Australasian Law Awards for acting for BNY Mellon in its role as security trustee in excess of 80 Allco finance transactions
“A variety of opportunities exist for private equity funds that are looking to invest” John Mann, Middletons 8
• Lane Cove Tunnel was refused an extension to it’s A$1.1bn of debt
►► Ramsay Health Care– Groupe Proclif investment A$142m
Lead lawyers: Lloyd Kavanagh, Marie Kissick Client: Infratil • Infratil sold its 32% stake in Energy Developments into the takeover offer by Greenspark Power Holding • Baker & McKenzie’s role work also involved advising Infratil on its pre-bid acceptance agreement with Greenspark and prior negotiations with other interested parties
Firm: Baker & McKenzie Lead lawyers: Ben McLaughlin (Sydney), Laurent Barbara (Paris) Client: Ramsay Health Care Firm: De Pardieu Brocas Maffei Client: Predica (seller) Firm: Clifford Chance Client: Duke Street (existing shareholder) • Ramsay to acquire a 57% stake in French acute care provider • Baker & McKenzie has had Ramsay as a client for the past two years • First deal in the public domain that Baker & McKenzie has advised Ramsay on
| M&A | ►► Energy Developments divestment A$140m Firm: Baker & McKenzie
| M&A | ►► Easternwell–Australian Drilling Solutions merger N/A Firm: Baker & McKenzie Lead lawyers: Brendan Wykes, Bryan Paisley Client: Australian Drilling Solutions Firm: McCullough Robertson Client: Easternwell Group Firm: Minter Ellison Client: Banking syndicate • Banking syndicate made up of BOSI, Westpac, WestLB, BankWest, GE Capital and Natixis • Baker & McKenzie has advised ADS since its inception in May 2008 when it was established by Ironbridge, which was also a Bakers client • Bakers also advised ADS on its acquisition of Colby Corp and Peak Drilling in December 2008 Australasian Legal Business ISSUE 8.2
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NEWS | analysis >>
Analysis >>
Allen & Overy arrives, Clayton Utz bleeds ALB investigates Allen & Overy’s dramatic recent entry into the Australian market and the effect on the local scene so far
I
ntrigue, anxiety, and poorly disguised glee – these are just some of the industry reactions to this month’s shock announcement that Allen & Overy will be entering the Australian market. Courtesy of poaching a cohort of partners from Clayton Utz, in the short term Allen & Overy’s opening raises questions about what caused such a mass defection. In the long term, however, the move raises questions about the future shape of Australia’s top tier firms.
Sources close to the firm have suggested that the defections were a symptom of generational division within Clayton Utz, which are said to have deepened following the appointment of Darryl McDonough to
Clutz’s stolen generation
david fagan, Clayton Utz
Clayton Utz has issued a brief statement in which CEP David Fagan expressed disappointment at the defections and said that such movements did periodically occur as part of “the life-cycle of a firm.” Fagan said that he was confident Clayton Utz was in “excellent shape.” There is no question, however, that the defections represent a major blow to the Aussie firm. Poached partners include senior figures such as Michael Parshall, who was joint head of the M&A group, Geoff Simpson, who was partner-in-charge of the Perth office, and others held in equally high regard. Industry observers contacted by ALB agreed that Allen & Overy has recruited extremely judiciously, in effect stealing a sizeable part of the generation of Clayton Utz partners who represented the firm’s future. 10
suggest that disharmony is widespread in the Clayton Utz partnership after the recent changes. A source from the firm said in fact that Darryl McDonough would be widely supported within the organisation when his term commences in June.
“There’s no doubt that over a period of time, there’s likely to be more linkages into the Australian market ... but I think what [the Lovells-Hogan merger is] showing is that for the big US and UK firms, the trans-Atlantic merger is the key merger they want“ the CEP role, taking effect in 2010. ALB understands this move generated acrimony within certain sections of the firm’s partnership. One of Allen & Overy’s new Australian partners, banking specialist Grant Fuzi, is also understood to have been a candidate for the CEP role. While several Clutz partners known to be unhappy with the firm’s leadership were not included in the list of A&O’s initial recruits, sources close to the firm have speculated that these partners will defect in coming months. Plans to slim down Clayton Utz’s partnership have also been reported to have been a key cause of discontent. That having been said, rumours and innuendo are an inevitable part of any large organisation, and ALB does not
And despite industry conjecture, it is also unclear whether the departing partners left for personal reasons, or for reasons related to dissatisfaction with their old firm. Granted, given that Clayton Utz has over 200 partners, an exodus of 14 is relatively small. The key question is what the defections say about the health of the firm and whether they will be an isolated incident. Clayton Utz is one of the more diversified top-tier firms and it may be the case that Fagan’s confidence in the fortunes of the firm is well-founded. It is worth noting that commentators from rival top-tiers have expressed confidence in the ability of Clayton Utz to recover from the loss, although an initial period of confusion and lowered morale is likely. Australasian Legal Business ISSUE 8.2
NEWS | analysis >>
►►Partners for Allen & Overy’s new Australian offices
Bolt from the blue
Last month, while international mergers (both real and speculative) were attracting all the attention, Mark Pistilli from Chang Pistilli & Simmons was one of the few commentators who predicted that the real threat to the top tier would come not via an international merger, but via aggressive lateral recruitment by a new entrant. “If [international firms] came out here and recruited, for example, the best of the M&A team out of Mallesons, the resources team out of Allens and the insolvency team out of Blakes, that would be a real threat,” he told ALB in January. “The PEP for law firms such as the Magic Circle firms is a lot more than it is in Sydney, so they can afford to poach the top talent.” At the time, it seemed like an outlandish prediction, as all eyes were on the Lovells/Hogan & Hartson merger – the first major UK-US law firm union. Many commentators predicted that international firms would not turn their attention to Australia until they had put transAtlantic alliances in place. And one of these, ironically, was David Fagan. “There’s no doubt that over a period of time, there’s likely to be more linkages into the Australian market from international firms, but I think what this merger’s showing is that for the big US and UK firms, the transAtlantic merger is the key merger they
Sydney • Jason Denisenko, corporate/funds and financial products • Angela Flannery, banking • Grant Fuzi, banking • Sonia Goumenis, banking/structured capital markets • Jason Huinink, banking • Barry Irwin, corporate/energy & resources • Aaron Kenavan, corporate/M&A • Grant Koch, corporate/private equity • Michael Parshall, corporate/M&A • Karolina Popic, banking/structured capital markets
want,” Fagan told ALB in January. Minter Ellison’s John Weber was another holding the same view. “As important as the [Australian] market is to us, at the end of the day it’s only 2% of the world’s economy,” he said.
Implications
The arrival of Allen & Overy disproves the theory that an Australian presence is not a priority for international firms. But while the firm will be undertaking domestic work, it is not necessarily the Australian market itself which will be the ultimate prize – rather the opportunity to use an Australian base as part of an integrated Asia strategy. Norton Rose is already using exDeacons lawyers from Australia to augment its Asia operations, providing an important cost advantage over rivals who are drawing resources from the US or the UK. This strategy is similar to the one employed by US firm Dorsey & Whitney, which opened its
• Michael Reede, corporate/private equity • Chris Robertson, banking • Andrew Stals, corporate/tax • David Wilkie, corporate/funds and infrastructure Perth • Meredith Campion, corporate/energy & resources • Geoff Simpson, corporate/energy & resources • Peter Wilkes, corporate/energy & resources, banking
doors in Sydney last year with the aim of using its Australian operations as a springboard into Asia. So the first round in this battle has only just been fired – but already some are predicting the end of an era. “This is the end of the big firms. Other [international firms] will come in and just poach the guts out of them,” said Pistilli. “They can take the profitable parts, leave the less profitable sectors behind and you’ve also got lower overheads. [There’s] no need to rent ten floors of Governor Phillip Tower.” Allen & Overy’s coup may simply be a product of the peculiar circumstances that prevailed within the Clayton Utz partnership in 2009. Whether or not the other big UK and US firms, should they decide to enter Australia, will be able to similarly entice away such a large segment of a firm’s partnership without the benefit of pre-existing discord, remains to be seen. ALB Additional reporting by Joshua Scott, Asia editor
Analysis >>
2010: perfect storm for PE practices Law firms with PE clients can expect to be burdened with a heavy workload in the next 12 months, but determining exactly what practice groups will shoulder that responsibility requires a close examination of clients’ situations
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There is a consensus among industry sources that 2010 will see a great deal more activity in the M&A market after severely depressed valuations limited the number of sellers in 2009. Valuations have rebounded strongly since their www.legalbusinessonline.com
low in March last year and this, along with management change, accounting adjustment, and ongoing liquidity and performance challenges, will bring more sellers to the table. There are only two reasons that an owner of an asset decides to sell –
“In 2009 a lot of funds mainly focused on their portfolio and stabilising portfolio companies and getting them through the crisis” RICHARD LEWIS, CORRS CHAMBERS WESTGARTH 11
NEWS | analysis >>
►►Leading PE law firms Australia • Baker & McKenzie • Clayton Utz • Corrs Chambers Westgarth • Gilbert + Tobin • Freehills • Henry Davis York • Holding Redlich • Johnson Winter & Slattery • Mallesons Stephen Jaques • McCullough Robertson • Middletons • Minter Ellison • Norton Rose Australia • Thomson Playford Cutlers New Zealand • Buddle Findlay • Bell Gully • Chapman Tripp • Kensington Swan • Minter Ellison Rudd Watts • Russell McVeagh • Simpson Grierson Source: ALB Practice Area Guide client survey
either they have to, or they think they are getting a good price relative to what will be available in the future. This year, both of those factors will come into play. On the buy side this will create opportunities for the healthy private equity firms and on the sell side it will see all private equity firms looking keenly at opportunities to sell existing positions. Law firms that have private equity clients should see a major resurgence of activity on all these fronts. Corrs Chambers Westgarth partner Richard Lewis says that many PE funds spent last year securing their position and will look to add assets to their portfolio this year. “In 2009
“You’re back to logical, rational levels of debt – but not for everybody, because you’ve got a relatively small audience of banks who have had intimate insight into how investors have invested” Tim Sims, Pacific Equity
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►► What services do your clients need? PE fund situation
Legal services
Good credit, track record and tax situation
Advice on acquisitions and investments
Tax issues
Advice on sales, tax-related matters
Credit problems
Advice on sales, performance matters
a lot of funds mainly focused on their portfolio and stabilising portfolio companies and getting them through the crisis,” he says. “I think they’ve mainly done that now and in the last few months of 2009 a number of funds were beginning to focus more on new investment opportunities.” However, obtaining debt for those leveraged acquisitions may be a problem for some funds. While the banks have the means and the motivation to provide debt to leveraged acquisitions, the economic downturn has motivated them to examine their lending criteria and has led them to demand a resilient track record of borrowers before debt funding is available at competitive prices. “You’re back to logical, rational levels of debt but not for everybody because you’ve got a relatively small audience of banks who have had intimate insight into how the different investors have invested in turbulent and challenging times,” says Pacific Equity Partners founder Tim Sims. This means that the banks know close up how the Tim Sims Pacific Equity firms have invested and how they have fared under pressure. Those that have had significant problems will be less able to secure the debt necessary to make new acquisitions. In recent months a new issue has been brought to the fore by the ATO’s response to the TPG/Meyer transaction – PE funds facing tax issues will need their legal and tax advisors to help them navigate those issues before they are in a position to re-enter the acquisition market. The three main tax issues facing PE firms appear to be treaty shopping offshore, whether income is considered capital or revenue, and the status of overseas investors relative to permanent establishment or deal sourcing issues in Australia.
“They’ll be a spate of sales later in the year if the market holds up,” Sims says. “Either law firms will be able to work on exits as funds seek to realise cash and show their investors they’re getting good IRRs and good liquidity, or they will see selective opportunities on the buy side for those that have the funds and are not unduly distracted by debt, performance or tax related issues.” For those that have been less fortunate in terms of portfolio performance there will continue to be bank restructuring and financing questions to be resolved by law firms. The PE clients that will provide the least work for law firms are those that are at the end of their fund’s life. While things have been improving in recent months it is a difficult time to raise new funds and those that are near their expiration will be unable to benefit from the increased deal levels expected this year. Even fund managers that have a strong performance history and a solid investment thesis are finding it difficult to raise money because of the ‘denominator effect’. When listed equities plummeted last year, institutions suddenly found themselves overweight in the non-listed equities sector. While the stock market recovery has helped balance the portfolio somewhat, institutions are still shunning private equity funds until they have achieved the ratios they are looking for. In order to predict the amount and type of work private equity clients will provide over the next 12 months, it is essential for law firms to examine their clients’ positions and provide the resources to help. Those firms whose clients came through the downturn in good shape can be expected to be busy buying and selling – getting back to business as usual – while those whose clients have trouble accessing debt or will have to help them right the ship before normal business can resume. ALB Australasian Legal Business ISSUE 8.2
NEWS | analysis >>
Analysis >>
Blake Dawson’s Tokyo bonsai Blake Dawson is gearing up for a fresh assault on Japan, but is Japan ready for Blake Dawson?
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The respective fortunes of China and Japan may have reversed since the heady days of the 1980s, but that has not deterred Blake Dawson from launching its tenth office in Tokyo. Is Blakes showing the way for rival Australian firms? Blake Dawson’s north Asia head, Ian Williams, hopes that it will be a case of the early bird catching the worm. “We decided that, if we want to take the practice to the next level, we really should be both at the point of where the investment decisions are being made and also at the point of investment,” Williams says. “There’s a fairly detailed regulatory regime which is not difficult but a bit time consuming. Obviously this is the first time we’ve done it and there aren’t other Australian firms in Japan so there is an educational process on both sides.” Williams views the Tokyo office as a natural extension of the firm’s Japanese practice in Australia, Indonesia and Papua New Guinea. Five Blakes partners have lived for extended periods in Japan and Williams believes it is the client relationships and insights that result from dealing with Japanese companies on cross-border transactions that gave the firm the opportunity to open the office.“You can’t create things artificially,” Williams says. “There are very few partners at major Australian law firms who have actually worked in Japan for Japanese companies.” Williams is one of those partners and the venture is exciting for him personally. What took him by surprise, however, was how positively his clients reacted to the news. “On a personal level it’s very exciting and on a firm level the response has been very positive from clients,” he says. “We’re even a little bit surprised about how excited they were about it and the symbolism of committing to Japan www.legalbusinessonline.com
with so much attention on China these days.” But the news of Blakes’ arrival in Japan has bemused a lot of lawyers already on the ground. White & Case Tokyo partner Robert Grondine says that in his view, the potential for Australian law firms in Tokyo are pretty dim. Grondine cites the high entry costs and lack of demand for Australian law specialisation in the Japanese market as significant barriers for entry. On top of these, he says that Japanese firms have deep experience in Australia and, for the most part, have formed relationships directly with Australian law firms in
Australia such that they really don’t need to be in Japan to service these clients. “The market solely for Australian law advice is far too thin in Tokyo to merit a major investment there by the large Australian law firms, who already compete effectively for this ►► Blake Dawson offices by location Australia
International
Adelaide
Port Moresby
Brisbane
Singapore
Canberra
Shanghai
Melbourne
Tokyo
Perth
Jakarta (associated office)
Sydney
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NEWS | analysis >>
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Australasian Legal Business ISSUE 8.2
NEWS | analysis >>
“We really should be both at the point where the investment decisions are being made and also at the point of investment”
>>
In-house Q&A
Ian Williams, Blake Dawson business among themselves in the major Australian cities,” Grondine says. “Just because there has been a surge of investment transactions from Japan to Australia in the past 12-24 months, which already illustrates my point that all of that work has been accomplished and serviced by them without having offices in Tokyo, does not justify the very large investment to open offices and staff people to Tokyo for the ongoing future.” Tokyo-based Morrison Foerster partner Ken Siegel agrees, saying that the recent increase in investments and other outbound transactions going to Australia still constitute a relatively small portion of the cross-border M&A market. “There are few if any major capital markets or litigation matters situated in Tokyo that relate to Australia or are governed by Australian law,” Siegel says. “Given this, it is hard to see the addressable market as particularly attractive for Australian firms.” Norton Rose deputy chief executive Don Boyd says Tokyo is an attractive place to establish a presence but the cost involved makes it difficult to do from scratch. “It is prohibitively expensive and very difficult to develop, from a start-up basis an office in Tokyo,” he says. “As much as we would have liked to have done that, it was probably not likely to be achieved by us in the short term as Deacons alone.” Grondine believes the best opportunity for Australian firms in Japan would be to compete with the UK firms on cost. To do this, lawyers stationed there would need to have or acquire UK law qualifications. “If the hard mining materials market continues its super red hot status in the coming years, then [Australian firms] could consider Tokyo on that basis to use that expertise to advise Japanese firms on hard mining materials and energy investments in other countries as well,” Grondine says. “But even there they would still require UK law qualifications to access that broader global market.” So it seems that, despite Williams’ optimism, plenty of challenges await Blake Dawson as it sets up shop in Tokyo. Williams himself has acknowledged the difficulties the firm will face by refusing to publicly admit any goals or objectives for the new venture. “We’re not looking for a specific number of transactions,” he said. “It’s actually just about improving the quality of the relationships and it’s from the relationships that the opportunities will come.” ALB ►► Top 5 Japanese/Australian deals of 2009 Deal
Law firms
Asahi – Schweppes Australia acquisition
Freehills, Baker & McKenzie
Nipon Paper Industries – Paper Australia acquisition
Minter Ellison, Yanagida & Nomura
Fujitsu – Kaz Group acquisition
DLA Piper
Sekisui House – Payce JV
Minter Ellison
Kirin – Lion Nathan
Mallesons Stephen Jaques, Blake Dawson
www.legalbusinessonline.com
Robert Iervasi
General Counsel Schweppes Australia
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In your opinion, why have in-house lawyers become an increasingly indispensable part of an organisation? Over recent years, in-house lawyers have become an increasingly indispensable part of an organisation which I believe is driven by two important aspects. Firstly, in-house lawyers have increasingly demonstrated value by being involved in key strategic projects from start to finish, ensuring that they are not only involved in the set up or advice phase, but also follow through with implementation and execution. In my experience at Schweppes, this approach to the delivery of legal services results in tangible value for the business and enhances job satisfaction of in-house lawyers. The second aspect relates to the unique approach and thinking in-house lawyers bring to the commercial environment. In-house lawyers are increasing being looked upon to participate in each function of the business, with increasing recognition that our way of working and approach to problem solving can be applied in the commercial setting.
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In recent times, the role of the General Counsel has diversified into a multi faceted role, (where the General Counsel can wear the ‘hat’ of Lawyer, Legal Manager, Compliance Manager, and Company Secretary). In your opinion, do you believe this has increased your risk profile? It is true that the role of the General Counsel has become multi faceted, with the General Counsel wearing a number of hats and increasingly being asked to take a seat on the executive team. For the organisation, this is invaluable as the General Counsel is well-placed to identify risks and opportunities across the business which may not be ordinarily considered by the executive team. From an organisational perspective, risk profile is reduced. For the individual, the risk profile will increase as more responsibilities are taken on within the organisation. It is important to understand the capacity in which a General Counsel is acting, recognising that the individual is not only a legal advisor to the business but could also be subject to other obligations as a member of the executive function. By doing so, a General Counsel is well placed to manage his/her own risk profile. Being mindful of privilege and how to maintain privilege in a multifaceted role is also critical.
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In your opinion, what do you consider to be the main challenges you and your team will face in 2010? In my opinion, managing priorities in a tight cost environment will continue to be a challenge in 2010. The current business environment is such that operational costs are either held flat or reduced, while the volume of work increases. While this undoubtedly adds complexity to managing the legal function, with resource capacity commonly being used as a reason for not being able to manage workload, it does provide an opportunity to review efficiencies within the department. In 2010, our focus will be on identifying work priorities that add value to the business and turning our attention to what really matters. Education and training across the business can also be a means by which workload of the in-house team is reduced. External service providers could also play a role in meeting this challenge by suggesting novel arrangements and structures (including those for fees).
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NEWS >>
news in brief >> Personal injury specialist to list Personal injury specialist firm Maurice Blackburn has reportedly engaged Oaktower Partnership to advise it on an IPO on the ASX. The move would follow in the footsteps of rival firm Slater & Gordon, which went public three years ago. Maurice Blackburn is believed to be considering an A$100m offering which would amount to a big payday for its stakeholders. The firm’s largest shareholders are believed to be its chairman Bernard Murphy, the firm’s medical negligence specialist Kathryn Booth, and another principal, Joshua Bornstein. In FY08, Maurice Blackburn generated revenue of A$61m and paid out more than A$6m in dividends and salaries to its then-16 equity partners, according to ASIC – down from the A$10m paid out in FY07. Wesfarmer selects Allens partner as GC Wesfarmers has appointed Allens Arthur Robinson partner Paul Meadows as group general counsel. Meadows worked at Linklaters in London in the 1980s before becoming a partner at Allens in 1989. He was appointed co-head of the firm’s commercial litigation practice group in 2003 and selected as a senior advisor to UBS Investment Bank Australia in 2006. In his new role, Meadows will have responsibility for overseeing all of Wesfarmers’ legal matters and will serve as a member of the group’s executive committee and leadership group. As a result of his appointment, Meadows’ wife Patricia Cross has resigned from the board of Wesfarmers, where she had served as a non-executive director since 2003.
Industry >>
A&O targets 50 lawyers in first year A llen & Overy has set a target of 50 lawyers and 20 partners for its new Sydney and Perth offices after their first year of operations, rising to 25 partners and more than 60 lawyers after three to five years. Globally, A&O averages around 3.7 lawyers per partner but worldwide managing partner Wim Dejonghe said he does not expect the firm’s Australian offices to reach that ratio right away. “I think that’s going to be hard to achieve in one year’s time but I would hope in a year’s time we’ll be around 50,” he said.
Andrew Trahair, A&O’s co-head of global banking, said the Australian strategy is to concentrate on particular practice areas and focus on high-end and cross-border work. Trahair said A&O would continue to grow the Australian partnership in the coming years despite there being no plans to create a “large firm”. “From 17 partners, we would probably expect in a year or so to move to about 20 partners,” Trahair said. “Depending on the success of the business, we would then expect it to grow over three to five years to be in the range of 25 partners – possibly a little bit more.”
Industry >>
Former Deacons lawyers fuel Norton Rose’s
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US firms adopt StarLaw Several leading US law firms, including Cooley Godward Kronish and O’Melveny & Meyers, are early adopters of ADERANT’s new StarLaw application suite. The global provider of business and financial management software for law firms released its new comprehensive suite of document, records, and email management applications at LegalTech New York 2010. ADERANT acquired the StarLaw suite of enterprise information management (EIM) applications in August 2009 and has been working since then to bring to market the next generation of the StarLaw application suite. StarLaw includes applications for document management, records management, and email management.
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ne of the key drivers of the merger between Norton Rose and Deacons Australia was the commitment of the latter to resourcing Norton Rose’s Asian expansion over the mediumto-long-term. Norton Rose has already announced the relocation of Melbourne’s dispute resolution head Peter Cash to its Singapore office, and group deputy chief executive Don Boyd said up to 15 more partners and senior associates will leave Australia for Norton Rose’s Asian offices in the coming months. ►►Norton Rose Asia-Pacific offices • Bangkok • Beijing • Hong Kong • Jakarta
• Shanghai • Singapore • Tokyo • Ho Chi Minh City
“We’ve got quite significant growth plans for most places but particularly Hong Kong, Tokyo and our China offices in Beijing and Shanghai,” Boyd said. “Our plans are to grow and we have already moved some of our people into Asia.” The Asian expansion strategy was critical to the business case for the Norton Rose-Deacons merger as it provided the London firm with a Don Boyd, Norton Rose way to add high-quality, low-cost lawyers to its 170-strong team already working in the firm’s Asia offices. “To just set up in Australia to tap into the Australian market doesn’t really make a business case because this is a massively competitive environment. The business case Australasian Legal Business ISSUE 8.2
NEWS >>
►► Key points
• Allen & Overy enters Australian market with offices in Perth and Sydney • Starting with 17 partners, Allen & Overy aims to have 25 in five years • Firm expects between two to three lawyers per partner
Dejonghe said A&O did not hold discussions with Australian law firms to discuss the possibility of a merger. “A firm like ours always has soft merger proposals or we think about it but in this case we did not seriously consider any merger option,” he said. However, other major UK and US law firms may consider the option if they enter the Australian market. “I assume everyone will consider these new facts and reestablish their position,” Dejonghe said. ALB
Wim Dejonghe, Allen & Overy
Andrew Trahair, Allen & Overy
Asia expansion revolves around resourcing Asia with Australians,” Boyd said. “It is a much more costly exercise to take someone from London and send them out to Asia than it is to do so from here.” As well as the cost benefits involved in sending Australian lawyers rather than their London counterparts to Asia, Boyd said that Norton Rose sees Australia as good place to find lawyers that have a good education and are used to working in a large-firm environment. Norton Rose Australia has already adapted its recruitment strategy to reflect its role as feeder to Norton Rose’s Asian operations. The firm is targeting lawyers and other staff who are interested in relocating to Asia as well as students who are studying in Australia but wish to repatriate to practice law. ALB www.legalbusinessonline.com
us report K&L Gates trumps Pillsbury and Paul Weiss in revenue results Pillsbury Winthrop, Paul Weiss and K&L Gates have revealed their revenue results for 2009. Pillsbury and Paul Weiss reported revenue decline. Pillsbury’s revenues fell by 7.5%, from 2008’s US$576m to 2009’s US$533m. The firm’s PEP also fell, by 2.6% to US$950,000, but it managed to keep revenues-per-lawyer flat at US$850,000. Paul Weiss also revealed its provisional revenues, with mixed results. It is understood that while the firm’s 2009 revenues fell by 2% to US$678m, PEP was slightly up, from US$2.65m to US$$2.69m. K&L Gates bucked the trend by breaking the US$1bn revenue barrier, for the first time, by US$300,000 – a 7.8% increase on the firm’s 2008 figure of US$959m. PEP also grew slightly, from US$855,000 to US$860,000. Winston & Strawn launches alternative fees Many firms have been considering alternative fee arrangements (AFAs), but Winston & Strawn has actually formed a new software program to encourage its lawyers to offer more flexible fee options to clients. The program is modelled on fee services the firm has offered in the last three years. Lawyers will be able to find out what fees to offer based on those past billing arrangements, measured on the types of work and services provided. Since launching the program the proportion of clients opting for AFAs has grown by 15%, according to the firm. “I expect [that] to continue and would
be surprised if we don’t get up to around 40%,” said partner Scott Farrell. New site rates firms on value The world’s largest organisation of in-house lawyers, the Association of Corporate Counsel, has launched a new law firm ratings service, based on a quality valuation of their service and fees. The program, “ACC Value Challenge”, is based on evaluations submitted by ACC’s members. Members rate firms using a five-point scale – one for ‘poor’ through to five for ‘excellent’ – on criteria such as the firm’s legal expertise, communication skills, cost/ budgeting skills and efficiency. The aim of the program, according to ACC president Fred Krebs, is to generate discussion about firms’ business models. Despite some criticism he says the program will simply formalise an evaluation process that in-house lawyers already conduct among themselves. Mayer Brown partner on fraud charges Former Mayer Brown partner Joseph Collins was recently sentenced to seven years in jail for fraud relating to the collapsed brokerage firm, Refco. Collins was the head of Mayer Brown’s derivatives group before he resigned last year and was convicted of conspiracy to commit securities fraud in a US court. Although the court heard that Collins did not personally profit from the US$2.4bn securities fraud, the judge said his actions were brought about by being too loyal. Collins is appealing his conviction.
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• Latham & Watkins has become one of the first firms to reverse salary freezes that were implemented by law firms worldwide in response to the financial crisis. The firm commenced its salary freeze in December 2008, among a number of other cost-cutting exercises including job cuts. • Latham & Watkins lost a well-known M&A partner to Greenberg Traurig. David Schwartzbaum, who headed up billion-dollar deals for the firm like the Gilead-CV Therapeutics and the Texas Pacific-Axcan Pharma acquisitions, has joined Greenberg’s New York office. • Arnold & Porter has scored a major coup, bringing in a four-lawyer team from Milbank Tweed to its London IP practice. Former Milbank partner David Perkins brought three lawyers with him to the firm, leaving only one partner at Milbank’s London litigation practice. • Arnold & Porter is also celebrating alongside Dewey & LeBoeuf, Gibson Dunn & Crutcher and Clifford Chance, after the board of Cadbury approved its proposed takeover by Kraft. The firms were involved with the regulatory side as well as the commercial and securitisation legal issues. The US$19bn worldwide deal also reeled in Freehills, Shearman & Sterling, Slaughter and May, and Cleary Gottlieb.
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NEWS >>
news in brief >> US law firm suing China hit by cyber attack California-based law firm Gipson Hoffman & Pancione has been targeted in a spear-phishing cyber attack that originated in China. The firm is representing software company CYBERsitter in its US$2.2bn law suit against the People’s Republic of China, two Chinese software makers and seven computer manufacturers for using stolen code. “They were e-mails targeted at individuals in our law firm that were made to appear as if they were coming from other individuals at our law firm,” a spokesperson said. “They attempted to get the target to click on a link or attachment.” The attack is said to have used the same technique as the one used against Google in China earlier this week.
Law firms owed fees by cash-strapped businesses Peter George, the head of the failed Elderslie Finance Corporation, has filed for personal bankruptcy with debts of A$10m – with A$273,000 owing to Clayton Utz. George bought Elderslie in 1994 for A$3m and raised A$140m from investors. He lent that money to companies he controlled, all of which have now collapsed. George is believed to owe Clayton Utz the money in relation to previous legal battles. Also, last October cash-strapped biotech company Dia-B Tech refused to pay Minter Ellison A$150,000 in fees the law firm expected to receive from a cancelled capital raising.
Industry >>
Clayton Utz pulls in more than A$30m from Commonwealth in FY09
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layton Utz has the most to lose from a review into the procurement of Commonwealth legal services: it has been revealed that the firm received A$30.7m from various Commonwealth agencies in 2008/09. Clayton Utz’s revenues from federal government work were A$11m more than those of the second-placed firm DLA Phillips Fox, which received A$19.6m. Along with Clayton Utz and DLA Phillips Fox, Blake Dawson (A$17.5m), Minter Ellison (A$12.6m) and Sparke Helmore (A$10.1m) all received more than A$10m from government agencies. Corrs Chambers Westgarth (A$9.3m), Mallesons ►► Law firm revenues from Commonwealth agencies in FY09 Firm
Revenue (A$m)
Clayton Utz
30.7
DLA Phillips Fox
19.6
Blake Dawson
17.5
Minter Ellison
12.6
Sparke Helmore
10.1
Corrs Chambers Westgarth
9.3
Mallesons Stephen Jaques
5.0
Deacons (now Norton Rose)
4.3
Freehills
4.0
Stephen Jaques (A$5m), Deacons (A$4.3m), and Freehills (A$4m) rounded out the top 10 recipients of the Commonwealth’s legal spend. A spokesperson for the AttorneyGeneral’s Department said that the Australian Government Solicitor billed almost A$90m for legal services and is listed as a separate entity along with private law firms. The report found A$304m in total was spent by federal government agencies on external legal services last year – down slightly from a record high of A$311m the year before. Commissioned in March, the review examined existing arrangements for the procurement of legal services and advised on how the Commonwealth can lower its legal spend. “The report finds that the current system of agencies individually tendering for legal services is very costly both to the Commonwealth and to external service providers,” said Attorney-General Robert McClelland. As a consequence of its focus on minimising legal spend, the federal government has pledged, among other things, to increase competition by enabling a broader range of firms to
Industry >>
Hogan Lovells confirmed as first major US-UK
T New IR rules increase client base Gadens workplace relations partner Kathryn Dent said that opening up of unfair dismissal claims to businesses with less than 100 employees will lead to an increase in legal advisory work. “Certainly there will be more work from an advisory perspective,” she said. “Whether that also translates to work representing employers at Fair Work Australia is a separate question, because lawyers have to seek permission to appear before Fair Work Australia in relation to unfair dismissal.” Dent, who will be speaking at the upcoming ALB Masterclass on employment law, said that the removal of the exemption of small business employers will mean that law firms will be advising clients that they do not necessarily already have a relationship with.
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he entry of Allen & Overy into the Australian market has overshadowed an equally significant development in the Northern hemisphere: US firm Hogan & Hartson and UK firm Lovells partners have voted in favour of the two firms merging. The merger, which takes effect from May, will create a combined firm that will rank within the world’s top ten. With revenues of around US$1.8bn, 2,500 lawyers, and more than 40 offices through Europe, Asia, the Middle East, and Latin America, the new entity should have enough firepower to furrow the brows of the strategists at Bakers and Clifford Chance.
►► Key points
• Merged firm to have 2,500 lawyers • Combined revenues will be in the region of US$1.8bn • Clayton Utz says it has held discussions about a binding relationship
The PR machines at the respective firms have billed the move as the “first transatlantic merger of equals” and “a progressive response to the increasing need by large multinational clients for high-quality legal advice on complex, cross-border transactions, disputes and commercial matters”. The move will also undoubtedly Australasian Legal Business ISSUE 8.2
NEWS >>
uk report Clyde & Co, Shadbolt join forces Eight partners have joined Clyde & Co as a merger with construction boutique Shadbolt is finalised, bringing the total number of global partners in the company to 173. Most of the moves have been from Shadbolt’s London office. Clyde & Co claim that the merger with Shadbolt will give them a contractual side to their existing construction practice, at the same time giving Shadbolt access to its offices across the Middle East, Asia, The Americas, Europe and Russia. Links struggles to hold onto young blood Linklaters’ retention rate for its current trainees has dropped to 76%, with 47 of the latest batch of 62 applicants kept on for newly-qualified roles. The retention rate was at its peak near the end of 2008 – 94% opted to stay, but then fell through 2009 to 82% last September.
act on behalf of the Commonwealth. It will also implement common tender arrangements for agencies seeking to purchase legal services and encourage the use of alternative dispute resolution in place of courts. ALB
Mishcon de Reya targets fraud work with New York office London’s Mishcon de Reya has opened an office in New York with the former founding partner of Sheppard Mullin’s New York office, James McGuire. McGuire will be the office’s managing partner overseeing a team of 15. The firm’s New York posting will mark its first foray outside the UK and is aimed at providing “a Rolls-Royce litigation service,” said the firm’s managing
partner, Kevin Gold, targeting the growth in litigation work caused by the rise in fraud cases during the financial crisis. End of an era as IP specialist leaves CC Baker Botts has taken Clifford Chance’s last dedicated intellectual property litigator, with Peter Taylor becoming its eighth London partner late last year. Clifford Chance has only one full time IP partner, and a further blow to its IP practice came after Mars, one of CC’s biggest clients, opted to instruct Lovells last year. K&L Gates opens in Moscow After joining the billion-dollar club by breaking the US$1bn mark in global revenues (see US column on pg 20), K&L Gates is pushing into foreign markets by opening in Moscow. The firm has also opened in Tokyo (see page 27) on the back of its successful international expansion strategy last year, which saw launches in Singapore and Dubai. The Moscow branch will be staffed by lawyers recruited from Haynes and Boone – including corporate partners Robert Langer and William Reichert who will lead a team of four other lawyers. “With our new Tokyo and Moscow offices, we will enter nations and parts of the world that are strategically important to K&L Gates’ global clientele,” said the firm’s chairman Peter Kalis.
firm merger revive rumours about a possible merger between Mallesons Stephen Jaques and Clifford Chance, as each firm looks to maintain its position in the international legal services sphere. Talks between the two firms were called off at the start of the credit crunch, but a rebounding global economy and stronger competition may merit another look at a union. The new firm – perhaps to the chagrin of one Nelson T Hartson who founded the firm’s business practice back in 1925 – will be referred to as Hogan Lovells. It will be jointly led by current Hogan & Hartson chairman Warren Gorrell and Lovells managing partner David Harris, as co-CEOs. ALB www.legalbusinessonline.com
ROUNDUP
• Offshore firm Appleby is launching an office in Guernsey this year, staffed with four lawyers recruited from rival firm Ozannes – Barney Lee, Helen Crossley, Jeremy Le Tissier and David Clark. Gavin Ferguson is the Londonbased banking partner being transferred to head the new office. • Pillsbury partner Denis Petkovic has left to head Withers’ international finance and projects practice. At Pillsbury he led the Europe and Middle East practices. • Withers is in expansion mode after announcing its intention to develop an international referral network. The firm is looking to establish connections and contacts around the world to boost the amount of cross-border work it captures. • Reed Smith’s former UK head Tim Foster has quit, leaving for Birmingham-based Hill Hofstetter, which was originally established by former Reed Smith lawyers in 2008. He will join the firm’s corporate practice. • French firm Racine has recruited the head of IP at rival firm Vaughan Avocats, Isabelle Renard. • A team of former lawyers from Clifford Chance – Avi Amsellem, Anne-Hortense Joulie, Fabrice Cacoub and Michael Levy – have formed a new firm, Parisian boutique – Lawington.
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NEWS >>
news in brief >> Flood of expat returns not eventuating As the US and UK were among the hardest hit in the economic downturn, many industry spectators predicted a deluge of lawyers returning to Australia and New Zealand. However, that mass repatriation has failed to materialise, so those firms looking to hire lawyers with recent experience overseas have had to adjust their incentives to appeal to the small number of returning lawyers. “We thought there would be a flood of lawyers coming back from the UK and the US and there certainly has been some, but I wouldn’t say there’s been a flood,” said Allens Arthur Robinson head of corporate Paul Quinn. “I think if we were going to see it in a major way we would have seen it by now.” Returning lawyers have a different outlook in terms of where they want to go, Quinn said. Most of them are looking to make a final move and will join the firm that provides them with the most opportunities – not simply the largest salary.
New Madgwicks partner targets superannuation work Madgwicks newest partner is Melbourne barrister David Galbally QC, who said he will target the burgeoning financial services sector to boost the firm’s revenue. Having spent the last nine years as chairman of the Transport Workers Union Superannuation Fund, Galbally is well-positioned to service the needs of the US$1.1trn superannuation industry. “I think legal firms have enormous opportunity to expand and grow in emerging areas of the law, the financial services industry being one such area,” he said. “Australia, in terms of the superannuation industry, is a world leader in providing compulsory superannuation for employees.” Galbally said there are opportunities for legal work across the board: from governance, risk management and best corporate practices through to the prevention of litigation and, in the event of litigation, representation. “I think these are areas that are going to grow with time,” he said.
►► Australia sits fifth in total superannuation assets
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Country
Assets (US$bn)
US
13,196
Japan
3,152
UK
1,791
Canada
1,213
Australia
996
New Zealand >>
Kiwi legal market to have ‘mini boom’ in ►► Key points
• Minter Ellison Rudd Watts managing partner says New Zealand is currently experiencing a ‘mini boom’ • Upswing in work caused by overlap of increased corporate work and lingering insolvency work • Likely to continue for next 12 months
T
he New Zealand legal market is currently experiencing a ‘mini boom’ as insolvency work from the recession overlaps with increased corporate work associated with an improving economy. Minter Ellison Rudd Watts managing partner Mark Weenink said he expects the increased activity to continue for the next
12 months, saying he is “cautiously optimistic” about the year ahead. On top of the improving economy, Weenink said new regulations coming through will generate a lot of activity. Last year also saw the New Zealand government create of a number of task forces to look into the causes of the financial crisis, with most having now delivered their reports. Weenink expects that to lead to increased activity for capital markets teams as new rules are put in place to help prevent a similar financial crisis from occurring. “We’re currently caught in the middle of a mini boom with the crossover between a lot of insolvency work and
New Zealand >>
Kensington Swan chief looks to opportunities ahead of SEM T
he integration of Australia and New Zealand into a Single Economic Market (SEM) will provide opportunities for Kiwi law firms that approach the changes with the right attitude, said Kensington Swan CEO Chris Heilbronn. Trans-Tasman integration is expected to hit new heights this year after Kevin Rudd and John Key took the next step towards a common regulator framework by signing a statement of intent for “Principle 7”. This is the last of the seven principles which will guide the SEM program. “Any change, whether it sounds good or bad at the outset, always provides lots of opportunities – it’s just a question of how fleet of foot you are,” Heilbronn said, although he conceded that the SEM would also provide its fair share of challenges for Kiwi law firms. Management of some of New Zealand’s largest companies will become increasingly centralised in Australia, which will have an impact on Kiwi law firms, Heilbronn said. As a result, Australian legal counsel will control the
►► Key points
• Australia and New Zealand’s move towards a Single Economic Market is expected to pick up pace this year • SEM will provide challenges and opportunities for Kiwi law firms • Kensington Swan CEO says “all change is good”
companies’ legal spend and determine how to utilise their external legal spend in New Zealand. “The exciting thing is that all change is good and it is just a matter of working out how to turn it to your advantage,” Heilbronn said. “It is hard, though for us to take on an Australian firm. We deal with the big firms over there and they’re juggernauts in comparison to the New Zealand firms.” He said that as progress is made towards a SEM, New Zealand firms will increasingly have to confront these issues. So what are Kiwi firms’ advantages? “We’re very talented, very practical and we’re cheaper,” Heilbronn said. ALB Australasian Legal Business ISSUE 8.2
NEWS >>
Legal Traveller >>
2010 – Minters partner new corporate activity,” Weenink said. “A lot of our work last year was based on refinancing and restructuring and putting a lot more equity into the balance sheet Mark Weenink, and we expect to see a Minter Ellison lot more of that work Rudd Watts this year as well; but at the same time we’re seeing a lot of new activity in the corporate area.” From a business standpoint, Weenink said there is more downside to being too risk averse than being too bullish about future workloads. He is looking to build a number of practice areas with lawyers who have experience in
PPPs, managed funds, health, local government, risk management and compliance. “We are heading along with everyone at full capacity, and the real challenge for us as a firm is to bolster our nonrecessionary areas in a way that when those areas get really busy we will have the right structures in place,” he said. “It’s really just a matter of identifying where the trends are going and making sure we’ve got the right people.” It’s a good market for recruiting as many of the large firms have frozen hiring. “We do have the luxury at the moment of being in a good market to employ people in,” he said. ALB
Industry >>
Carter Newell lifts recruitment freeze C arter Newell has restarted its recruitment program, having lifted a freeze initiated during the depths of the economic crisis last year. Peter Ellender, CEO Peter Ellender Carter Newell told ALB that the firm is looking to strengthen a number of key areas. “At the moment we’re looking to boost our team in quite a few of our specialist areas, including
“At the moment we’re looking to boost our team in quite a few of our specialist areas, including our resources team” Peter ellender, carter newell our resources team, the construction & engineering team, the corporate team and the insurance team,” he said. “We did have a hold on recruitment last year as the downturn hit and things were a little uncertain in core areas but we’re now looking at recruiting in those specialist teams and to keep growing.” ALB ►► Bunny Bash
Guests to Gadens Lawyers’ annual bash at the Art Gallery of NSW were treated to living statues that managed to keep their composure for the entire three hour event. The firm also had a private showing of the late Rupert Bunny’s work, the majority of which the Melbournian completed whilst living in Paris.
www.legalbusinessonline.com
Frances Drummond, Freehills partner, IP, Sydney
Favourite city to visit on business New York. It is such a great city as you can usually walk to your meetings past the great buildings and shops. I have been in winter with the fabulous lights and the ice rink at the Rockefeller and in spring when New Yorkers start wearing their cool gear. Best restaurant for business lunch For good talking space, Glass at the Hilton works; and for a more formal lunch, Est is perfect. The food and service at both restaurants is top notch. Worst business travel experience I travelled to Amsterdam for a conference when I was seven and a half months pregnant and had some weird pains along the way and almost had to turn back at Bangkok. I then arrived in Amsterdam without my luggage, and I had a function with clients to attend that evening. Ever tried to find a maternity clothes shop in a foreign city? Not a fun experience! Least favourite destination I found Taipei very dull. I was there for a week and the traffic was terrible and it was very grey. Most exotic leisure destination ever visited The island of Boracay, off the Philippines. They say that the sand is the whitest in the world… it is truly an island paradise. Getting there is a bit hairy ... [but] the water is clear and the cocktails are perfect. Most dangerous travel experience I’m not that fond of flying so I consider some of the flights I have taken dangerous. The flight from Kathmandu to Chitwan is a prize winner - basically up the side of a mountain and down the other side. I also took a flight from Medan to Jakarta in about 1989 which was unscheduled. You just put your unscreened luggage on a conveyor belt and off you went. I was the only foreigner on the flight and no one knew I was on it. It felt dangerous to me!
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NEWS >>
news in brief >> Maddocks looking to build reputation on infrastructure Maddocks has appointed Barangaroo CEO John Tabart as an external board member, with an eye on developing the firm into a leader in infrastructure. Maddocks has traditionally been a strong player in property and government practice areas. CEO David Rennick said that Tabart’s appointment will help the firm combine those skillsets to create an infrastructure leader. “Our aim really is to become known as the true leaders in government and infrastructure,” he said. “Infrastructure is a relatively new focus for us but we’ve traditionally been very strong in property construction and planning, and infrastructure is really an indicator of us going to the higher level in those areas.” Tabart is also a non-executive director of Infrastructure Partnerships Australia and will use his contacts in the sector to help promote Maddocks. “Because he’s led so many infrastructure organisations, he’s got great experience in business planning,” Rennick said. “He’s got a very insightful mind in how to develop business and to explore opportunities.”
Bank boss says M+K withheld information from clients Bendigo and Adelaide Bank managing director Mike Hirst has accused Macpherson + Kelley (M+K) of inadequately advising clients, tampering with communications between the bank and its customers, and withholding “vital information” from its clients. M+K is leading a class action which claims that loans made by Bendigo and Adelaide Bank were invalid because investors were misled by a third party when they took on the debt. Under debt collection guidelines banks are required to correspond with customers via their lawyers once the bank has been notified that the customer has retained legal representation. “Unfortunately in the case of M+K, our correspondence to defaulting customers sent via M+K was tampered with,” Hirst said. “This also meant M+K was withholding vital information from its clients about their loan balances, loan arrears and interest that was being applied.” M+K said in a statement: “We read with interest the media release by Bendigo and Adelaide Bank dated 22 December 2009. M+K has not acted improperly and has no further comment on this matter. M+K will continue to act in the best interests of its clients.”
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Workplace relations >>
Landmark case changes the game for OHS lawyers
A
High Court ruling handed down in Kirk v Industrial Relations Commission of NSW has provided an extra defence for OHS lawyers in NSW and Queensland to use for clients that accused of breaching their duty of care in relation to their employees. “It’s very much a landmark case because it overturns the way the duty of care has been interpreted for quite some time in NSW,” said Norton Rose partner Michael Tooma. Prior to this ruling, the line of authority had been that the scope of the duty is absolute. The employer’s requirement to ensure the health and safety of employees had been interpreted to mean to secure and guarantee the safety of employees. This meant that all the prosecution needed to prove was that the employee had been exposed to risk. Tooma said that has always been a point of contention for employers and that the High Court decision overturned that approach. “The High Court in effect has said that the prosecution has to be very specific about what it is that the defendant failed to do to address the risk to health and safety,” Tooma said. The decision shifts the focus to a specific act or omission, opening up defence avenues for OHS lawyers. “It will mean that there will need to be a greater consideration given to the availability of the defences in any given case,” Tooma said. “Initially it will require a reconsideration of the strategies adopted.”
►► Key points
• Kirk v Industrial Relations Commission of NSW has provided OHS lawyers with more defence options against breaching duty of care • Ruling overturns the way duty of care has been interpreted in NSW previously • Prosecution now has to be very specific about what a defendant failed to do to address risk to health and safety
In addition, there will be an adjustment in the number of prosecutions brought and an adjustment in the strategies used to defend cases, Tooma said. The case arose when the WorkCover Authority took action against Picton farm owner Graeme Kirk in 2001 after his farm manager, Graham Palmer, died. Palmer had driven a four-wheeldrive vehicle down the side of a hill on the property and was killed when the vehicle overturned. In the ruling, the High Court slammed the WorkCover Authority, calling on it to “finish its sport” with Kirk. “It is absurd to have prosecuted the owner of a farm and its principal on the ground that the principal had failed properly to ensure the health, safety and welfare of his manager, who was a man of optimum skill and experience – skill and experience much greater than his own – and a man whose conduct in driving straight down the side of a hill instead of on a formed and safe road was inexplicably reckless,” the court said. ALB Australasian Legal Business ISSUE 8.2
NEWS >>
Update >>
Property >>
Recent REIT activity boosts beleaguered property practices
R
ecent activity by real estate investment trusts (REITs) has provided a boost to law firms’ property practice groups, which have been among the hardest hit by the GFC. The recent A$365m acquisition of the ASX-listed Mirvac Real Estate Investment Trust (MREIT) by Mirvac Group follows on from Lend Lease Investment Management’s launch of a A$200m institutional fund and Challenger Life Company’s (CLC) proposed A$157m acquisition of Challenger Kenedix Japan Trust (CKT). As well as property groups, an increase in activity by A-REITs would have a significant impact on the workloads of banking groups, corporate groups and M&A groups. Clayton Utz and Minter Ellison advised on the Mirvac deal, which provided Minters with enough work to keep four partners, four senior associates and six other lawyers busy. “I think what we’ve seen in the last 12 months is a recapitalisation of the A-REIT market,” said Minters partner Stuart Johnson, who worked on the Mirvac deal. “Those entities that have been able to raise capital and strengthen the balance sheet have done so and are now well-placed to take advantage of opportunities in the market.” Mirvac has been a Minters client for the past seven years. The firm advised Mirvac on its A$500m equity raising in November 2008 and the A$1.1bn raising in June 2009. Now that those capital raisings have been largely completed, Johnson hopes that more property transactions will take place. “Last year, there wasn’t the volume of property transactions coming through but I think valuations have potentially readjusted now and we’re hoping that 2010 will provide an uptick in property transactions,” Johnson said. “We’re certainly hoping that, with debt markets shoring up a bit, property transactions will return in 2010.” ALB
Employment contracts/policies – Are they Fair Work compliant?
2
010 brought with it the requirement to fully implement the requirements under the Fair Work Act 2009. For most employers, this will necessitate a review of contracts and employment policies to take into account the new employment conditions arising from the system’s new safety net. The new minimum conditions are found in the National Employment Standards (NES) (dealing with generally applicable conditions) and modern awards (dealing with more industry/ occupational specific conditions). The NES prescribe 10 conditions which apply universally. Some conditions such as severance payments in addition to notice, may be new for non-award employees like managers. Other conditions are entirely new like the requirement that a Fair Work Information Statement be given to all new employees. The NES also rationalises conditions which have previously been found in State legislation, like leave entitlements. For example, employers are likely to find changes to the rules regarding when annual leave can be taken, which may need to be addressed in contracts/policies. Rights to request extended parental leave for an extra 52 weeks have been given to employees, and the rules regarding when parental leave can be taken have changed. Contracts/policies may need to be amended to address the new rules and how they may interact with other entitlements, such as paid parental leave. There are also rights given to employees to request more flexible work arrangements. These requests can only be refused on reasonable business grounds. Consideration should be given to how such flexibilities might be accommodated and how these requests are to be dealt with to ensure that a consistent approach. The other area of potential change is existing industrial instruments may have been replaced by the new modern awards and employers’ obligations may have changed. Some employees not previously covered by awards may now be covered by a modern award. Employees over the high income threshold (currently $108,300), however, can usually be excluded from the coverage of modern awards provided that the employee is notified in writing. Employers need to check whether these awards apply to their employees and whether they are complying with them. It is timely for employers to take the opportunity to ensure that their contracts/policies are up-to-date, consistent and compliant with the new system. Tim McDonald, Partner Sparke Helmore Lawyers
►► Recent A-REIT activity Deal
Legal advisors
Mirvac - MREIT acquisition
Clayton Utz, Minter Ellison
Lend Lease Investment Management fund launch
Freehills
Challenger - Challenger Kenedix Japan Trust acquisition
Allens Arthur Robinson
www.legalbusinessonline.com
Employment Law
What difficulties have you encountered during the first month of the Fair Work Act? Submit your comments here.
Tim McDonald
23
NEWS >>
news in brief >> Law firms help out Haiti victims Gilbert + Tobin and Freehills have joined Clayton Utz in contributing to aid organisations that are working in Haiti after the devastating earthquake that has killed at least 75,000 to date. G+T partners have pledged A$50,000 to Medecins San Frontières (Doctors Without Borders). “I know all of us are shocked by what has occurred in Haiti,” G+T managing partner Danny Gilbert wrote in an e-mail to staff. “Partners have decided to make a donation of A$50,000 to Médecins Sans Frontières, a longstanding pro bono client of the firm.” Gilbert also encouraged staff to donate individually to the firm’s chosen charity. Freehills and Clayton Utz are matching contributions from lawyers and staff to a number of aid organizations. “Freehills has an enduring relationship with some of the major aid agencies such as Medecins Sans Frontières, UNHCR, Oxfam and World Vision, which are currently active on the ground in Haiti,” a spokesperson said. “We match dollar for dollar all contributions and donations made through workplace giving to these charities.”
IP >>
iiNet decision to lead to more legal action
A
Macquarie renews ALB Australasian Law Awards partnership Macquarie Relationship Banking will be the official partner of the 2010 ALB Australasian Law Awards for the second consecutive year. After more than 600 movers and shakers in the Australian and New Zealand legal industry attended last year’s high-profile awards ceremony in Sydney, Macquarie jumped at the chance to again be involved in the law industry’s leading awards night. “The awards recognise excellence within the legal industry, which we think is definitely worth celebrating,” said Terry Lyons, the head of legal at Macquarie Relationship Banking, adding that the bank has been working with legal firms since 1985. “We value these relationships highly and see the law awards as a way we can demonstrate our support and appreciation of our clients and the broader legal industry.” Lyons said that, over the years, Macquarie Relationship Banking has worked with a number of ALB Awards winners and nominees. “We look forward to the event again this year,” Lyons said. www.albawards.com
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landmark decision in the Federal Court – which found that internet service providers (ISPs) are not liable for illegal downloading by their users – is likely to be appealed, according to IP lawyers. iiNet, an Australian ISP, had been served with notices by the Australian Federation Against Copyright Theft (AFACT), alleging that iiNet’s customers were infringing the copyright of the major film studios - specifically by sharing and downloading films and TV shows via the BitTorrent peer-to-peer protocol. “Whichever way the decision went, it was always likely that an appeal would be made, and so Justice Cowdroy’s judgment is unlikely to be the final word on this important issue,” Clayton Utz partner John Fairbairn said. “For copyright owners, this decision shuts off a potentially powerful way of reining in online copyright infringement and has global implications in terms of how this difficult issue should be addressed.” Fairbairn, along with Timothy Webb, acted for the Internet Industry Association in relation to the ►► Key points
• Federal Court found ISPs not liable for illegal downloading by users • Decision expected to be appealed • Copyright holders may seek a legislative response
proceedings. HopgoodGanim’s IP & technology head Michael Morris said the ruling is unlikely to stop movie studios and other media producers lobbying for more legal protection. “It’s probable that they will either appeal the decision or look for a legislative response to address the ongoing problem of online piracy,” he said. “At the moment, companies and copyright holders have no effective legal protection against copyright infringement carried out on the internet [since] legislation hasn’t kept up with advances in technology.” ISPs are routinely sent infringement notices by copyright owners, Fairbairn said, adding that ISPs could have been forced to take responsibility for the infringing acts of their customers if the copyright owners were successful. However, Justice Cowdroy ruled that iiNet only provided the means of accessing the internet, but not the means by which infringement occurred – in this case, the BitTorrent protocol. “The judge pointed out that all iiNet did was provide its users with access to the internet,” Morris said. “It’s unfortunate that some of these users then used file sharing programs and infringed copyright, but holding iiNet accountable for this would be like holding Australia Post accountable for the contents of the letters they deliver,” he said. ALB Australasian Legal Business ISSUE 8.2
Firm Profile NEWS >>
Buddle Findlay
NZ COMMENTARY
“New Zealand M&A activity in 2010 - cause for cautious optimism?”
A
s we launch into the New Year in earnest, February presents a timely opportunity to assess how the M&A market may fare in 2010 following an uneven performance in 2009. In New Zealand, M&A activity this year will largely be driven by global credit trends while longer term activity could be stimulated by the recent recommendations of the Capital Market Development Taskforce (Taskforce).
New Zealand to follow international market trends New Zealand’s relatively small M&A market is expected to follow the trends set in international markets. Those trends are likely to include: • Increased activity in comparison to the low levels of 2009. However, cautious buyers will ensure that complex and hostile transactions are less common than during the dizzying heights of 2007. • Large-scale and complex transactions will remain rare as debt levels remain low. In New Zealand, the anticipated sale of the downstream marketing and distribution assets of both Shell and Mobil are likely to lead the first quarter of 2010 in this regard. • As the restructuring and refinancing of the multitude of private equity backed acquisitions of 2007/08 begin to take shape, we expect to see some exits by way of IPO or secondary buyouts. • Sales by competitive tender will remain the first choice option for trade sellers. However sellers will need to be flexible around timeframes, information flow and vendor protection provisions as the market remains predominantly “buyer-led”.
Taskforce recommendations In addition to these trends, the Taskforce released its final recommendations in December 2009 which were directed www.legalbusinessonline.com
at tackling some of the challenges facing New Zealand’s capital markets and increasing the contribution of capital markets to New Zealand’s economic growth. In relation to M&A activity specifically, the Taskforce’s recommendations (if they are implemented) may help to stimulate activity at both ends of the M&A transaction lifecycle. One of the Taskforce’s objectives is to improve the level of commercialisation of start-up and early stage businesses. The recommendations designed to achieve these goals focus on consolidating the commercialisation activities of groups such as Crown research institutes and universities, as well as looking at innovative ways to attract equity investment to these ventures. If successful, these initiatives should simulate investment in the venture capital sector and provide a broader base of “home grown” target companies in the future. In the shorter term, commercialised intellectual property assets in fields such as biotechnology may be picked up by buyers at a much earlier point in the growth cycle – which will in turn create opportunities for the resulting capital to be invested back into the New Zealand venture capital sector. One of the most critical objectives listed by the Taskforce is to free up private market investment and deepen public markets by reducing regulatory barriers and creating stepping stones to full NZX listings. For example, the Taskforce has suggested that the Securities Act exemptions are revised to include much clearer, broader exemptions such as a “registered investor” exemption and a small offer exemption similar to the 20/12 exemption which exists in Australia. In relation to public market reform, the Taskforce recommends allowing unregistered and exempt exchanges to develop their own less prescriptive listing
rules. If adopted by government, these types of initiative are likely to provide a broader range of both private and public exit opportunities for sellers of New Zealand assets, thereby stimulating buying activity. The cautious optimism that pervaded the New Zealand market during the last quarter of 2009 did not manifest itself in the expected number of capital market transactions. Synlait’s float was put on hold, Biovittora’s IPO failed to gain any significant support and Kathmandu’s offering was not the hit with investors that it had promised to be. On the other hand, Pyne Gould Corporation’s rights issue was a resounding success, and Auckland Airport has recently announced a NZ$126m fully underwritten entitlement offer. So, from our perspective, while we view the glass as being half full, we recommend using a tray to carry it.
This article was written by Ash Hill in the Auckland office of Buddle Findlay, one of New Zealand’s leading law firms. Ash is a senior associate in the corporate team and specialises in mergers and acquisitions, private equity and venture Ash Hill, capital investments and capital Buddle Findlay markets and securities law advice. Ash can be contacted by phone: +64 9 363 1036 or e-mail: ash.hill@buddlefindlay.com
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NEWS | appointments >>
news in brief >> Bill could dampen M&A activity while boosting firms’ bottom line The Trade Practices Amendment Bill introduced into the Senate late last year will make significant changes to the way the competition aspects of a proposed merger are assessed. Possibly this could lead to less M&A activity if the bill in its current form is passed. However, rather than having a dampening impact on law firm profitability, law firms could benefit, according to Brett Bolton, a specialist in competition and trade practices law at HopgoodGanim Lawyers The changes would require the ACCC to apply a lower test to determine whether an acquisition or merger could have a noticeably negative affect on competition in a market. This would result in a significant reduction in the number of mergers and acquisitions approved each year. As it stands, a party that is interested in merging with or acquiring another business often approaches the ACCC informally to see if there will be any hurdles that need to be overcome. Bolton said that organisations are likely to bring in competition lawyers prior to that engagement if the law is passed, thus generating more work.
appointments ►► Lateral hires Name
Practice areas
Organisation coming from
Organisation going to
Meaghan Bare
Employment law
CCI Lawyers
Kligers Partners
Rebecca Barr
Aged care
Baker & McKenzie
Lynch Meyer
Anton Block
Dispute resolution
Rigby Cooke
Kligers Partners
Michael Caplan
IT & telecommunications
Blake Dawson
Gilbert + Tobin
Andrew Chew
Infrastructure
Mallesons Stephen Jaques
Baker & McKenzie
Thomas Jones
IP
Mallesons Stephen Jaques
Corrs Chambers Westgarth
David Martin
Family law
Howe Martin
Lynch Meyer
Richard Morrison
Government services
Clayton Utz
Sparke Helmore
Martyn Taylor
Competition
Mallesons Stephen Jaques
Gilbert + Tobin
Cameron Whittfield
IT & telecommunications
Russell McVeagh
Gilbert + Tobin
Julian Wright
Tax
McCullough Robertson
Hopgood Ganim
►► Promotions Name
Practice areas
Organisation
Jeff Baker
Financial services
DibbsBarker
Catherine Dermody
Competition
Gilbert + Tobin
Tim Gole
Corporate, communications & technology
Gilbert + Tobin
Mark McCowan
IP
Corrs Chambers Westgarth
Scott Sharry
Insolvency & restructuring
Clayton Utz
Mark Wiemers
Insurance
DibbsBarker
Clayton Utz
Lawyers want performance-based pay Allens Arthur Robinson corporate head Paul Quinn has called for associates’ remuneration to be based on performance, to bring them in line with partners and most of the corporate services staff. Quinn said that the traditional lockstep model of remuneration in legal partnerships has slowly broken down over the past decade. Most Australian firms have sought to strike a balance between giving pay raises just for showing up to work each day and a “US-style ‘eat what you kill’ remuneration culture”. However, Quinn said that associate salaries have essentially remained on a lockstep structure and listed several challenges to moving away from that model. Those challenges include the need for a firm to have a strong performance culture, the difficulty in administering performance-based remuneration, and resistance to changing a long-held tradition. John Moore, a partner of Thynne & Macartney, said that the lockstep model is antiquated, regardless of the level of experience a lawyer has. “Lockstep is a dinosaur and I can’t see how firms can afford to keep it,” he said. “Whether you’re 30 or 60, everyone deserves to be paid on the basis of their performance.”
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Sparke Helmore
Clayton Utz team poached by Sparkes Sparke Helmore has recruited a government services team from Clayton Utz, led by partner Richard Morrison. The team will be based in Sparke Helmore’s Canberra office. Morrison took special counsel Holly McAdam and lawyers Diana Navarro and Elizabeth Skelly with him to the new firm. Sparke Helmore national managing partner Jesse Webb said the firm is focused on procurement, legal and probity services, Federal litigation, Richard Morrison and Commonwealth compensation business. Mallesons
consumer healthcare business and its proposed acquisition of Guidant Corporation. He has also helped Primo Smallgoods obtain ACCC clearance for its acquisition of Hans Continental Smallgoods, which was approved on the basis of a ‘failing firm’ argument. Mark McCowan Jones will work out of the Sydney office and specialises in access to regulated infrastructure across a range of industries, including telecommunications, airports, ports, rail, broadcasting and water. He has particular expertise in thirdparty access issues and advises clients on competition law and the administrative law aspects of the Thomas Jones operation of regulatory regimes.
Corrs Chambers Westgarth
Corrs boosts IP team Corrs Chambers Westgarth has beefed up its IP practice by promoting Mark McCowan to partner and recruiting Thomas Jones from Mallesons Stephen Jaques. McCowan, who is based in the Melbourne office, specialises in competition and trade practices and has acted for Johnson & Johnson in obtaining ACCC clearance for its global acquisition of Pfizer’s
Mallesons
Baker & McKenzie
Baker recruits Mallesons partner Malleson Stephen Jaques partner Andrew Chew has joined Baker & McKenzie as part of its Sydney construction practice group, and as a member of the firm’s specialist infrastructure group. Australasian Legal Business ISSUE 8.2
NEWS | appointments >>
As a qualified engineer, Chew has worked on a number of major infrastructure projects over his 15 years spent as a lawyer, including acting for successful bidders for the Peninsula Link project, the Mitcham-Frankston Freeway, the North-South By-pass Tunnel, the Western Sydney Orbital toll-road project, the Chatswood Transport Interchange, the Sunbury Rail Electrification Alliance Project, and the supply of the Outer Suburban Trains to RailCorp. He has also advised on the US$5bn Saudi Landbridge project, on documentation for the Sydney desalination plant and on the financing for the Defence Project Single LEAP (Living Environment and Accommodation Precinct), a Commonwealth defence project for living-in accommodation for single Defence Force members.
Clayton Utz
Clayton Utz promotes Sharry to partnership Clayton Utz has promoted insolvency & restructuring specialist Scott Sharry to the partnership. Sharry began his legal career with Clayton Utz in 2001 as a graduate, and has represented a range of interests and clients during his time there. Clients have included banks, financiers, liquidators, receivers and administrators (in relation to insolvency administration), recovery and management issues, across a broad range of industries.
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Sharry said his appointment reflected the strength of Clayton’s restructuring, insolvency and general commercial litigation practices – both in Queensland, where he is based, and country-wide.
Various
Kligers Partners
Two principals sign to Kligers Melbourne mid-tier firm Kligers Partners has added Anton Block and Meaghan Bare to its principal ranks. Block joins the firm from Rigby Cooke and will be part of the dispute resolution group, while Bare was formerly a principal at CCI Lawyers. She joins the firm’s employment law practice group.
Various
Gilbert + Tobin
Two principals sign to Kligers Gilbert + Tobin managing partner Danny Gilbert sent round an e-mail recently announcing the appointment of five partners to the ranks, as the firm ramps up operations in anticipation of a new office opening in Melbourne. Of the five partners that have been recruited, IT & telecommunications specialists Michael Caplan and Cameron Whittfield are expected to work out of Gilbert + Tobin’s new Melbourne office.
Caplan joins the firm from Blake Dawson and has a strong relationship with Telstra, having worked on the telco’s outsourcing of Medibank, AGL and Tabcorp’s telecommunications; NAB’s IT & telecommunications, and Telstra’s renegotiation of its long term IT Operations Services Agreement (ITOpSA) with IBM. Whittfield spent his early career working for Russell McVeagh, Vinson & Elkins in London and Gide Loyrette Nouel in Paris, advising on corporate Catherine transactions, cross-border M&A, Dermody telecommunications reform and commercial arrangements. Martyn Taylor has joined the firm’s competition & regulation practice group in Sydney. He previously worked in the competition teams of Mallesons and Freehills and has more than 15 years regulatory and commercial experience, obtained Cameron principally within the Asia-Pacific Whittfield region. Finally, Catherine Dermody, a regulatory lawyer in the competition & regulation group, and Tim Gole, a lawyer who focuses on large and complex TMT transactions in the corporate, communications & technology group, have both been promoted to partner
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profile | managing partner >>
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Australasian Legal Business ISSUE 8.2
profile | managing partner >>
ALB 2010 MANAGING PARTNER SERIES
John Weber, Minter Ellison Minter Ellison: jewel of the top tier, or just a really big law firm? Chief executive partner John Weber speaks with ALB’s Renu Prasad about what his firm represents
B
y lawyer count, Minter Ellison is not the largest law firm in Australia. According to ALB’s last survey (July 2009), that particular title belongs to Mallesons, which scraped ahead of Minters at some point during FY2009. While Minters is the most often-cited example of the modern Australasian law firm behemoth, that characteristic depends on whether the partnerships that comprise the firm are to be considered as one. It’s all part of the enigma of a firm which competitors have struggled to come to terms with. In the middle of all this is the firm’s CEP John Weber – a thoughtful, quietly spoken dispute resolution specialist who most recently headed up Minters’ Canberra office. Given the spread of the firm’s offices into diverse markets such as Darwin, Gold Coast and Adelaide, Weber spent more of 2009 in airports and planes than he cares to remember. But now, with the first year in the CEP role under his belt, he’s back in Sydney and ready to account for what makes Minter Ellison tick.
Practice areas
Revenues at top-tier firms generally declined in 2009 but notable exceptions were Clayton Utz and Minter Ellison, which both averaged about 5% growth. As far as Minters is concerned, Weber attributes the result to the firm’s cultivation of a broader set of practice areas such www.legalbusinessonline.com
as insurance, government, and insolvency & restructuring. “We acted for a number of clients who actually became busier during the downturn: banks and government agencies heavily involved in either asset sales or work related to government programs being delivered to try and avert the financial downturn,” he says. “We’ve also maintained for many years a tier-one insolvency and reconstruction capability, which for many years wasn’t a very sexy thing to have, but come the downturn, people were run off their feet.” But Weber is not particularly optimistic about the prognosis for the Australian legal services market in 2010. “It will continue to be a difficult market. We haven’t yet seen a return
Screamer or not, 2010 is sure to see belts tightening in other key areas. About 20% of Minter Ellison’s revenues come from government work and the firm will no doubt be following reform proposals for government sector legal spend with interest. “All eastern seaboard states – as well as the federal government – are in various stages of looking at efficiency savings and value delivery mechanisms for legal services. That’s to be expected and applauded,” says Weber. “The Victorians have had a whole-of-government panel for a number of years and there’s now been a recommendation made to establish something akin to that in the Commonwealth. I suspect over time you’ll see that type of move in both
“Because we’re such a large organisation, we operate on a regional basis which is perhaps part of the reason why some of our competitors haven’t understood us. When you’re in a smaller partnership, you tend to think that everything is going to be the same” to the levels of operations that we would consider to be normal. We’re still seeing a softening in the market. There are deals around, but you just haven’t got the deal flow that you’d see in a stronger market. I think that will remain soft for a while. I don’t think it’s going to be a screaming year.”
John Weber
Minter Ellison
Queensland and New South Wales as well. The Victorians have been leading in this space for a while – they really have been aggressively controlling their legal panels.” Other than Minters, who are the top-tier players in this space? “We typically see Clayton Utz and Blake 29
profile | managing partner >>
►► Top five Australian firms by lawyer size Rank
Firm
Managing partner/CEO/Chairman
Total no. lawyers
Partners
1
Mallesons
Robert Milliner
1,030
191
2
Minter Ellison
John Weber
899
297
3
Clayton Utz
David Fagan
769
217
4
Allens Arthur Robinson
Michael Rose
698
172
5
Freehills
Gavin Bell, Mark Rigotti, Peter Butler
648
210
Source: ALB30 survey, July 2009
Dawson on most government panels. From time to time we also see Freehills and Allens, but we don’t see a lot of Mallesons,” says Weber. “If I look back ten years ago, we saw Mallesons all the time but they seem to have changed their focus to act on the other side.” Meanwhile, Minters is looking to grow in the M&A space. Partners from some rival firms have suggested that the firm is generally absent from the major M&A transactions, a claim which is, of course, not accepted by Weber. “We’ve got a very significant M&A practice, especially in Sydney and Melbourne, and that’s an area of focus for growth for us,” he says. But other than saying that the firm is keeping an “open mind” on lateral hires, Weber is reluctant to elaborate on the growth strategy. “Some of it will no doubt be organic, some of it will be inorganic,” he says cautiously.
Partnership
Minter Ellison is made up of four partnerships – New Zealand, the Australian East Coast, Western Australia and South Australia. All overseas offices outside New Zealand are part of the East Coast partnership, yet there is no financial integration between partnerships and no immediate plans to integrate in the future. “You’ve got to look at what makes sense in a market,” says Weber. “If there’s a compelling rationale for doing so, you will – but if there isn’t [a rationale], then you won’t. For example, the New Zealand market and the Australian market are very different and we have a very successful relationship that works exceptionally well. But in [the] short term, I wouldn’t see any reason why we would be looking to integrate them financially.”
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This structure is another reason why Minter Ellison eludes easy characterisation as a firm. “Because we’re such a large organisation, we operate on a regional basis, which is perhaps part of the reason why some of our competitors haven’t understood us. When you’re in a smaller partnership, you tend to think that everything is going to be the same,” explains Weber. In 2005 Minters took the interesting step of appointing an industry outsider (Guy Templeton) to the CEO position. Following his departure last year, the appointment of Weber marks the return to a more conventional approach. “You recruit different people for different times – that was a point in our firm’s history where we thought that it was useful to have an external person. Guy did an exceptionally good job – he was a very capable leader.” Weber nominates Templeton’s disciplined approach to the running of the business – particularly in terms of finance and operations – and international focus as the key areas where the firm has benefited from his legacy as CEO.
International mergers
The firm hasn’t been immune to the interest shown by potential overseas suitors but, at least for the moment, Weber says he can’t see the point of a merger. “It’s difficult to see how truly global firms would operate,” he says. “Perhaps people are trying to position themselves for a decade ahead. “Certainly there is a gradual globalisation of some industries and some clients but I’m not sure whether or not that can yet support a number of truly global firms. I don’t think in the next 12 months you’re going to see a whole raft of international mergers in this market.” ALB
“I don’t think in the next 12 months you’re going to see a whole raft of international mergers in this market” John Weber
Minter Ellison
Australasian Legal Business ISSUE 8.2
Feature | in-house issues >>
Case study: Telstra and Gilbert + Tobin’s alternative fee structure
A
Will Irving, Telstra
landmark legal agreement was made last November, when Telstra and Gilbert + Tobin came to an agreement where Telstra will pay G+T a fixed fee – believed to be A$10m-A$15m – for legal advice. The arrangement will run for four years with a price review after the first year, and the agreement includes conditions that would result in G+T receiving more money if Telstra uses more than a certain number of hours. Alternately, Telstra will receive a rebate if the company uses less than a certain number of hours. These measures ensure that neither party is taking on an open-ended risk but, for the most part, the deal represents a genuine fixed-
fee arrangement. The Telstra/G+T arrangement came about as a result of Telstra issuing a tender to its legal panel seeking an innovative billing arrangement, at the start of 2009. The company had been working on a fixed-fee basis on particular matters with a few of its law firms –but never on the scale of the currrent deal. “G+T came back with a very innovative proposal at a scale that, to be frank, I wasn’t initially expecting,” Telstra general counsel Will Irving told ALB. “We were expecting a number of firms to come in with specific fixed-fee arrangements or blended rates or success-based fees and they came in with something that was pretty much an across-the-board proposal.” While Telstra does not reveal its exact arrangements with the law firms on its panel, Irving says that about 30% of the company’s external legal spend is accounted for by alternative billing. He says that the right balance would be about a 50/50 split of fixed and hourly billing. While G+T managing partner
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Danny Gilbert said that clients want to get the sense that they are receiving value for money, the deal with Telstra was possible, he says, because Irving understood law firms and was willing to negotiate a deal that was mutually beneficial. “Where you’ve got clients that just want to win all the time on the pricing, it just won’t work,” Gilbert said. “Where you’ve got clients who just want to absorb your entire margin either through discounts or fixed-price Danny Gilbert, arrangements then nobody wants to do their work – the Gilbert + Tobin relationship can’t blossom in those circumstances.” Gilbert says that the arrangement with Telstra has made the firm focus very hard on the management of relationships with clients. “I think it does focus the mind on efficiency because you don’t have the clock just ticking away,” he says. “You know that whether you spend an hour on a job or 10 hours on it, you’re going to get paid the same [amount].” In an interesting development, the focus on efficiency has spread from G+T to other firms on Telstra’s panel – including those without fixed-fee arrangements in place. As they are competing for work against a firm that has a very low cost as far as Telstra is concerned, the competing firms have to ensure that they provide attractive estimates. “You bring a disruptive player into any market and you will change the economics for the whole lot. You will give people incentive to find better ways of doing things,” Irving said. A lawyer for one of the firms on Telstra’s legal panel told Irving that the firm is using the discipline it has learned from the Telstra experience when pitching to new clients.
Australasian Legal Business ISSUE 8.2
Feature | in-house issues >>
In-House:
Full steam ahead ALB talks with leading in-house counsel and in-house lawyers about their top priorities for the year ahead
A
n increased regulatory burden, continued pressure to control costs, more sophisticated and exacting work. That seems to be the outlook for the in-house profession in 2010. In short, in-house lawyers will be continuing their pursuit of that allimportant business mantra: to do more with less.
Cost-management pressure
The release of a report commissioned by the federal Attorney-General last month which was critical of the handling of the government’s legal spend (A$555m last year) is likely to be a portent for reform of the government legal sector. The report found that there was a lack of coordination between departments and need for improved management of external service providers. “It is clear that the report will impact on the [in-house government] sector quite substantially,” says Peter Turner, CEO of the Australian Corporate Lawyers Association, noting that these impacts are also likely to flow through to state legal departments. It appears likely the message has already been heard: a spokesman for the Defence Materiel Organisation (DMO), which operates under the auspices of the commonwealth’s Department of Defence, told ALB that the organisation is already in negotiations with its legal panel over alternative billing arrangements. This is likely to be only the start of a series of reforms. Many observers are expecting the consolidation of “whole of government” panels across the Commonwealth and states will occur. And while the heat will be on the government sector, corporate counsel is also unlikely to see any respite from the pressure to make decisions on www.legalbusinessonline.com
►► ALB In-house survey: what are your team’s priorities for 2010?
Annette Spencer head of legal counsel, UBS Team priorities: With the supervision and enforcement of significant market operator rules moving to ASIC in 2010, effective ongoing dialogue with the regulators is a must. As technological developments – both here and overseas – enable different ways of trading, we want to contribute to a regulatory framework that fosters innovation and competition, while keeping investor protection and market integrity paramount
Carl Rowling general counsel, Auckland City Council Commenting on Auckland SuperCity project, a major local government consolidation which brings together seven local authorities and creates or restructures a number of very large council controlled organisations: Assisting in [the Supercity] process while looking after business as usual is by far and away the biggest challenge for the in-house team here at Auckland City. We have to accomplish this in an environment of zero staff increases and an ongoing focus on securing savings as the effects of the recession continue for many of our ratepayers. Balancing those equally important priorities will become increasingly difficult and the pressure will continue to rise over the next nine months. Putting in place and maintaining effective strategies to deal with the demands and stresses of this challenge is uppermost in my mind
David Matthews general counsel, Fonterra Team priorities: Our priorities are to develop a long-term capital structure for Fonterra and continuing the work commenced last year to consolidate borrowing programs. We will also review key priorities for our business to ensure that legal services are properly aligned to business priorities. Business priorities in 2010 will be very different from 2009 and we must make sure that we quickly identify new priorities which require focus. Finally, after a year of significant turmoil, we will revisit our core compliance programs to ensure they are as effective as possible.
Will Irving general counsel, Telstra Team priorities: The government’s plans [for Telstra] are significant, but the bulk of my team’s day-today work is focussed on the operating business and a range of initiatives – for example, a lot is happening to improve Telstra’s customer service Market comment: In legal terms across the economy, the general level of regulatory reform remains high, with the government continuing to implement significant competition and consumer law reforms, and changes in HR and in the banking and finance sectors too. Everyone is a little more risk-averse, which means downside risk protection is more prominent in people’s minds than during the boom. Economy wise, I’m expecting a year of consolidation, though later in the year the amount of lending to be refinanced across the global economy in 2011 and 2012 may well weigh on things - though of course I hope the US is recovering by then and it may not be a big deal, but this is something to watch
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Feature | in-house issues >>
“Companies are not just doing what they did in the past – there are different types of transactions, different funding models, multi-jurisdictions” Rebecca Holbrook
Fisher & Paykel
34
cost. Key decisions include getting the internal structure right for in-house teams, contracting out appropriate kinds of work and pushing for more innovative fee structures such as Telstra’s arrangement with Gilbert + Tobin. Part of the push towards improved value has been driven by the GFC, but an improving economy does not necessarily mean that the issue will disappear off the agenda. The GFC may have abated but the need for inhouse lawyers to manage an increased workload within a fixed budget has not. In a sense, the in-house profession may have become a victim of its own success. Far from having to fight for involvement in the business, inhouse teams are now seeing more of the action than ever before – a symptom of the increasing complexity of global commerce. “Companies are not just doing what they did in the past – there are different types of transactions, different funding models, multi-jurisdictions,” observes Fisher & Paykel Appliances GC Rebecca Holbrook, who is also president of the Corporate Lawyers Association of New Zealand (CLANZ). In some sectors, contracts have been described as becoming markedly more complicated. For example, Kiri Parr, regional legal officer of engineering and consulting firm Arup, says that contracts in the construction industry
are becoming more onerous and onesided as parties attempt to secure more favourable terms for themselves, such as additional indemnities and warranties. The result is a heavier review and negotiation workload for in-house teams. GFC or no GFC, cost containment for this rising workload will remain a key issue for in-house lawyers. While some in-house teams have increased their resourcing, this is by no means a consistent pattern. Rebecca Holbrook’s perception is that in-house lawyers will either maintain or reduce their legal spend in 2010. “This is not a time for firms to decide that the GFC seems to have passed, so they can put their fees up by 10%,” she says. The Telstra-Gilbert + Tobin deal (see box-out) is just the latest manifestation of this push to improve value. Beaton Consulting principal Joel Barolsky, who works with law firms to develop billing and remuneration structures, says that an increasing number of clients have been asking about alternative billing methods and the best way to implement them. He says the deal between Telstra and G+T will only continue that trend: “That’s a pretty radical alternative fee arrangement that was struck between one of Australia’s largest and most sophisticated buyers of legal services and a leading firm,” Barolsky says. “When in-house counsel sees
Australasian Legal Business ISSUE 8.2
Feature | in-house issues >>
market leaders like Telstra embrace alternative arrangements, they look to follow those early adopters.”
Taking initiative on external costs
It is thus clear that external advisers will be asked to do more for less in 2010. But are law firms up to the challenge? Peter Turner says that firms are increasingly willing to take on more of the risk or to bill on a project management basis. However, he notes that it is not yet clear whether this will become a long term trend and says that in-house counsel may need to take the Peter Turner, initiative in this area. ACLA Helen Conway, general counsel for Caltex Australia, says the challenge is for companies to “develop specific proposals and push ahead in a determined fashion.” She acknowledges that this carries a
www.legalbusinessonline.com
risk that law firms - particularly the larger ones - will simply not accept the proposals. “This means companies may have to go with other firms which don’t have the recognised expertise, capability or capacity. This is less risky in the case of work which is not strategically or operationally critical to the company. Clearly, it is necessary to segment the legal work to be outsourced before structuring fee arrangements,” she notes. Other in-house lawyers share Conway’s concern that calls for alternative billing arrangements will go unheeded. Louise Leaver, legal counsel for Australian Health Management says that that the relatively short duration of the downturn may be a factor: “I don’t know that there has been that long term pain that is often needed to cause a permanent shift in approach. I would not be overly surprised if some firms returned to old habits.” Rebecca Holbrook says that inhouse lawyer associations worldwide
“When in-house counsel sees market leaders like Telstra embrace alternative arrangements, they look to follow those early adopters” Joel Barolsky
Beaton Consulting
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Feature | in-house issues >>
►► ALB In-house survey: what are your team’s priorities for 2010?
Kiri Parr regional legal officer, Arup Team priorities: There is always the danger of feeling swamped in an in-house role. It’s important to maintain focus and keep the team vibrant, motivated and working at our best. We will also continue to provide extensive training to the business so that people can recognise when a legal issue is rising and talk to us at the right time
Louise Leaver legal counsel, Australian Health Management (AHM) Team priorities: We have already significantly reduced our external legal spend at AHM over the last 12 months, focussing on the capabilities of the in-house team. This year the focus is really to deliver more value within the existing cost environment. To do this I think there needs to be concentration on individual lawyers’ personal development plans, to ensure that lawyers have the skills and knowledge to do the work and avoid doing it on the fly (thereby increasing the risk profile of that work) Market comment: In 2010 we need to be on the front foot with regulatory changes that are likely to occur, both generally and in particular industries. The challenge will be finding the time to be abreast of the regulatory changes when we are already time-poor, delivering more with less. I don’t think that in Australia we have yet felt the regulatory impact of the GFC or the State and Federal Governments’ budgetary pressures. I think 2010 is the year for that impact to be felt
Ted Williams group counsel, Thiess Team priorities: Having had to adjust to radical change and uncertainty in our operating environment, 2010 will be a time for consolidation and applying the lessons of 2009 to systems throughout our business. Credit and counterparty risk will remain a key focus of our work, as will the need for external providers to demonstrate their capacity to add value through better understanding of our business
Helen Conway company secretary and general counsel, Caltex Australia Team priorities: The key issue is ensuring we are aligned with the strategic and operational priorities of the business – doing work which adds the greatest value. This year, we will be reviewing how the legal team operates to ensure we are as efficient as possible, so we are able to do the key work with current headcount and work with our external lawyers to look at putting in place alternative billing methods Market comment – AFAs: There is a growing acceptance among the law firms that they need to consider alternative fee arrangements. The challenge is for companies to develop specific proposals and push ahead in a determined fashion. The risk is that law firms – particularly the larger ones – will simply not accept the proposals. This means companies may have to go with other firms which don’t have the recognised expertise, capability and capacity. This is less risky in the case of work which is not strategically and operationally critical to the company.
Francesca Lee general counsel and company secretary, Oz Minerals Team priorities: Balancing the many demands on the team to assist with working on potential acquisitions and alliances, both locally and internationally. Managing litigation, keeping abreast with and responding to the many recent (and foreshadowed) changes in the law that could impact in areas such as the corporate and governance area, occupational health and safety, environmental and sustainability-related matters.
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have reported growing discontent with the value provided by law firms and widespread disenchantment with annual fee increases. While she predicts an increased use of mechanisms such as panels and fixed fee arrangements, she says that firms often have a tendency to confuse the concepts of value and price. “It’s not about giving someone a 20% discount off an invoice - it is about justifying that spend and the way they do business.” Holbrook says that ultimately the onus is on the firms themselves to develop these solutions and to prove their value.
Regulation and more regulation
The GFC has taken a heavy economic toll, but what have we gained from it? For governments both local and abroad, the answer seems to be a renewed enthusiasm for regulation, although the efficacy of reforms thus far has been questioned in some quarters. Nonetheless, it is clear that in-house counsel are contending with an increase in regulatory activity in Australia and overseas. “All regulators have acquired new and much tougher powers in their particular areas,” says Turner. “We also have the new fair work legislation and no doubt the [federal government] will make another attempt to introduce its emissions trading scheme – a major reform.” Trade practices, financial services and superannuation are other areas where new legislation is either already in place or likely to be passed, with significant ramifications for legal counsel. For New Zealand in-house lawyers, Holbrook nominates the finance sector and competition and commerce more broadly as the areas where there will be an increased regulatory burden. 2010 shapes up as a monster year for those working in the NZ finance sector in particular. Sarah Carstens, general counsel for Fisher & Paykel Finance Group, says that the regulatory changes which will be occupying her team include the introduction of prudential supervision of non bank deposit takers, reforms for provision of financial advice and the implementation of the extensive and administrative requirements under anti-money laundering and counter Australasian Legal Business ISSUE 8.2
Feature | in-house issues >>
terrorism legislation. She is also anticipating further changes to the Credit Contracts and Consumer Finance Act 2003, and the introduction of prudential oversight of Fisher & Paykel’s insurance business under a bill currently before the New Zealand parliament. A theme which seems to be prevalent for both New Zealand and Australian GCs is how to make effective submissions on proposed regulatory reform. “In-house counsel are ideally placed to lead or be a key stakeholder on submissions on proposed policy, and bills, before they are enacted,” says Carstens. “I think one of the key themes [for the profession] is how in-house lawyers can effectively lobby and make submissions on proposed regulatory reform.” Annette Spencer, head of legal counsel at UBS, is another who Rebecca Holbrook, nominates effective Fisher & Paykel dialogue with regulators and contributing to the regulatory framework as a key priority for the new year.
Networking and legal privilege
In-house lawyers often refer to themselves as the “jack of all trades” and increased regulation and more sophisticated work means a heightened pressure to stay up to date. Rebecca Holbrook says that she would encourage in-house lawyers to be active in building professional networks for knowledge sharing and to participate in seminars and industry associations. She says that despite the need to control costs, it is worthwhile to allocate some funds to networking events because a good base of contacts can ultimately result in a more efficient legal spend – for example, identifying the experts in a particular field who are likely to be compatible with the legal team. “It is also worth having one or two trusted law firms whom you can ask for referrals,” says Holbrook. Legal professional privilege will also continue to be under the spotlight. The right of in-house counsel to claim privilege has been questioned by some Australian judicial decisions, although it has also been affirmed in other www.legalbusinessonline.com
“The risk is that law firms – particularly the larger ones – will simply not accept the proposals. This means companies may have to go with other firms which don’t have the recognised expertise, capability or capacity ... Clearly, it is necessary to segment the legal work to be outsourced before structuring fee arrangements” Helen Conway
Caltex Australia 37
Feature | in-house issues >>
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Australasian Legal Business ISSUE 8.2
Feature | in-house issues >>
cases. A Commonwealth report on the matter was concluded in late 2008, but a government response is still pending. “It’s a right which is currently up for grabs, unless it is legislated – it is an important issue given that we are living in a more litigious society and there is a growing role for lawyers to play in managing conflict,” observes Peter Turner. Of major consequence to Australian lawyers of all persuasions is the push to introduce national legislation to regulate the legal profession. Potential benefits, such as reduction in the costs and uncertainty associated with practising interstate, will undoubtedly be welcomed by budget-conscious lawyers.
Work/ life balance
ACLA studies have shown that corporate lawyers are working an average of 50 hours a week, which is similar to the hours averaged by the rest of the profession. “An increasing percentage of law graduates are concluding that they’re not equipped to deal with today’s legal profession and are pursuing other careers,” says Turner. “There is a possible link – we need to look at ways of working smarter, not harder and perhaps technology solutions.” Kiri Parr’s work conditions at Arup are an example of the kind of flexibility employers may need to offer to retain their legal talent in-house. Parr, who has two small children, works the equivalent of three days a week, with the hours spread over four days. Two of those days are worked from home and the other half in the office, with phone and internet allowing for a seamless transition between locations. Parr has taken her younger child on business trips in the past, accompanied by a nanny or Parr’s own mother, with Arup covering the additional travel costs incurred. Kiri Parr says that solutions like these are in the long term interests of all concerned and should not be characterised as a maternity issue. “In-house work is very demanding. We don’t want lawyers who work here for two years and then burn out – we want them here for the long run. That means being flexible as someone’s life changes – it’s not just about maternity leave.” ALB www.legalbusinessonline.com
►► Defence Materiel Organisation legal panel Allens Arthur Robinson Australian Government Solicitor (AGS) Blake Dawson Clayton Utz DLA Phillips Fox Minter Ellison Norton Rose Sparke Helmore
►► Telstra legal panel – members Arnold Bloch Leibler Australian Government Solicitor (AGS) Blake Dawson Davies Collison Cave Freehills Gilbert + Tobin Henry Davis York Mallesons Stephen Jaques Norton Rose Piper Alderman
“In house counsel are ideally placed to lead or be a key stakeholder on submissions on proposed policy, and bills, before they are enacted. I think one of the key themes is how in-house lawyers can effectively lobby and make submissions on proposed regulatory reform” Sarah Carstens
Fisher & Paykel 39
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Making giving easier... Those who wish to contribute significantly to medical research will need high-level advice, not only on tax and reporting matters but also to ensure the choice of research project is right. Noel Chambers, head of philanthropy at the notfor-profit Research Australia, explains. The face of philanthropy is changing as grant makers becoming increasingly sophisticated. This is particularly the case with regard to health and medical research, the philanthropic project support for which is aimed translating research outcomes towards delivering community benefits. Health and medical research plays a key role in developing better knowledge and understanding of chronic conditions and their related risk factors, and in developing the improved treatments and preventive strategies that underpin a healthy and active community. One of the most notable changes to the funding of that research is the emergence of a new breed of givers: ‘Philanthropreneurs’ are in some cases high-net-worth individuals who are familiar with venture capital processes and their attendant risk-management strategies, due-diligence needs and performance measures and who wish to apply these principles to their giving strategies. They may also recognise that commercial pathways are a valid and sometimes vital component contributing to the delivery of safe and effective new treatments, diagnostics and improved clinical practices.
Philanthropreneurs may establish tax-effective vehicles – notably Private Ancillary Funds (PAFs) and Prescribed Private Funds (PPFs) – to assist them with the implementation of their giving strategies, and indeed on 1 October 2009 new guidelines published by the Australian Taxation Office came into effect in relation to the establishment of PAFs and transitional arrangements for existing PPFs. Professional services providers can assist with the establishment of PAFs and PPFs, but assistance with the choice of which health and medical research projects to support, which can be challenging if the philanthropreneur does not have a scientific background or established relationships with the health and research community, is often not readily available. Neither is the expertise and systems to facilitate that support. Research Australia’s extensive networks, experience and capability can assist philanthropreneurs, companies, trusts, foundations and individuals meet their giving needs by utilising independent and transparent governance procedures to identify the appropriate health and medical research programs and the nature and conditions of the grant, whilst maintaining confidentiality. By lowering barriers and working with the legal and financial communities, Research Australia is endeavouring to make supporting health and medical research easier.
For more information: www.researchaustralia.org Australian Tax Office: Private ancillary funds http://www.ato.gov.au/nonprofit/content.asp?doc=/content/00215720.htm Trustee Handbook: Roles and Duties of Trustees of Charitable Trusts and Foundations in Australia http://philanthropywiki.org.au/index.php/Trustee_Handbook www.legalbusinessonline.com
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Feature | M&A >>
Nigel Hunt, Mallesons
M&A:
mood 42
an acquisitive Things can only get better from here. ALB takes a look at what the M&A trends are that the top experts expect to see in 2010
Australasian Legal Business ISSUE 8.2
Feature | M&A >>
►► Australian & New Zealand M&A – Top legal advisers for calendar year 2009 Legal advisor
Value (US$bn)
Rank
Market share
No. of deals
Allens Arthur Robinson
96.3
1
61.1
75
Freehills
94.9
2
60.2
101
Mallesons Stephen Jaques
92.3
3
58.6
88
Freshfields Bruckhaus Deringer
69.1
4
43.9
14
Blake Dawson
68.4
5
43.4
59
Linklaters
62.4
6
39.6
8
Slaughter & May
58.6
7
37.2
3
Clayton Utz
23.0
8
14.6
89
Baker & McKenzie
36
12.0
9
8.2
Torys
8.7
10
5.5
4
Corrs Chambers Westgarth
8.5
11
5.4
26
Minter Ellison
6.4
12
4.1
75
Gilbert + Tobin
5.9
13
3.8
21
Allen & Gledhill
4.2
14
2.7
11
Simpson Grierson
3.6
15
2.3
10
McCarthy Tetrault
2.3
16
1.5
6
Sullivan & Cromwell
2.2
17
1.4
4
Davies Ward Phillips & Vineberg
2.0
18
1.3
5
Gianni, Origoni, Grippo & Partners
2.0
19
1.3
3
Ogilvy Renault
2.0
19
1.3
4
Fasken Martineau DuMoulin LLP
1.9
21
1.3
7
Lovells LLP
1.9
22
1.2
3
Johnson Winter & Slattery
1.7
23
1.1
3
Blake Cassels & Graydon
1.7
24
1.1
7
Paul Weiss
1.7
25
1.1
2
Source: Thomson-Reuters
W
hen M&A lawyers tell us they are optimistic, it is worthwhile remembering that everything is relative. Optimism is the best way to describe a market that is likely to see more M&A activity this year than in 2009; however, that in itself is not a particularly bold prediction. Last year was the slowest M&A market seen in five years, yet 2009 was not without its highlights. The BHP-Rio Tinto iron ore joint venture capped off a year of strong interest in the resources sector, although regulatory clearance remains an importance hurdle for this particular deal. And 2009 was, of course, the year that Chinese inbound investment really came to the fore, giving some cause to rejoice and others cause for consternation. While that was last year, what is on the radar for M&A in 2010?
Target sectors
Unsurprisingly, the resources sector is topping the list of expected hot www.legalbusinessonline.com
segments for M&A in 2010. In addition to the well-documented interest from Chinese, Japanese and North American buyers for commodities such as coal, copper and gold, diversification into other sectors is likely to continue. An example is Bright Food’s interest in CSR’s sugar assets. Some domestic consolidation is also expected. AAR partner Ewen Crouch warns against making the assumption that consolidation always means aggregation. He says that it is more a case of companies making the right strategic fit. “Companies are looking quite closely at what parts of the business are key to their future, and what parts are not so key,” he says, “... what parts can be enhanced by acquisition and what parts don’t fit the strategy. That gives rise to opportunities for both buyers and sellers.” Crouch says that reforms to the financial services sector may stimulate consolidation there, and adds that some consolidation may also occur in the commodities, resources and general industrial sectors.
“The sense I’m getting is that vendor expectations are too high – other than the resources sector, it’s difficult to see why the stock market’s so high Gary Lawler
G+T
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“The balance of M&A activity will stay in favour of domestic deals or inbound deals. It will be a while, if ever, before outbound exceeds those categories” Nigel Hunt
Mallesons
Mark Pistilli of Chang, Pistilli & Simmons says that more consolidation of the coal sector, especially among owners of mines along the eastern seaboard, can be expected. “This consolidation started to happen towards the end of last year and has continued in 2010. There are still a number of independent mine owners who haven’t yet been gobbled up.” He is also watching the LNG sector with interest. “There have been a lot of deals over the past 12 months in that sector, and I think this year it will go two ways. Either people will see gases such as LNG and natural gas as the major fuel of transition, as we move away from a carbon economy, and will continue to support the sector strongly, or they will come to the conclusion that those assets were bought for too much and the bubble will burst. It is hard to see the sector remaining stagnant given the recent large investment in it.” Pistilli says that the utilities and infrastructure space will also be active. “There are a lot of companies in the sector carrying high levels of debt, and we are still seeing distress,” he says, expecting that the most active buyers for these assets will be existing players who are buying out other players.
Asset prices
Corporate distress last year had many predicting a surge in opportunistic M&A, but those expectations fell somewhat short. “Last year there
weren’t the largely anticipated number of deals because the debt markets were essentially frozen – otherwise there were all of the ingredients for a massive boom,” Pistilli says. “My feeling is that asset prices will remain depressed for a large part of the year. There is a question of exactly how long that window will be and whether buyers will miss the boat.” Mallesons partner Nigel Hunt says that the market has already moved on from the distressed stage, and current prices represent a return to reality from the heady days prior to the GFC. “There were examples of deals done at values which were not sustainable in the cold light of day – what we have this year is a reality check on value,” he says. At the time ALB went to print, the reporting season had only just begun and, with some exceptions, results were generally in line with market expectations. Gilbert + Tobin partner Gary Lawler is of the view that asset prices do not seem to be depressed. “The sense I’m getting is that vendor expectations are too high – other than the resource sector, it’s difficult to see why the stock market’s so strong,” he says. “It will be very interesting when the reporting season comes around to see if the results are in line with what is priced into the market. That will have a big bearing on where we end up for the rest of the year.” AAR’s Crouch says that the valuation
►► Top announced Australian M&A deals – calendar year 2009 Date Announced
Target
Acquiror
June
Rio Tinto PLC-WA Iron Ore Assets
BHP Billiton-WA Iron Ore assets
November
Transurban Group
March
Macquarie Communications
November
value (US$ bn)
Target’s legal advisor
58.0
Linklaters Allens Arthur Robinson Freshfields Bruckhaus Deringer
Investor Group
8.1
Mallesons Stephen Jaques (AU)
Canada Pension Plan
6.4
Freehills Mallesons Stephen Jaques Baker & McKenzie
AXA Asia Pacific Holdings
AMP
6.3
Mallesons Stephen Jaques Freehills
December
AXA Asia Pacific Holdings
National Australia Bank
5.5
Mallesons Stephen Jaques Freehills
November
AXA Asia Pacific Holdings
Investor Group
5.4
Mallesons Stephen Jaques Freehills
April
Lion Nathan
Kirin Holdings
3.4
Mallesons Stephen Jaques
August
Felix Resources
Yanzhou Coal Mining
2.5
Allens Arthur Robinson
February
Hutchison (Aust)Telecommunications
Vodafone Group (Aust) -Telecom
2.4
Allens Arthur Robinson Freehills
September
Lend Lease Primelife Group
Lend Lease Corp
2.3
Gilbert + Tobin
Source: Thomson-Reuters
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Australasian Legal Business ISSUE 8.2
Feature | M&A >>
of assets is ultimately a factor of the individual motivation of each seller and buyer, and that it isn’t possible to make a generalisation about whether asset prices are depressed. Freehills’ Tony Damian points out that asset prices alone may not always necessarily affect public M&A deal volume. “If you are seeing rising asset and stock prices, you wouldn’t expect that to be an impediment to scripfor-scrip deals involving companies with comparable assets,” he observes. Damian says that another potential trend could be the return of hostile acquisitions. “While I expect the continued presence of ‘merger of equal’ transactions, I think that we may well see the return of hostile M&A deals with significant premium,” he says. For non-hostile M&A, Malleson’s Hunt is of the view that a drop in participants in trade auctions is likely to result in more sellers resorting to IPOs. “More deals were going to trade sale before the GFC, but now there are an increased number of deals going down the IPO route,” he observes. “There will also be more balanced, less seller friendly documents.” In contrast, Crouch says that he expects more sellers to opt for trade sales because of their simplicity: “IPOs are certainly one method, but that method involves not just selling the asset, but a new ownership and development structure for the asset,” he says.
The million-dollar question
There is a strong consensus on an appetite for growth in the market, but access to funding will continue to be a pivotal factor driving M&A activity. Hunt says that the price of debt is slowly coming down and competition is returning to the market – but only for the right kind of buyer. “If you’re an A+ rated organisation such as Woodside or Wesfarmers, the debt market is there for you,” he says. In the meantime, he expects, other acquirers will resort more to scrip bids and lightly geared deals – in essence, a return to the models which was prevalent prior to 2003. G + T’s Lawler is less optimistic about credit: “I think it will remain tight for some time. There’s less access www.legalbusinessonline.com
to foreign credit and there is talk of banks being required to increase their level of tier-one equity, which again will result in less money for lending.” There has also been some suggestion that there is a connection between the large number of capital raisings which took place last year and the level of M&A which can be expected to occur this year. For example, Freehills’ partner Rebecca Maslen-Stannage commented earlier this year that she expected M&A dealflow to “pick-up significantly in comparison to last year’s lower levels, as strong companies which have raised capital have positioned themselves for future growth.” And Lawler says that a good deal of capital raisings last year were for the purpose of sourcing substitute funds, rather than new funds. “A lot of the raisings were to fix balance sheets or to substitute for maturing debt – a lot of lenders were not prepared to extend debt on the same terms or on terms which were considered reasonable,” he says. Chang Pistilli & Simmon’s Mark Pistilli agrees and says that the result could be another round of capital raisings to fund M&A activity unless the debt markets thaw further. He warns, however, that the pattern may not be sustainable: “We will probably see further capital raisings to fund M&A, but there will come a point where it won’t be sustainable to tap the Australian capital markets any further. The capital markets are finite … at which point buyers will need to look for the more traditional funding means, such as greater proportions of debt, to fund growth,” he says.
“India will take time to get to the level of activity within Australia of the Chinese, given that Chinese inbound investment has happened over a long period and there is a greater understanding of doing businesss in Australia” Mark Pistilli
Chang Pistilli & Simmons
Source countries
China’s domination of inbound Australian M&A has been well documented, as has the gradual diversification of Chinese investment beyond the resources sector. Pistilli says this increased outbound investment from China may just have left the world’s second most-populous nation with the uneasy feeling that it could get left behind. “We’re seeing a lot of Indian interest – particularly in small-to-medium mining companies, the bio-fuels and 45
Feature | M&A >>
“Short-term currency movements don’t play all that strongly on long-term investment decisions – and the Chinese are modelling their decisions on a long-term curve” Nigel Hunt
Mallesons Stephen Jaques
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agriculture sector – a bit of everything, although they’re not as interested in IT and manufacturing and other areas where India is already domestically strong,” he says. But that is not to suggest that Indian investment is ready to take on Chinese proportions just yet – this will depend heavily on the pace at which India’s urbanisation and development progresses. “India will take time to get to the level of activity within Australia of the Chinese, given that Chinese inbound investment has happened over a long period and there is a greater understanding of doing business in Australia,” observes Pistilli. “The Indians are really just learning how to do business here.” Yet the strong Australian dollar may deter investment. Pistilli notes that when the Korean won lost 25% of its value against the Australian dollar last year, a number of previously active Korean buyers disappeared off the M&A radar and deals with Korean companies collapsed. The intriguing exception to the rule, however, seems to be China. Lawyers report that the rising Australian dollar has not, at least thus far, deterred Chinese investors. “Short-term currency movements don’t play all that strongly on longterm investment decisions – and the Chinese are modelling their decisions on a long-term curve,” says Malleson’s Hunt. “They want to secure a foothold in the resources which are necessary to their future. If you’re taking a 10% placement as part of a 20-year strategy, you’re not going to be so fixated on what you pay for that 10%.”
AAR’s Crouch does not think currency will be a significant factor in deterring foreign investment in the energy & resources sector. “It’s a different equation with investment in the ownership of companies that own underlying resources – [investment] provides a natural hedge if you are a user and importer of those resources.” Freehill’s Damian is predicting the continued presence of active North American acquirers in the Australian market place. “In particular I think we may see further examples of interest from Canadian companies as well as interest from well-placed US firms,” he says.
Outbound M&A
Damian says that there is a “golden opportunity” for strong Australian companies to make strategic acquisitions in 2010. But will this opportunity go begging? G+T’s Lawyer says that he has not seen a great deal of interest so far from his clients in relation to outbound investment. “I’m not quite sure why,” he says. “Obviously credit is tight and possibly a reflection of the opportunities available offshore. And Australian companies have not always had a great track record with big off-shore acquisitions – some have, some haven’t.” Malleson’s Hunt is optimistic about outbound M&A levels because of the strong Australian dollar and less competition for assets, but he’s not getting too carried away. “The balance of M&A activity will stay in favour of domestic deals or inbound deals. It will be a while, if ever, before outbound exceeds those categories.” ALB
Australasian Legal Business ISSUE 8.2
Feature | M&A >>
www.legalbusinessonline.com
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Feature | interview >>
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Australasian Legal Business ISSUE 8.2
Feature | interview >>
In-house perspective
Annette Spencer, UBS
Advice you can bank on UBS Australia’s head of legal counsel Annette Spencer shares the highs and lows of a tumultuous 2009
Y
ears spent in law school seemed like a long time for Annette Spencer to wait in order to discover whether law was the right career path for her. “I wanted to know that I wasn’t going to spend all these years studying, only to find that being a lawyer wasn’t the life for me – so I answered a job ad at uni to work at Rabobank,’ says Spencer. “Once I got a taste of the variety that was available for in-house counsel, I never looked back.” Having worked in-house in Australia and the US (Spencer is admitted to the New York Bar), Spencer has resisted the lure of private practice and is comfortable that she has chosen the right career path for herself. And the latest chapter of her career is off to a flying start. Spencer and her team won the 'Investment Bank In-house Team of the Year' award at last year’s ALB Law Awards. “It was great to get recognition from our peers and to achieve something as a team,” she says. UBS has three broad arms in Australia – wealth management, asset management and investment banking. Spencer heads up a team of ten lawyers and officers in the investment banking group and reports to Asia-Pacific general counsel, Chris Madden. UBS has had a hand in many of the capital raisings which dominated the headlines last year. In the five quarters
www.legalbusinessonline.com
“Business knowledge helps build long-term relationships and if [external advisers] understand culture and risk tolerance levels they can be more effective – particularly on deals which have a quick turnaround time” to 31 December 2009, 55 S&P/ASX 100 companies have tapped the market for A$71bn in new equity capital. UBS has worked with 29 of those corporations, raising A$42bn. These included capital raisings for Asciano (A$2.35bn), Woodside Petroleum (A$2.5bn) and CSR’s SAREO raising ($375m). Spencer says that the period between July and September was particularly busy. UBS underwrote the largest block trade in Australian sharemarket history for the Australian Government’s Future Fund sell-down of its A$2.37bn stake in Telstra. And Spencer predicts the market is poised for more activity if the conditions are appropriate. “It really depends on how quickly corporates decide they now want to access capital for acquisition opportunities,” she says. “Everybody is getting themselves ready to respond if the M&A market picks up next year.” The capital raisings and block trades provided more than a few sleepless nights for the team, but Spencer says they were one of
Annette Spencer
UBS Australia
the most satisfying aspects of 2009 due to the relentless intensity of the work and the fact that the team was able to provide valuable advice on every deal. Government bond transactions have also been an active area and UBS has provided advice on issuance and facilitated distribution through its client network. “We’ve seen some significant issues in 2009 and recently a return to Kangaroo bond issuances,” she says, adding that large-scale infrastructure projects such as the National Broadband Network (NBN) could reinvigorate the development of non-traditional bond structures such as retail bonds, ensuring as many different types of investors as possible are involved. She notes that simplifying regulations relating to retail bonds could open up this relatively untapped market. And regulation is a theme which Spencer says is set to take on a new significance, as regulators of the finance industry ponder major reform. “With the supervision and enforcement of 49
Feature | interview >>
“Everybody is getting themselves ready to respond if the M&A market picks up next year” Annette Spencer
UBS Australia
significant market operator rules moving to ASIC in 2010, effective ongoing dialogue with the regulators is a must,” she says. “As technological developments both here and overseas enable different ways of trading, we want to contribute to a regulatory framework that fosters innovation and competition whilst keeping investor protection and market integrity paramount.”
Working through the downturn
Spencer says that in the early days of the global financial crisis there was a good deal of “stress-testing” of precedent documents, procedures and rules. “That was the challenge – responding to questions that were arising because our clients were looking at things in a different light, and focussing on clauses in the context of ‘worst case scenario.’ Focus is always dependent on the times and when you’re hearing constant stories of default and insolvency, you find clients will focus more on those clauses,” Spencer says. Spencer views the financial crisis as a “reference point” in the career of a lawyer. “The positives are that many lawyers who worked through the GFC can now look at a clause and have firsthand examples as to why that clause is important.” Despite the additional challenges, external legal spend remained steady throughout the financial crisis. UBS has long-standing relationships with certain firms, although this does not preclude experts from other firms being used where appropriate. However, Spencer is generally happy with the service she’s received from firms during the downturn.
“We used top-tier firms and they’ve all done fairly well to respond to clients’ changing needs,” she says. “Clayton Utz has done a particularly good job this year. They listened, realised that we were facing different issues and introduced partners with relevant expertise – people we hadn’t traditionally dealt with, but they leveraged their own internal knowledge to make introductions.” Spencer says that she expects advisers to understand the risk tolerance levels of UBS and to understand the organisational business model, particularly in terms of client focus. “That business knowledge helps build long-term relationships and if [external advisers] understand culture and risk tolerance levels, they can be more effective, particularly on deals which have a quick turnaround time, so you don’t have to monitor every level of instruction and we can let partners engage more directly with bankers," she says. “The sign of a really good partner is that they know when to raise a matter with counsel,” she says. “There have been a lot of deals that have moved at a fast pace recently, and the emphasis for firms needs to be on providing succinct, well-structured advice, as there just isn’t time for rewriting lengthy advice when the message should have been communicated effectively the first time.” Spencer also warns against ‘key man’ syndrome and says that she would encourage firms to share their knowledge of clients such as UBS among their partners, to cover the contingency of the key contact leaving the firm. ALB
►► UBS: Highlights of 2009 Debt capital markets • UBS was a bookrunner on every major syndicated deal by State and Commonwealth governments – including the Commonwealth's A$4bn Treasury Indexed Bond, the largest bond ever issued into the domestic market Equity capital markets • In the five quarters to 31 December 2009, 55 S&P/ASX 100 companies have tapped the market for A$71bn in new equity capital. UBS worked with 29 of those corporations, raising A$42bn • In 2009 UBS conducted 18 ‘over A$500m’ issues, including Wesfarmers (A$4.6bn) Woodside (A$2.6bn), ANZ (A$2.5bn), Asian (A$2.4bn) and Telstra (A$2.4bn).
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Australasian Legal Business ISSUE 8.2
Feature | dictation >>
Talk is cheap Do the advantages of investing in the latest digital dictation technology outweigh the cost? ALB crunches the numbers…
T
he immediate cost savings of dictation devices can be hard to quantify, but in an industry where time is money, the question lawyers really need to ask is can they afford not to upgrade to the latest digital transcription technology? Digital dictation systems (DDS) not only allow lawyers to create documents much more quickly, it also allows provides greater flexibility by allowing them to work remotely. While many firms have just gone through a period of belt-tightening, Olympus product specialist Richard White says there are several advantages to firms upgrading their current system. “It’s about saving time and creating a much smoother workflow,” he says. Arnah Pearson, the Asia Pacific sales manager for WinScribe, says it doesn’t take much time for dictation technology to pay for itself.” The range of time it takes a law firm to recover their investment in our solution varies between approximately six months and 18 months,” she says, adding that there are several variables that influence the equation. One important factor is the process that the law firm is currently using. For those who are still using analogue tapes, the time to ‘pay back’ is faster than for those firms who have already 52
started using digital dictation. This is due to the high costs associated with tape replacements and repairs and maintenance on the tape units. Another factor is the proportion of fee earners within a firm that begin using DDS. Some firms begin with a pilot or internal division and then gradually roll out to the entire firm. With wider productivity savings a firm will reach payback faster, Pearson says.
“Dictation can be done in Australia and transcription can be done overnight in India – or anywhere in the world for that matter” Arnah Pearson
WinScribe Advantages]
There are many cost savings – hard costs that can be measured (decrease in ratios and temp staff, tape costs, et cetera), and soft cost savings, she says. “These soft costs include increased productivity on the fee earner and secretary’s part, and increases in document production turnaround time. The efficiencies and productivity that can be gained by [using] WinScribe is
entirely dependent on how the system is implemented.” And despite the economic downturn, Pearson says many law firms have recognised the cost savings and advantages of upgrading their dictation technology. “The WinScribe solution has been designed to make work faster and more efficient for legal firms. “Our experience has been that procurement activity has been focused on those things that can deliver savings to the bottom line. As a result, we have continued to enjoy growth in the market and sustained interest as firms look for ways to do more with less,” she said. The adoption of this technology varies by geographical location and firm size. In Europe, where the technology was first rolled out, more than 70% of the ‘Top 500’ law firms have incorporated it into their business. According to Pearson, North America and Australasia are still growth markets for the technology and vendors have heavily focused on these markets over the last four years. “Digital dictation has traveled from breakthrough technology automating an old analogue (tape) process over the last 15 years. As mainstream users of analogue dictation, law firms already had a systematic approach to using dictation. The rate of adoption of DDS Australasian Legal Business ISSUE 8.2
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Feature | dictation >>
“The range of time it takes a law firm to recover their investment in our solution varies between approximately six months and 18 months” Arnah Pearson
WinScribe
among law firms varies in different markets around the world. In the UK, for example, adoption is high, especially amongst the larger firms. Very few of the ‘Top 250’ law firms do not have professional DDS, she says. “In Australia, adoption [rates are] perhaps less but still high with the figure reducing as firm size gets smaller. The only impact on growth of adoption is the emergence of younger ‘self-typing’ fee earners, but where efficiency is considered, firms usually require DDS as a means of capturing and recording documents,” she says.
Technological advances
In the last decade, Olympus’ Richard White says the software has improved ten-fold. “They’re constantly improving it,” he says, adding that major leaps have been made in recording quality, microphone technology and the compatibility with various IT systems. WinScribe has also focused on mobility: the penetration of Blackberry and iPhone devices have influenced the company’s development path, according to Pearson. For example, the company has developed a strategic partnership with RIM to ensure it develops applications for each of their main new Blackberry models. Arnah Pearson, Winscribe has also WinScribe focused on cloud computing. “As with mobility, our customers want independence in terms of location and devices they use. We have released an ‘On Demand’ service that allows customers to use our solution via the web, which we will continue to develop for that segment of our customers who prefer to operate ‘in the cloud’,” Pearson says. “Our product design and implementation also allows for complete flexibility in location. Dictation can be done in Australia and transcription can be done overnight in India – or anywhere in the world for that matter.” A third area of technological advancement being undertaken by WinScribe is in relation to managing business processes and workflow. “A good part of the efficiency gained from our solution occurs as a result of being 54
able to configure the solution to suit the most efficient processes a firm has developed over time. WinScribe has amassed a lot of expertise in the field of business process management and we expect to deliver more of that as part of the future direction of our product development.” Another company at the forefront of technological advances is Philips, which has integration with WinScribe. “Our dictation systems are scaleable for use in small offices or in large multilocation installations. Office-based or mobile, however you choose to create your documents, we deliver solutions that fit, designed to boost the productivity of a law firm’s business,” says Graeme Pearson, Philips APAC manager Philips Graeme Pearson. The company’s SpeechMike Air product is the next evolution in wireless dictation, as it not only boasts improved speech recognition capabilities but incorporates refined ergonomics for convenient operation. No longer joined to the PC by a cable, the new microphone takes desktop dictation to a new level. High connection reliability, low power consumption, and an expedient data transfer rate provide secure wireless desktop dictation with Bluetooth technology. The Philips’ SpeechMike allows users to record dictation directly on the computer using the familiar 4-Position Switch, the scroll wheel and optical trackball to navigate through documents. The product is designed to give greater comfort for users with smaller hands as well as for lefthanded users, especially during longer dictation sessions. For those users looking for portability, the digital pocket memo is a good option. This device allows users to dictate from court rooms, on client visits or during business trips. Voice commands, on-board file encryption and password protection are a few of the product’s features. The bottom line with all of these products is increased efficiency, better workflow management and improved service levels to clients. All of that adds up to reduced stress for lawyers – and who can put a price on that? ALB Australasian Legal Business ISSUE 8.2
Feature | dictation >>
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Feature | website >>
A site to behold Websites have become an essential marketing tool for law firms to utilise for all forms of persuasion. ALB investigates Note: you can read the entire version of this story online: www.legalbusinessonline.com.au
A
ll lawyers, at one stage or another, have used a law firm website to “do their homework” on a firm. Whether you’re trying to decide which firm to engage, looking to apply for a job at the firm or you’re simply checking out the competition, it is difficult to imagine professional life without that handy electronic portal. But what’s in it for the firm? For law firms with a large consumer client base, the value of having a well
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designed website is self-evident. Slater & Gordon, for example, receives over 50,000 enquiries a year, over 10% of which originate from the firm’s website. And according to the firm’s chief operating officer, Mike Feehan, web inquiries are increasing by 50% a year. But for commercial firms working on a business-to-business basis, the equation is slightly more subtle. A strong web presence is still an essential part of any marketing strategy, but it would be highly optimistic to
assume that much work eventuates purely as the direct result of a website. “We do occasionally get matters referred to us as a result of the website – usually smaller matters,” says Ian Robertson, Holding Redlich Holding Redlich Sydney managing partner Ian Robertson. “It’s unlikely that we’d get much [major] work as a result of the website – but on the other
Australasian Legal Business ISSUE 8.2
Feature | website >>
hand, it is unlikely that anyone who is considering using us or working for us would do so without looking at the website.” And that is the critical point. A website may not broker new business for commercial firms, but it does have a critical bearing on whether the firm seals the deal with a prospective client.
Presentation
A good website can reassure clients about a firm’s professional credentials, while a bad one can cost the firm business. “People judge you by the way you present yourself – it is a way to showcase credibility, experience and expertise,” says Mallesons’ head of communications, Kris Barry. Barry says the key part of a firm website is the partner profile area. This is an important first point of call for prospective clients who are weighing up the firm’s credentials – and it is also an important return port of call for existing clients looking to bring in additional expertise. “They might have a general sense of the partner they want and want to look at the recent work and rankings,” says Barry. “That’s certainly the feedback we’ve had from clients on how they use the site.” She says that regular updates of the profiles, such as recent work and directory rankings, are important: “Outdated information diminishes the power of what you’re trying to do.” Another significant part of a firm
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website is the careers section, where prospective employees can discover more about the firm’s internal culture. “We have noticed that people that apply for jobs at Holding Redlich are better informed than ever about the firm,” says Ian Robertson. Allens Arthur Robinson web and extranets manager David Bradbury says that the firm’s website traffic regularly spikes when it is conducting a recruitment campaign.
“People judge you by the way you present yourself – [websites are] a way to showcase credibility, experience and expertise” Kris Barry
Mallesons
Client engagement
Behind the scenes, firm websites can act as a portal for clients to access information about their matters and manage their relationships with the firm. Mallesons has an extranet capability through which clients are able to check lawyer and partner availability in real time. If the person they want to speak with is unavailable, there is a facility to refer clients to team members who are available. The most popular feature of the Mallesons extranet is the capacity to track projects and costs in real time and to compare actual costs against estimates. “Clients can report to the GC or the executive team on how costs are progressing – they don’t have to wait for a monthly account. This adds transparency to the relationship,” says Barry. There is also a facility for clients to provide feedback about the firm’s performance to the relationship partner, which assists in situations
where the client is not comfortable with a more direct method such as face-to-face or by telephone. “It is a holistic online strategy – it is not just about a website in isolation, but a suite of offerings to bring the client closer,” Barry says.
Publications
David Bradbury cites publications – along with the careers section – as one of the most-visited sections of the AAR website. “Publications are where we really impress prospective clients,” he says. And he is not just referring to traditional text publications. The firm has an arrangement with a corporate webcasting network which conducts video and audio interviews with lawyers, which the firm can upload onto its site or send to clients. “The video is more for the social aspects of the business, such as our
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reconciliation plan,” says Bradbury. He says that the audio casts are a popular way to quickly disseminate information and news updates. “A written publication takes time to write and edit, whereas you can record an audio update on the phone and have it online within an hour, so we’ll be the first in the market to respond to developments.”
Social media
No one quite knows exactly how social media tools are going to drive business to firms – but the consensus is that it’s better to be on the bandwagon than off it. “They could be the next big thing, and then again they may disappear within three years,” says AAR’s Bradbury. “We have more and more people following us David Bradbury, on Twitter every day – AAR particularly during the Copenhagen [climate change] summit.” “It doesn’t cost much to get going and to keep going,” says Bradbury. “And things like Twitter tend to work better for business than they do for individuals – there’s only so many times you can write about what you had for breakfast, but as an organisation we have a good flow of stories. But once you start, you need to be consistent and keep updating it.”
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►► Top law firm websites - December 2009 Local law firm websites are ranked by their market share taken from available Australian internet users* Rank
Websites
Domain
1
Allens Arthur Robinson
www.aar.com.au
Visits 7.35%
2
Slater & Gordon
www.slatergordon.com.au
5.94%
3
Armstrong Legal
www.armstronglegal.com.au
4.95%
4
Minter Ellison
www.minterellison.com
4.89% 4.62%
5
Mallesons Stephen Jaques
www.mallesons.com
6
Clayton Utz
www.claytonutz.com
4.16%
7
Deacons
www.deacons.com.au
4.02%
8
LAC Lawyers
www.laclawyers.com.au
4.01%
9
Blake Dawson
www.bdw.com.au
3.81%
10 Law Partners www.lawpartners.com.au 3.39% Source: Experian Hitwise. *Note: traffic patterns are particularly variable in December: the top two firms for the majority of 2009 were AAR and Mallesons
International battles
Two years ago, Mallesons commenced having part of its web content written in Chinese. AAR is another firm making more of its web content available in Chinese. “You have to have excellent translators – fortunately we have a large number in our Hong Kong office to make sure the translation is spot on,” says Mallesons’ Barry. Internationally, websites will come into their own as important representations of brand. Names such as Allens or Mallesons may speak for themselves in Australia and New Zealand, but offshore clients may feel the need to make their own enquiries. Malleson’s Barry notes that in some practice areas such as IP, up to half of the firm’s clients are based offshore.
Normally the top tier like to eyeball each other over the latest M&A legal advisor tables from Bloomberg or Thomson Reuters, but an equally intriguing rivalry is being played out between AAR and Mallesons for supremacy in the Hitwise rankings for the top law firm website. AAR has traditionally dominated, but in early 2009 Mallesons broke through to seize the title on several occasions. According to AAR’s Bradbury, it was a temporary aberration. “Mallesons won January, February and March and then we did some search engine optimisation and won every month through to December,” he says. “[Hitwise] don’t announce who won the year until March, but I imagine we would have won it.” ALB
Australasian Legal Business ISSUE 8.2
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Australasian Legal Business ISSUE 8.2
Feature |lifestyle website >> >>
The Point Villas – Lake Taupo
F
irst light glimmers on the calm surface of Lake Taupo as we slide our bodies into the cool water from the boat jetty. It’s bracing, but not as bad as we imagined, and silent. We are alone save for a fantail performing a merry dance on a branch flirting with the lakeside. A few easy strokes take us around a rocky outcrop where the thrill of discovery awaits. Gigantic Maori carvings, towering more than 10 metres high, are etched into the cliff that looms majestically above us. I feel like an explorer from an Indiana Jones movie. The Mine Bay carvings, which date back to the late 1970s, are usually only accessible by boat, kayak or helicopter, but staying at luxury escape, The Point Villas, gives you easy access from the private part of Whakamoenga Point, more commonly known as The Point. If you are mad, like us, a dawn visit guarantees missing the hoards of tourists who flock to see them daily. Even better, a hot tub, big enough for two, is waiting back at The Point Villas. It’s a tough choice between that and the shower. A bubbling waterfall burbles beside it, with only a glass wall separating inside from out. Nestled amongst the bush, the bathroom, in particular the shower, has a magnificent view that looks out over the www.legalbusinessonline.com
lake. It’s like being at one with nature but with the added pleasure of stepping on to Italian travertine stone tiles warmed by underfloor heating. Our lake view spot is one of two villas that can be secured for an ultimate luxury escape. Each is fully equipped – soft sensuous linen, giant fluffy towels and robes, and a wine cellar to raid, filled to the gunnels with Mt Difficulty’s Roaring Meg pinot noir – even tennis racquets for a friendly game on a court just a few metres from the front door. The villas are self-catering with wellequipped kitchens that would impress even Gordon Ramsey. A dinner table comfortably seats eight, and the giant granite bench that overlooks the bay is a workspace paradise for cooking enthusiasts. There is an option to hire a chef to cook for you, but one of the best things about The Point Villas is the privacy so most prefer to cook for themselves. If cooking is not your bag, a local Thai restaurant does deliver, and The Bay Bar & Brasserie, which is less than a 10 minute drive to nearby Acacia Bay, does great takeaway wood fired pizza. Perfect for a romantic getaway, The Point Villas are also great for a fun gettogether for a group of friends – in either summer or winter.
►► The Point Villas Whakamoenga Point, Lake Taupo, North Island, New Zealand • Two luxury villas available to individuals or groups for exclusive use with private lakeside view. • Price range $1100 a night per villa • For more information visit www.thepointvillas.co.nz Mobile: 0064 274 774 323 Ph: 0064 7 377 8002 Email: info@thepointvillas.co.nz Review supplied by Fairfax Media
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market data | capital markets >>
Equity Capital Markets TRANSACTIONS List Australia, New Zealand Jan 24-Feb 20 NB: Does not include transactions valued at less than than USD10m, best efforts transactions and private placements Issuer
Proceeds (USDm)
Issue date
Currency
Bookrunner(s)
Sector
Australia Charter Hall Group
248.6
12/02/10
AUD
Goldman Sachs JBWere Pty Ltd, Macquarie Equity Capital Mkts
Real Estate
Beadell Resources Ltd
67.2
27/01/10
AUD
Macquarie Capital Partners LLC
Materials
OceanaGold Corp
53.0
18/02/10
CAD
Macquarie Equity Capital Mkts
Materials
Perseus Mining Ltd
31.9
08/02/10
CAD
Cormark Securities Inc, Clarus Securities Inc., Dundee Securities Corporation, BMO Nesbitt Burns Inc, CIBC World Markets Inc, GMP Securities Ltd., Rodman & Renshaw Inc
Materials
OceanaGold Corp
21.4
18/02/10
CAD
Macquarie Equity Capital Mkts
Materials
Hunnu Coal Ltd
17.4
05/02/10
AUD
CPS Securities, Azure Capital Pty Ltd
Materials
Arafura Resources Ltd
15.7
17/02/10
AUD
BBY Ltd, Bell Potter Securities Ltd
Materials
88.7
28/01/10
NZD
Credit Suisse Australia Ltd, First NZ Capital Securities
Industrials
New Zealand Auckland Intl Airport Ltd Source: Thomson Reuters
DEBT CAPITAL MARKETS TRANSACTIONS LIST Australia, New Zealand Jan 24-Feb 20 Issuer
Proceeds (USDm)
Issue date
Currency
Bookrunner(s)
Sector
Australia ING Bank(Australia) Govt Gtd
1,778.2
18/02/10
AUD
JP Morgan Australia Ltd, RBC Capital Markets, UBS Investment Bank, Westpac Banking
Financials
National Australia Bank Ltd
1,386.9
02/02/10
EUR
Credit Suisse, Deutsche Bank AG, JP Morgan, National Australia Bank
Financials
Commonwealth Bank of Australia
1,349.9
18/02/10
EUR
Barclays Capital Group, BNP Paribas SA, Commonwealth Bank of Australia, UBS Investment Bank
Financials
Series 2010-1 REDS Trust
747.2
09/02/10
AUD
Deutsche Bank AG (Australia), Royal Bank of Scotland (AUS), Westpac Banking
Financials
ANZ Banking Group Ltd
616.6
03/02/10
JPY
Citigroup Global Markets Japan, Daiwa Sec Capital Markets, Nomura Securities
Financials
SPI Elec and Gas Australia
447.3
04/02/10
CHF
BNP Paribas SA, RBS
Energy and Power
ME Bank Pty Ltd Govt Gtd
436.1
10/02/10
AUD
Commonwealth Bank of Australia, Credit Suisse Australia Ltd, Westpac Institutional Bank
Financials
Westpac Banking Corp
325.0
02/02/10
USD
Morgan Stanley
Financials
ASB Finance Limited
322.1
28/01/10
GBP
RBC Capital Markets
Financials
National Australia Bank Ltd
250.0
26/01/10
USD
JP Morgan
Financials
Global Tower Partners
250.0
11/02/10
USD
Barclays Capital, Deutsche Bank Securities Corp
Telecommunications
Commonwealth Bank of Australia
236.2
03/02/10
CAD
Scotia Capital Inc
Financials
Arab Bank Govt Gtd
129.3
08/02/10
AUD
ANZ Banking Group, Westpac Banking
Government and Agencies
Westpac Banking Corp
100
02/02/10
USD
Goldman Sachs & Co
Financials
ANZ Banking Group Ltd
46.2
03/02/10
JPY
Citigroup Global Markets Japan, Daiwa Sec Capital Markets, Nomura Securities
Financials
ANZ Banking Group Ltd
17.1
19/02/10
HKD
ANZ Banking Group
Financials
ANZ Banking Group Ltd
12.9
25/01/10
HKD
HSBC Holdings PLC
Financials
ANZ Banking Group Ltd
12.9
11/02/10
HKD
ANZ Banking Group
Financials
ANZ Banking Group Ltd
10.3
11/02/10
HKD
HSBC Holdings PLC
Financials
NEW ZEALAND ANZ National (Intl) London
280.5
16/02/10
CHF
Credit Suisse, UBS Investment Bank
Financials
Mighty River Power Ltd
69.7
04/02/10
NZD
ANZ Banking Group
Energy and Power
Westpac Trust Secs Nz Ltd
38.7
05/02/10
SGD
Hong Kong & Shanghai Bank (SG)
Financials
Source: Thomson Reuters
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market data | M&A >>
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