In ten years' time, this moment might be remembered as Clifford Chance's Australian debacle. Then again, it might equally be known as Clifford Chance's Aussie masterstroke. This two-way merger with Sydney's Chang, Pistilli & Simmons (CPS) and Perth's Cochrane Lishman Carson Luscombe (CLCL) at this point contains but the seed of an outcome. The true success of the venture will be measured, in due course, by the quality of the clients and work which the firm manages to attract. In the meantime there will inevitably be some critical questions asked about the viability of this venture - as indeed there were in relation to Allen & Overy's arrival last year.
This narrative has progressed along familiar lines and with this in mind, ALB asked Clifford Chance partner Scott Bache to respond to some of the more common criticisms that are likely to be raised against his firm's latest venture.
Argument: The Australian market is over-lawyered and there is no room for a new player.
The counter-argument: Clifford Chance is offering services which were not previously available in Australia, or were only available from a small number of firms. "When people say the market is overcrowded, there's some merit in that argument if you look at it from a purely domestic point of view, but if you look at the space where you can deliver Australian clients a global platform as they spread out of Australia and around the world, there's actually a pretty big hole in that market," said Scott Bache. "We work on deals all over the globe; we can tell clients what is going on in the rest of the world. Only really one or two other people in this market can offer that."
This selling point has also been used by Allen & Overy and there appears to be significant interest from clients in the idea of a globally informed advisor and a "one stop shop" - using the same firm for a transaction rather than different firms in multiple jurisdictions.
Argument: Clifford Chance Australia does not represent a new firm, but simply a rebranding of existing players. It does not represent a threat to the existing players.
The counter-argument: Access to Clifford Chance's global resources gives CPS and CLCL an enhanced depth which allows them to take on work which they previously would not have been capable of undertaking.
"We've taken out the best boutique corporate/ M&A firms in the country," said Scott Bache. "Suddenly they've gone from being attacked as being people that don't have the scale to do significant M&A - I don't think anyone's questioned the quality - and now they have got the firepower to be punching on the deals with the leverage which they could have had."
Large firms are likely to argue that only a firm with a local full service capacity is capable of providing the depth of resourcing and practice areas needed on complex transactions. A critical question will be how seamlessly CC is able to draw resources from overseas and refer clients to specialist firms for advice on matters in which CC does not intend to build a practice.
Argument: Clients do not need a "one stop shop" and to use the same firm globally. Increasingly savvy clients are able to develop their own relationships with firms in each jurisdiction.
The counter-argument: Clients are already voting with their feet and leaving firms which do not have a presence in all the jurisdictions where they do business. Scott Bache claims that this was the reason why Clifford Chance entered the Australian market. "In the last couple of years, we've noticed that we've been losing work in Asia as a result of not having a presence in Australia," he said. "This is about us being able to serve our existing clients. What sophisticated clients want globally is a one stop shop and we have been able to do that in most of Asia, but then Australia came up as this massively importantly part of Asia for our clients in places like China, Japan, Korea and India."
The alternative model is to use "best friend" or associate firm relationships to coordinate cross-jurisdictional work, a model which Bache, unsurprisingly, calls into question: "I know that Australian firms are well run and do cross-border work by joining up with counsel in different jurisdictions, but one thing I can tell you by having done a few deals where I've been on the other side of that - I've seen how inefficient it is and how it becomes a potential risk issue in the transaction," he said.
The development of global firms serving global clients was a theme originally raised by Don Boyd to justify the Deacons-Norton Rose merger. If this analysis is correct, there will be serious implications for firms which miss out on the putative rush to find a global merger partner.
CLIFFORD CHANCE AUSTRALIA - QUICK FACTS
Formal commencement: 1 May
Current partnership size: 14 partners
Projected partnership size: 20 to 25 partners over next 3 to 5 years
Practice areas: M&A, competition, private equity, dispute resolution
Offices: Sydney, Perth