The collapse of the Allen & Gledhill-Zaid Ibrahim alliance is more than just a failure of strategy: it highlights some of the challenges facing Southeast Asian law firms looking for regional expansion
On new year’s eve last year while lawyers across the region were reflecting on the year that had been and were preparing to usher in a new one, lawyers at two of Southeast Asia’s largest law firms, Singapore’s Allen & Gledhill and Malaysia’s Zaid Ibrahim & Co were terminating the strategic alliance that they had formed only 18 months earlier.
The alliance that was thought to be ‘symptomatic of a new force in Southeast Asia and was both expected to dominate the legal services arena in the region and provide the catalyst for a host of similar moves. But none of these eventuated. Few firms have followed the lead set by the two firms, the alliance was never the force it was predicted to be and according to many in the region, the entente was dead long before it was silently killed off by both firms late last year.
And while the story behind the fall of the A&G/Zaid empire is a riveting read on its own – containing as it does everything from frustrated ambitions to a love triangle – the fact that it also serves as cautionary tale on ASEAN expansion makes it even more interesting.
An unsuccessful adventure
When the strategic alliance was announced in early 2008, both firms cited the forces of globalisation and the desire to create a regional heavyweight as the rationale behind the move.
“This Alliance creates a premier legal powerhouse for the ASEAN region, able to deliver pan-ASEAN solutions and advice,” the firms both said in a press release in late 2007. “Globalisation is reinforcing the trend for competitive Alliances in the legal marketplace to better serve increased cross border trade flow and mergers and acquisitions… this Agreement marks the next phase in our regional expansion plans, offering our clients a level of service and regional capability the market has not seen before.”
But the rhetoric was far from the reality. “The biggest achievement of the alliance was probably getting a few dozen people to turn out for the opening press conference,” said one lawyer who has been following the alliance since late 2007. “If you look at what has happened since, it has been a bit of an anti-climax.”
Indeed, it is hard to pinpoint what the strategic alliance achieved in the short space of time it was around. “The merger claimed to offer both firms a ticket into ASEAN…it was expected that they would claim the lion’s share of work being transacted and be in the best position to expand as a result of it…this just did not happen,” said one lawyer close to both firms. “The only thing to come out of the alliance was a joint venture office in Vietnam and whether this can be termed successful is still very much up for debate.”
The odd couple
The consensus, then, is that the A&G/Zaid strategic alliance was a failure, but the reasons for its collapse are less clear.
One of the more popular explanations is that the two firms were not as compatible as it may have seemed.
“A&G chose the wrong partner,” said another lawyer who has worked with both law firms. “Remember that it was A&G who first wanted to expand into Malaysia, and they first approached an older and longer established firm – Shearn Delomore. [Some partners] could see good long-term prospects for a Malaysian firm to link with Singapore’s number-one firm but Shearn Delamore partners by a majority were not interested. A&G then approached Zaid, a younger law firm, more closely linked to Malays and the Malaysian government.”
The misfit between the two firms was apparent from day one and perfectly evidenced when it came to things like strategic expansion. “Zaid wanted to push ahead aggressively with new offices in the region but A&G were dragging their heels,” the lawyer continued. “This is not that surprising…A&G are in reality the Slaughter and May of Singapore – they want to be big in their own backyard, but have little real interest in expanding overseas.”
In addition, A&G’s Singapore joint-law venture (JLV) with Linklaters was widely understood to have further frustrated the strategic alliance’s ability to expand. It is believed that, under the JLV, A&G cannot open offices in countries where Linklaters already has an office, ruling out places like Hong Kong, China and Thailand. “If you are running this strategic alliance, you would naturally feel crowded out by having a Magic Circle firm in the back of the room… it created something like a love triangle and someone was always going to lose out and in law, perhaps as in life, it was the smallest guy.”
It should be noted though that since parting ways both firms seem to have pushed ahead with their own expansion plans. Zaid has announced that it intends to open offices in Sydney and Melbourne to service the nascent commercial and consumer Islamic finance markets there while A&G is believed to have set up its own associated firm in Kuala Lumpur. The firm now enjoys an association with Ramhat Lim & Partners – which was formed on 1 January 2010 – and is incidentally the new home to a number of former Zaid partners.
A cautionary tale for ASEAN expansion
One question that must be asked is whether Southeast Asia is ready to sustain a heavyweight law firm.
If the A&G/Zaid experience is used as a test-case, then the answer is surely a resounding ‘no.’ The rationale that the firms built their relationship on two years ago was the potential for growth of investment flows between countries in the ASEAN region – in hindsight, perhaps a questionable assumption. Due to a confluence of factors, levels of investment between these countries never reached the heights that A&G/Zaid (and many others) predicted. In this period, the largest investors in Southeast Asia were either Northeast Asian countries (Korea, Japan), China, or the more developed economies of Europe.
That having been said, the financial crisis, law reform, economic liberalisation and a number of other factors in a short period of time have reshaped the ASEAN region into one of the most economically lucrative in the world – not only to the US and EU but also to countries within the region. Singapore, Malaysia, Vietnam, Thailand and the Philippines are all investing in each other in a process that many predict will only increase in the year’s ahead.
Meanwhile two firms from Southeast Asia, DFDL Mekong and McEvily & Collins, merged to form a combined firm still relatively modest in size (90 lawyers) but having a footprint that few others do (five countries: Vietnam, Thailand, Laos, Cambodia & Myanmar). In this case, the firms cited the work already flowing into and between the countries in the region as the impetus for the move.
Perhaps theirs is a more measures reaction to that same regional imperative. ALB