Window for Australia mergers may be closing on U.S. firms


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K&L Gates will head into Australia in a big way when it officially merges with Aussie firm Middletons on Jan. 1, but the market is not -- and cannot be -- for everyone, analysts say.

The merger will give K&L Gates an additional 300 lawyers across new offices in Melbourne, Sydney, Perth and Brisbane and a 400-lawyer presence across 11 offices in the Asia-Pacific region.

K&L Gates leader Peter J. Kalis said Australia was an attractive market because it is an English-speaking territory with ties and familiarity to Asian markets, and because of the $550 billion in U.S. investment into Australia since 2005.

The Asian market, particularly China, has been very difficult for U.K. and U.S. firms to penetrate, consultant Peter Zeughauser said. That's why Australia has been used by firms in England and, to some extent, the United States, as a bridge to Asia.

"A lot of people see this as a way to triangulate the issue of the Chinese market. [U.S. firms] had been going to Singapore, Korea and China and even Vietnam, but the cultural differences are difficult to bridge," Mr. Zeughauser said.

"Australians are more familiar with that and they have the breadth and depth in the region and Western law expertise. So it's a friendly neighbor kind of thing."

Not only have a number of London's Magic Circle firms already entered the market, but so has Chinese firm King & Wood, making official this year its consolidation with Australian-based Mallesons Stephen Jaques to form King & Wood Mallesons. The new firm is geared toward representing legal needs across the Asia-Pacific region.

DLA Piper and K&L Gates are the first two U.S. firms to join forces with a large Australian firm. DLA Piper officially combined with DLA Phillips Fox in 2011.

Mr. Kalis said his counterpart at Middletons, managing partner Nick Nichola, has described the Australian market as one that is being "hollowed out," with large firms remaining on one end and boutique firms on the other.

Mr. Kalis said it would be difficult to open a brand-new office in Australia with just a few lawyers because there would be little brand recognition. But some U.S. firms have taken that approach.

Ed Wesemann, a consultant with Edge International, said Australia is one of the most competitive markets in the world. He said the country's corporations have long given out work through competitive bidding processes. He also noted that Australia's population, about 22.8 million, is relatively small and there are a number of lawyers competing for that work.

Mr. Wesemann said Australia's big play nationally is its natural resources sector, while the country is also appealing to U.S. firms because of its strong ties with China and other Pacific Rim nations.

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Gina Passarella: gpassarella@alm.com or 215-557-2494. To read more articles like this, visit www.thelegalintelligencer.com.


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