Hong Kong's legal community becoming internationalized

When it was announced earlier this month that Koo & Partners was to merge with the US firm of Paul, Hastings, Janofsky & Walker (Paul Hastings), eyebrows were raised. What were the ties that bound together a large US corporate law firm with a much smaller Hong Kong financial services practice? Both firms can answer this question with one word: China.

"The US is the world's largest economy and China is the future. Linking the two together means that there will be lots of business opportunities," says Donald Koo, founding partner of Koo & Partners.

In essence, Koo felt that his firm had to face up to the fact that Hong Kong's growth will have to come from China. His firm has reached a sizeable scale in a short amount of time in the local market, but for future expansion, the only road to take was that leading to China.

However, a small Hong Kong firm on its own would not be that successful in China. What was needed was a bridge that would internationalize Koo's practice, gaining it access to international China business. That bridge as found in Paul Hastings. "When China's WTO accession was approved, that was the catalyst for our discussions with Paul Hastings," says Koo. "The PRC ball game is no longer a national ball game, it is international."

The merger will see the partnership of Koo & Partners amalgamate into the partnership of Paul Hastings, with most of the existent Hong Kong partners becoming full partners of the larger merged, US based entity. The firms will continue to focus on their core finance, banking, commercial and corporate practice areas, although it is understood that some of the legacy practices of the Hong Kong firm will be discontinued in the newly merged entity.

What makes this issue so interesting is the story behind Koo & Partners. Founded only eight years ago in 1993, the firm has grown rapidly so that pre-merger it had 26 partners, 97 lawyers and over 250 staff. Although founded and managed by the eponymous Donald Koo, it is not a family firm. This has made the rapid expansion and subsequent merger possible. "We are not a typical Chinese family law firm," reveals Koo. "In our firm all the partners are equal. This is the same as in international firms such as Paul Hastings."

Koo has had informal associations with two previous law firms, firstly in 1995 with UK firm Lawrence Graham. That association was replaced in 1997/1998 with a similar informal association with another UK firm Rowe and Maw. Fully merging Koo and Partners with either of these two firms or other UK firms with which Koo had discussions was not possible due to the local/international partner system operating at the UK firms. The fact that Koo & Partners can be fully merged on equal terms into the US firm, is why this deal is so much more compelling for the partners and clients of both firms.

"When we set up in 1993 we aimed to be a different type of local law firm and took a corporate approach with a vision of one day becoming an international firm," says Koo. "Now that Hong Kong is in the doldrums, everyone needs to look to China."

It will be interesting to see if this deal provides a template for further merger activity in the Hong Kong market. Hong Kong's unique position as a gateway to China suggests that more such deals should happen. However, the main obstacle preventing more deals is the structure of the local legal market, according to Koo. "Hong Kong firms need to get their structure right so that they can merge. The first thing to do is get the families out of the business."

Koo is excited about the immediate prospects for the newly merged his firm. He is looking for new corporate finance lawyers and in particular expects to see much more activity in the high yield market.