Signs of activity picking up have been apparent for many firms in the past six months, with a number of PRC firms the largest beneficiaries of the market rebound.
Beijing-based Commerce & Finance Law Offices and DeHeng Law Offices have climbed to the head of the Asia-Pacific (ex Japan) M&A legal advisory league table, by value. This is the first time that a PRC firm has topped a league table board.
According to research from independent intelligence service Mergermarket, in the first half of 2009 these two firms have advised on US$20bn and US$19bn worth of deals, respectively. The firms have taken the top two spots in the H1 2009 Asia-Pacific (ex Japan) M&A league table.
Haiwen & Partners, the only other PRC firm in the rankings, is in 19th place by volume, having advised on eight deals worth US$4.6bn.
Mergermarket's league tables show there were 462 deals announced in Q2 2009, which is over 11% more than in the previous quarter.
It seems the downward trend in activity seen in the past five quarters in the region may have come to an end. The strong performance of PRC firms owes much to bustling M&A activity in China. Global share in H1 2009 has increased to 8.3% by value and 7.4% by volume, up from 5.8% and 5.4% respectively, in 2008.
Domestic demand is driver
The largest 10 deals in the Greater China region announced in the first six months of 2009 involved a local bidder or acquirer. This shows that domestic companies are now the major M&A deal-makers, not only at home but overseas.
Shanghai listed China Yangtze Power's plan to acquire US$15.8bn worth of assets from its parent company, China Three Gorges Project Corporation, is one of the biggest asset restructurings in the local capital market. DeHeng Law Offices is the sole legal advisor to China Yangtze Power.
"With China's economy continuing to grow sturdily and leading the global market recovery, major domestic companies will keep pursuing major deals across a range of sectors, including natural resources, renewable energy and high technology," chief global partner, Wang Li, said
While some foreign-client-oriented law firms have seen a decrease in instructions for M&A transactions over the past year, this firm has enjoyed solid growth. As a well-established and trusted advisor to many large state-owned and private domestic enterprises, M&A practise has become an important part of business, according to Wang.
Total revenue proportion for this work increased by 20%, over the same period last year. "The country is undergoing a significant readjustment of its industrial structures, and the large-scale state-owned enterprises are undertaking major restructurings and consolidations. This market evolution has created strong demand for M&A legal services," Wang said.
DeHeng Law Offices has developed a strong M&A practice group, growing in line with the market, having more than 10 partners and over 100 lawyers headed up by Wang. The practice group has been involved in major and complex M&A transactions in recent years. Deal highlights include advising China Resources on its acquisition of China Worldbest Group; Shell China's acquisition of Tongyi Petroleum Chemical; and FAW Group's acquisition of Tianjin Automotive Xiali.
Recently DeHeng Law Offices assisted the financial services conglomerate Ping An Insurance, in its acquisition of Shenzhen Development Bank. "We believe that PRC firms will become increasingly dominant in Greater China's M&A market - it is an inevitable trend," Wang stated.
"The global financial crisis sweeping through the world has had a profound impact on many economies. But China's fast recovery, ahead of [the] global economy has triggered a new, phenomenal M&A wave, led by domestic companies. The emergence of PRC firms is a natural progression, as they actively assist many notable transactions to successful completion."
The US$2.6bn merger between China Eastern Airlines and Shanghai Airlines is the latest manifestation of the current M&A phenomenon. Although China Eastern is listed on the HKSE, the company's general counsel, Guo Junxiu, sought out leading firm Commerce & Finance Law Offices for the work. Shanghai Airlines turned to its legal advisor Fangda & Partners for advice.
"PRC firms have learnt a lot from their international counterparts in past years, and have made impressive progress in handing large, complex M&A transactions," said Gao Yang, who is a partner with Fangda. "Firms will increasingly play a lead role in transactions that have major PRC elements."
It's erroneous to assume that going forward, international firms will have a smaller share of the merger and acquisition transactions involving local businesses and companies.