获奖名单按律师姓氏首字母排序 Winners are listed in alphabetical order.
2021 ALB China Top 15 M&A Lawyers
M&A has perhaps always been one of the core practices of modern law firms. This year's ALB China Top 15 M&A Lawyers ranking again showcases the top lawyers in the market who have solid foundation of knowledge and rich practical experience in the field, as well as strong business acumen and creative solutions.
Asian Legal Business launched the 2021 ALB China Top 15 M&A Lawyers ranking survey in the last month of 2020. One of the ranking criteria was how many major transactions the candidate lawyers had participated in over the past 12 months. However, for M&A lawyers, it was no easy task to submit a whole-year report on the transactions performed during 2020.
Given the impact of COVID-19 pandemic, the economic downturn, along with geopolitical events, many changes have taken place in M&A transactions in the past year, and some M&A lawyers even had to change their practice directions. Therefore, like many rankings done in the context of the pandemic, this year's M&A lawyers ranking not only showcases the superb skills of the lawyers, but also highlights the winners who have maintained flexibility and resilience in the face of changes.
Market research institutions started to release their reports on 2020 global M&A market a few months ago. According to Mergermarket, in 2020, M&A transactions in markets other than Asia and Europe saw a sharp decline, or basically remained the same as in 2019. Globally, the most active M&A sectors in 2020 were TMT (with a transaction value growth of 56.8 percent), energy, mining and utilities (with a growth of 3.8 percent), and industrials and chemicals (declined by 27.1 percent).
The private equity funds in the M&A market remained strong in 2020: in total, $608.7 billion was spent by PE firms in 2020 across 3,509 deals, 3.3 percent up on 2019. PE firms have continued to invest in innovative tech-related assets. Technology remained the most active sector for sponsor-led investment, and pharma, medical & biotech was also in the spotlight.
Against the backdrop of a slight decline, the M&A sector in the Asia-Pacific region performed outstandingly in 2020. According to Mergermarket, M&A deals in the Asia-Pacific region (excluding Japan) achieved year-on-year growth of 26.1 percent in 2020. Although the outbound M&As fell by 24.4 percent due to travel restrictions, the inbound M&A deals increased by 10.3 percent. In terms of industries, Energy, Mining & Utilities saw the most remarkable growth, with a year-on-year increase of 176.8 percent.
China is definitely "the jewel in the crown" in this region. Greater China accounted for more than half of all APAC deal activity by volume and over 60 percent by value in 2020, and the top five M&A deals by value in the Asia Pacific region all took place in China. About the characteristics of China's M&A transactions in the past year, Mergermarket points out that although outbound activity was more heavily influenced by regulation and geopolitical events, China "in particular is proceeding with a massive reorganization of its economy towards a more market-oriented system to increase efficiency and attract foreign capital to counter economic decoupling threats from the U.S."
According to a recent M&A activity report by Herbert Smith Freehills, foreign investment and domestic economic reorganization are the main drivers for China's M&A activity in 2020. Among them, "foreign direct investment into China has remained resilient, achieving a 6.4 percent year-on-year growth ... while domestic deals and restructurings have also been driving M&A activity, as China focuses on stimulating its domestic economy and upgrading its industries." The report also points out that the most active M&A sectors in China in 2020 are TMT, industry, finance, and energy.
Thanks to the relatively high M&A activity in China in 2020, some M&A lawyers experienced a continuation of the business trend of the past few years. Pan Xinggao, partner at Commerce & Finance Law Offices, was one of them. He tells ALB that in 2020, he "has done a greater number of M&A cases than that in previous years, at least five of them were larger scales and with greater influence." And those deals were of a large variety, including "mergers and acquisitions of controlling shares of non-listed companies, cross-border investment M&A, reorganization and listing of listed companies, transfer of State-owned controlling rights of A+H listed companies, transfer of shares of listed companies by agreement, the bankruptcy and restructuring of companies, etc."
Daniel Lee, partner at Jingtian & Gongcheng, shares his observations of business changes in 2020 from the perspectives of cross-border and domestic mergers and acquisitions. "Cross-border mergers and acquisitions became rather difficult as the U.S. government imposed new restrictions on investments in China and tightens scrutiny on foreign investments in the U.S., coupled with other anti-globalization trade policies. However, RMB M&A activity has been steadily going up due to the encouragement of technological innovation and the reform of capital market. During the past year, M&A deals mainly took place in the machinery manufacturing, IT, biomedical, semiconductor and electronic equipment industries, which highly coincided with the policy-supported technological innovation sectors," Lee tells ALB.
Some other lawyers went through a remarkable business transformation in 2020. Guo Shifang, partner at Global Law Firm, tells ALB that in the "pre-COVID-19 pandemic era", her main practice area was cross-border M&A, with a particular focus on Chinese companies "going out" projects. But in 2020, "our 'going-out' related transactions were executed in a different way – the parties to the transactions are in China while their assets are overseas," she says.
The COVID-19 pandemic, coupled with geopolitical events, has made it difficult for cross-border M&A. First, it was the investment in the U.S. "It's been extremely difficult for Chinese State-owned enterprises' mergers and acquisitions of U.S. assets to pass CIFIUS review since 2020," Guo says. "We are currently helping some clients to do preliminary analysis of their U.S. projects. But if the clients are State-backed or are involved in sensitive industries such as 5G, communication, and artificial intelligence, we remain extreme caution and prudence with their projects."
India is another popular destination for Chinese enterprises' cross-border investments; but the projects there have also become difficult to proceed with since last year. "During the pandemic, India introduced policies to impose restrictions on investments from neighbouring countries, in particular, those from China. As far as we know, any investment project that fails to keep the M&A shares at less than 10 percent must be subject to approval of the Indian government. It is said that the approval process takes about a year or two. So, it's almost impossible to make investments there," Guo says.
Due to the above restrictions, Guo shifted her practice focus to domestic M&A transactions that have rebounded more quickly. "The timetable for domestic transactions is faster, so looking back on 2020, our business volume has increased in general," she says. Some of the representative cases include representing Luxshare Precision in a series of mergers and acquisitions of Apple's mobile phone industry chain. Furthermore, Guo's team also represented Xiaomi in several mergers and acquisitions, including investment in industrial funds with a large investment amount, and the integration of Xiaomi's ecological chain.
"Industries such as communication, mobile phones, semiconductor, and TMT remain active in general, and we've been deeply involved in deals in those industries, covering the whole process such as due diligence, transactions, and examination and approval. These projects are usually time-critical and heavy in workload. We were quite busy during the second half of the year," Guo says.
Tang Zhihua, partner at Han Kun Law Offices, participated in a number of landmark private equity M&A projects in 2020, including some inbound mergers and acquisitions by foreign private equity funds. "According to a report released by the Ministry of Commerce in January, the actual use of foreign capital in China amounted to nearly RMB 1 trillion in 2020, and the scale of foreign investment attracted has reached a record high. This shows that the scale of foreign investment in China was quite stable in 2020, and foreign investors, in general, remain optimistic about the Chinese market," Tang tells ALB.
As far as the projects he participated in are concerned, "most of the target companies are multinational companies engaged in industry, medical, new materials and high-end manufacturing, and there was almost no merger and acquisition of the Internet companies, which is quite different from the domestic market." Especially for large-scale international PE clients, most of their M&A projects are in traditional industries. Another characteristic of these transactions is that "the buyers are not really attracted to companies that of a large scale or have multiple lines of business, in fact, they value whether the target companies focus on certain industries. The buyer usually acquires a core business of the target company to expand its global market share and enhance its profitability," Tang observes.
Talking about how buyers' focuses have changed, Tang says: "In the projects we've participated in, almost all buyers are concerned about the impact of the COVID-19 pandemic on the target companies' business, in addition to whether M&A transactions will trigger a monopoly declaration. The sustainability and stability of the business, the execution of major contracts, and human resources management are the main areas of concern."
In terms of PE fund M&As in the Chinese domestic market, Tang says: "We feel it is somewhat similar to those in the international market, which were mainly driven by VC/PE and financial investors, with the focus on domestic consumer goods, TMT and medical industries."
NEW DEMANDS, NEW CHALLENGES
In terms of the new challenges facing the M&A business in the past year, Pan points to the changes in the way of communication. "Given the pandemic, we had fewer opportunities to meet in person with our clients, peers and industry players, and therefore fewer opportunities to develop new clients," he admits. He then "started to use online tools to strengthen communication and to seek more business development opportunities."
Lee agrees with Pan, and further points out that how the changes in the way of communication have affected the business and team management. "During the first six months of 2020 when the pandemic was in a very serious situation, we had to work virtually – having almost all meetings with our clients online – which was a disruptive change in the service model that lawyers were used to before. We had to try to provide all services online, for example, we started to use electronic documents more when doing due diligence, and we started to have discussions with clients and do business development through teleconferences or video conferences," Lee says. "In addition, since our colleagues started to work from home, we also adjusted the performance assessment mechanism for lawyers, adopted a more efficient and scientific method to help our lawyers to be more productive and to provide quality service when they work from home. We've also strengthened online training."
Guo says that her pressure mainly came from the new work content and the increased workload, and the related team management issues. Although cross-border M&A and domestic M&A are quite the same in nature, "it's a lot of work when handling domestic projects. In the past, when doing overseas projects, we usually asked the local lawyers at the location of the subject matter to do local due diligence. We mainly played the role of facilitating transactions and overall coordination. But in domestic transactions, we must take part in all kinds of work, and work on all details. I was worn out during the second half of the year."
As handling domestic M&A transactions needs more hands, Guo "immediately expanded her team." With more people joining the team, team training became a new issue. In 2020, Guo "spent a lot of time on training the team. In order to help new members quickly adapt to the high requirements of clients and grow faster, I made a lot of efforts in coaching and mentoring them on how to write documents, how to read materials, how to modify agreements, etc."
Furthermore, as M&A lawyers working together with clients on the front line of transactions, the ranked lawyers this year perceive the subtle changes in clients' requirements.
The changes are first manifested in the mentality of clients. "In 2020, a lot of work proceeded online or remotely, which indeed helped save a lot of travel time. But we also noticed that instead of having regular meetings with us as before, clients came to us more frequently. And we also took the initiative to contact our clients more and keep them posted the progresses of projects," Guo says.
Pan shared the same experience. "Clients pose higher requirements for M&A lawyers in terms of timely services," he says. "Clients need lawyers to respond quickly and with priority, so lawyers need to better balance multiple tasks at hand."
Pan also points out that during the pandemic, "online office and video conferencing tools have become necessary to our daily work." In Guo's view, technology brings convenience and in the meantime, new issues, too. For example, "When using an online conference system, we often need to present the work results by sharing the screen. In order to make online meetings more efficient, we optimized the presentation approach. In 2020, I urged my team members to improve their presentation capabilities, including how to prepare user-friendly materials," she says.
Guo says that she learnt quite a lot about what the "industrialization of the legal profession" means from the changes in the M&A sector during the past year partly because she specializes in electronic products related business, especially the integration of the mobile phone industry chain. "They share very similar business models. When we did the first project, many specific concepts were strange to us. Now we've learnt a lot of terms the clients use in their sectors, and what they are truly concerned about during due diligence. My experience in 2020 has allowed me to see that if we follow our industry clients to explore deeply in their industries, it'll eventually benefit both lawyers and their clients by adding value to their services and products."
Pan observes that "clients want M&A lawyers to have all-round professional skills. In addition to strong legal skills, we also need to have knowledge in finance, business, and commerce." To this end, he applied himself to "building up knowledge reserves, keeping abreast of the latest laws and policy trends, always proceeding from the perspective of clients' interests when responding to clients' needs, proposing practical solutions, and providing professional, efficient and comprehensive legal services and the related value-added services."
As a PE equity fund M&A expert, Tang has observed subtle but significant changes in clients' demands over the past few years. "In the projects we've represented, there are more and more auction sale transactions. Given there are a number of potential buyers bidding for the same subject matter, it always needs feedback and response more quickly. Moreover, lawyers need to have business thinking to help clients accurately identify risks, and propose constructive solutions, so as to finally determine a competitive bidding scheme under the premise of controllable risks," he says. The changes in the way of transaction impose high requirements on the comprehensive quality of lawyers, "especially for cross-border projects, requiring Chinese lawyers to be in line with international standards in terms of language skills and professional skills. Clients also value lawyers' ability to give practical solutions and speed of response," he says.
As regards the future prospects, Guo says that the unique experience in 2020 has become a very valuable asset to her, allowing her to look at the so-called "cross-border" and "domestic" M&A transactions from a new perspective, as well as their different requirements for lawyers.
In the past, when talking about the international vision of Chinese lawyers, it might be more about the ability of Chinese lawyers to communicate with clients and foreign lawyers in cross-border transactions and break down barriers. However, the experience in 2020 shows that "lawyers need to have an international perspective even when they're handling purely domestic business." For example, an M&A integration of mobile phone industry chain could be "completely a domestic project, but the target company may have been included in the U.S. entity list or sanctioned. Then the project involves international issues, and Chinese lawyers need to use their experiences and expertise to help domestic investors understand the possible impact of the sanctions on the target company and the corresponding impact on investment decisions," Guo says.
Other similar examples include the cross-border e-commerce business which has been a hot area lately. "In 2020, we represented our clients to invest in two cross-border e-commerce projects, which required us to understand the different rules of different platforms and regulations of different countries and regions regarding business structure and taxation. Then these two look-like purely domestic projects actually involve very complicated foreign legal issues or even some tax or financial related issues," she says.
"In the future, all lawyers might need to have an international perspective regardless of what kind of business they are dealing with and what their practice areas are," Guo predicts. She, therefore, points out that it's very important for lawyers to increase their knowledge, gain exposure and learn more, and stay informed of the latest hot issues, including political events, so as to help clients have better control over the direction of transactions.
Speaking of the performance of VC/PE in China's M&A market in 2021, Tang says: "Since the beginning of the year, we've been working on several large-scale international M&A projects that are mainly in the manufacturing industry. It is possible that high-end manufacturing, new materials and high-tech will remain the M&A hot areas this year. In China, as the government implements policies to strengthen the real economy and address the technological weakness, high-tech and high-end manufacturing, such as chip manufacturing, will continue to be hot areas; there will also be many opportunities in the retailing business and online services such healthcare, consumer products, and e-commerce."
How would M&A lawyers further improve their services in the new year? Tang proposes the idea of "pursuing the craftsman spirit in the legal profession." "For example, if you want to be a good dressmaker, you must work hard in all aspects, such as cutting collars, sewing sleeves, embroidering buttons, etc., so as to make a fine garment. To become a mature lawyer, it's in fact a process of accumulating experiences and enhancing skills. We usually handle many issues for foreign clients, such as direct investment and general corporate and commercial affairs, which are very complicated. By handling those issues, we accumulate a lot of experience for M&A transactions – the legal issues handled in the two scenarios are interlinked, so it's a natural way for lawyers to learn, to practice and to grow."
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