When Australian market leader Mallesons Stephen Jaques and Chinese powerhouse King & Wood officially merged on March 1, the new combined firm became a game changer. With 21 offices and 390 partners worldwide, King & Wood Mallesons is the first and only firm with its international network head quartered in Asia, a true “combination of equals” offering Australian, UK, Hong Kong and PRC law advice. Global managing partner Stuart Fuller and China managing partner Wang Ling sat down with Candice Mak to discuss the integration of the firms’ cultures, why the King & Wood Mallesons model cannot be replica ted, which elements are crucial for success, and the challenges they tackle as leaders.
ALB: What is unique about the King & Wood Mallesons offering in the market?
SF: King & Wood Mallesons is the first of its type, combining a Chinese and Western law firm. The true difference with us is that we are the only law firm that can practise Hong Kong law, English law, Australian law and PRC law. In essence, that is the key differentiation. It is also about our footprint in those markets. One of the key challenges for any business with the rise of China and with the shift in economic power is that you really need to know the markets you are operating in to do well. We know the market better than anyone else. We get China. We can best advise on China, help people navigate the complex environment, and that is a very unique thing in one coordinated brand.
WL: If we look at the whole legal market and the combination based on the Asia-Pacific area, we are unique. I think what we have accomplished reflects the developments in this market and our clients’ ambitions.
ALB: How would you describe the King & Wood Mallesons culture?
SF: It is all about being the best you can be, a culture of excellence and quality, and a culture of client-focus. We do better work for clients, help clients in their business, and we have a very strong focus on our people. How do we train and develop them, how do we bring our partners with us on this journey, and how can we constantly influence everybody in the firm. (And) we do have a lot of fun as the partners genuinely get along.
ALB: What was the genesis of the firm?
SF: We first met in November 2010. We did not know each other all that well; we did not have a long track record of referring work to each other or acting as co-counsel. But we had connections at the top. We had a meeting in Beijing – I remember that it was an extremely cold day! Within an hour, it was very clear that we had a common vision about where we wanted to take the respective firms. We were Australia’s leading firm and China’s leading firm, but we had greater aspirations for clients and our people to create a new firm that would be a genuine combination of equals, which is a strong driver for the King & Wood Mallesons combination. It is a combination of equals, and people got on board.
WL: We had a very good feeling after meeting with Mallesons, and we wanted to continue the discussions in more detail. The result of those discussions came true, so that is very exciting.
SF: These discussions took place over a year. In addition to doing the deal, we spent a significant amount of time talking to the partners about why this would work. We wanted to get very strong support from them. In the end, more than 95 percent of partners voted in favour of the deal. That was a very clear affirmation that it was the right choice, and that we were the right firms combining at the right time – some have even called it audacious!
ALB: How do you define the firm’s strategies that you have set during your tenures?
SF: In the short term, integration. We have started in Hong Kong where we have fully merged our respective firms to create King & Wood Mallesons. It is now the 4th largest firm in Hong Kong with close to 350 people. Common management is key. The management team speaks regularly on issues across the whole firm. We have a very clear plan about integration for the practice teams, clients, people and systems. That really focuses on strengthening the core of the network over the longer term. We will be focused on broadening our capabilities. We will also do this on the basis of what best suits the clients and our people over time.
ALB: What were some of the post-integration merger issues you have had to address?
WL: We put a lot of effort into looking closely at the business opportunities that existed as a result of the combination. On the practice side, it is quite exciting. The lawyers on both sides have been working together, managing transactions, or doing joint pitches. The combined team ultimately provides stronger and higher quality services to our clients. For operations, systems, IT, business development and marketing, at each level, we are moving forward swiftly with integration.
SF: For the firmwide things that we needed to do for March 1, we hit the targets perfectly: The launch of the brand, the client launch campaign across the network and the brand campaign, particularly in Australia, and the international advertising campaign. We were very focused on launching the brand in a very fresh and different way, reflecting the act that our combination was the first of its type, and we wanted to make sure we had market impact. We have a client business development stream which is very strong, and part of our challenge has been controlling and harnessing the energy of our partners and lawyers to work together, which is a perfect problem for managing partners to have. The desire of partners to look for business opportunities and to go and get more work, particularly work we would not have seen had we stayed separate firms, is a real test of the success of our combination. We had to deal with a lot of internal stuff, so conflicts and alignments, pricing, and retainer terms, all of which we put into place by March 1. We are constantly looking at those to make them more efficient and effective. In Hong Kong, we have a new IT system, new phone system, and we are meshing partners together into a new single profit pool. That was a huge effort. There are some inevitable teething issues around that, mostly around IT, and we have put a lot of effort into getting it right. These are very personal issues because everyone relies so heavily on IT these days. We have recently physically integrated the practice teams, so that the corporate, banking and litigation groups in Hong Kong are sitting together. It is a very tangible sign of integrating people, and in hindsight, I am very glad we did not try to do this for March 1. The initial plan was to launch the firm and physically integrate by March 1. But putting a couple of months between it to let all the pieces settle down was absolutely the right call. We will be doing more of this over the next 18 to 24 months, as we continue to integrate a lot of back office functions.
ALB: The King & Wood Mallesons combination is the first of its kind. Do you foresee more tie-ups of a similar nature happening in the future between competitors?
WL: What is notable about our case is that both firms were the top in their jurisdictions. If we look at other Chinese firms, some have also set up alliances or partnerships using different structures or opened up offices in other countries. It seems that a number of Chinese firms are exploring what the best way is for them to develop their business. The combination between King & Wood Mallesons received a lot of attention from the market and colleagues in the market. They are quite interested in knowing how the Verein structure, which we use, works. I think we are the first Chinese firm to use the Verein structure. I think the other Chinese firms are quite interested to see if maybe this could be a model they could use, or at least something to look at, or at least pay more attention to.
SF: For many of our competitors, if you want to be a leading global law firm, you must have exposure to the largest economy on the globe. So the challenge for the industry, whether a law firm or a business, is how to get that exposure and how to service your clients in that market - Chinese clients wanting to do work in the China market, Chinese clients wanting to invest outward, which looks to be a significant business activity over the next 10 to 20 years, and international companies going into China. If you want to be a significant global player, you need to have a significant presence in what will be the world’s largest economy, and you have to do that at the top tier. We have done that. On one level, the King & Wood Mallesons combination cannot be copied because each is the leading firm in each jurisdiction. Our competitors may follow over time, but they will not be at that brand or quality point.
ALB: How is the Verein structure crucial to your success?
WL: I think the basis for the combination structure was when during discussions, we realised that the structures of both firms were quite similar. Both firms had quite similar strategic goals, cultures, values and visions. On the King & Wood side, we had a modified lockstep system, but our structures were quite similar. So there was quite a solid basis to set up this structure. Most Chinese firms do not have this structure.
SF: Vereins should be better understood than they are, because there are a number of accounting firms and global law firms that use it, so it is not an unknown structure. One of the reasons we chose it was that we believe it is the structure of the future. It gives you the benefits of a common approach to brand, management, clients and people development. Then you overlay on that common approach a degree of flexibility, where you can run the firm and have sufficient regard for the different markets, the economics of markets, and the volatility of markets and exchange rates. Also how you can be flexible about bringing in new members into the Verein as you want to expand your footprint. The Verein gives you much more flexibility than a single profit pool, one lockstep model. Plus, and I think this is becoming apparent to some other firms, there is an inherent limitation on how big a firm can get when it is a single profit pool, single lockstep, because markets perform differently, exchange rates fluctuate, pricing is different, productivity is different, and trying to put that into one uniform model across x number of countries is a hard task. It is a fulltime management job in itself. We can create all the benefits from a client and people perspective with a structure that gives you more flexibility, which is what the Verein gives.
ALB: What are the key challenges of running a firm like King & Wood Mallesons?
SF: We have a very focused business development plan as a combined firm around the areas where we think we can add better value to our clients than our competitors. In the first six weeks, we let that evolve and there was what I ended up calling “creative chaos”. We had so much connection between the partners in that period about client opportunities, joint pitches, etc. We started to work on five to six matters in that period of time, and we have now closed five of those. We have done over 50 pitches together as a combined firm in either China or Australia or Hong Kong, all in just 80 days. So part of our challenge was actually controlling the energy of the partners to get on a plane, see each other, and pitch to clients. It is a good problem to have. The thing we are both adjusting to is running firm that is now over 21 offices and with three languages, Mandarin, Cantonese and English, and making sure that however we do things, it works across the whole network. How we communicate, how we manage, and how we make decisions.
WL: The challenges are the firm locations if we are looking at the market, the target clients, and also that the backgrounds of the firms are quite different. If we look at the Australian part, Mallesons is more than 180 years old, but King & Wood is still a young firm – though it has grown very stable and quickly. Also, if we look at the markets, Australia is a first world nation, while China is still an emerging market. If we look at our client bases, some Chinese clients have become very experienced and some lack experience. When we integrate together, we need to fill in those detailed issues. So one part of the integration is to consider the background of our specialties. We are not only concerned with the business of deals, but also in the operational management of the combined firm.
SF: This is all just a question of scale, I suspect. Whether it is across three jurisdictions or 23, you have the same broad issues of aligning people with the systems. The true thing about us, or the different part about our combination, is that it is a combination of equals. It is not a takeover or merger. If you have a dominant firm taking over a less dominant firm, that is easier to run by just saying “do it my way”. However with us, the combination of equals is a strong part of the DNA. It is a matter of saying “let’s look at the way we want to do it together”. There is not one dominating the other or creating opposition, but rather we are both saying “we really want to do this”, which means that communication is key. Making decisions on a joint basis is much more powerful, and you get a lot more engagement when people work out things together instead of just being told what to do.
ALB: How do you ensure best practices are upheld across all offices?
WL: Although we have so many different offices, you see the same structures of the same practice areas, and we are always sharing market observations and information. Even though partners are in different offices, they have been getting to know each other and are working together to provide support to one another.
SF: We have an executive team of four and we speak and e-mail regularly. There is Wang Ling as China managing partner, Australia managing partner Tony O’Malley, myself as the global managing partner and Hong Kong chief, and Rupert Li, who is the China international managing partner. The four of us have a particular time every week where we get together and talk about broader points across the firm. The international management committee has eight core members, four from each legacy firm with several Hong Kong observers. It meets every two months and looks at the overall firm, how we are going along in our business plan, integration plan, strategy, and any policy issues. The committee’s function is to primarily set standards and policies in the firm. So that is one way of achieving consistency at that level. Also, markets are different and the aim is to be the best in the market. You want to have that in whatever you do, in whatever market, and be accommodating of that market. So having an absolutely vanilla product across every market does not recognise the local nuances. As long as you are the best in the market and the client experience is very similar, that is the thing to aim for. That is a challenge for global law firms.
WL: On both sides, we had practice heads. So we now have co-heads of the practice on each side. They help to coordinate any matter(s) that involves the lawyers and partners. If an issue arises, they know how to quickly involve the right person at the right time.
SF: We have started with the firms’ top 30 clients with co-relationship partners and common client teams. With these clients, we are saying “here’s our team, what’s driving your business? And how can we help you? Here’s a team that can do that across all the practice areas that would be relevant to the client”. Client feedback and client engagement is crucial. It does not matter what we say about how good we are; it is actually the voice of the client that is the key thing. The reaction from clients and the market was even more positive than I had personally hoped for.
ALB: What ingredients are vital to the success of the firm over the next few years?
SF: Clients and people. We are making sure that we are a very client-focused firm, which is what we are. To be honest, the King & Wood culture is incredibly client focused, so it is something out of the combination that we, Mallesons, will relearn. Mallesons is very client-focused as well. But being older and a dominant brand in the Australian market, we really want to edge up the client experience in the Australian market. But how we do execute our client strategy - the proof of concept? Are we getting more work from our existing clients and are we getting better deals from more clients? Deals we would not have won had we stayed as two separate firms? (And) then there is the people experience: how we are developing and training our people, giving them career opportunities, and improving
their quality and their careers.
ALB: What personally makes you believe in the success of King & Wood Mallesons?
SF: You have to be passionate and energetic about it as leaders of the firm, because you have to convey that you genuinely believe in what we have done, which I do. The combination of firms, the change in the global economic and political environment, the brand of the firm, the quality of the firm, and the clients and the market and the people connections - these are very strong across both firms. Being 81 days in, the signs are good because the people are gelling. We are dealing with each thing we need to deal with on a daily basis. We are talking regularly, and the client and market reaction is strong. Both firms are client driven firms, and if you get that reaction from the market, that incentivises the firm to continue on. It is our job to give partners and lawyers all the assistance they need, the platform they need to go into the market and get that work.
WL: What I can add is that when you find the opportunity, you seize it for the firm’s development. When you have a very good basis, like from the management to the people to the structure of the firm, and you have no reason to cap the opportunities, then the opportunities can become true. Owning opportunities and taking them; that is really important to the next stage of the firm. When I look back on the development of King & Wood, many people have asked the same question: How did King & Wood build up so quickly? It developed quickly, not just in size or headcount, but I believe because people recognised the stable development and mature qualities of the firm, though it was still very young. I think one of the reasons for the growth in the past was that King & Wood tried to do something different from the other colleagues in the China market. We tried to catch the opportunities provided, or potentially provided, by the market or by the economic developments in the Chinese market. That is very important for the firm, and I think that is the main reason why we needed to do the combination.
ALB: What have you learnt from the management style and the culture of the other’s firm?
WL: There are many things we learnt from Mallesons. As a young firm, we were quite impressed by the efficiency of Mallesons’ management and its systems, each with a function that supported the firm’s development and created efficiency. The next stage for us on the King & Wood side is how we can adapt to the system. If we look at the legal practice, particularly in some sectors, Mallesons has a very good reputation and is highly recognised in the market in areas such as mining and energy. Knowing we can bring these into qualities into the combined firm is, I believe, really fantastic.
SF: Mallesons is a very strong client focused firm, but the King & Wood client focus is incredibly strong with its depth of connection in the market. One thing I have realised from King & Wood, which is dominant in its market, is that it is the client connection and market connection that you have through your partners, being constantly in the market, and constantly focused on the clients - that makes a big difference. The singular focus is on what clients want, how do we get the deal, and how our connection to the market - through clients and people - mean we can provide better and broader service to clients. That is making a big difference with any client that we deal with. The other thing I have noticed is the communication style of the King & Wood lawyers. It is far more conversational. Mallesons, again, is
180 years old. We have very slick administrative services, and we probably do more by e-mail and by short, sharp communications. But the way, we do it in the Chinese firm; how I have seen Wang Ling and her partners do it is they have very significant conversations about decisions. So it is a group decision. That is the way you make a better decision, you talk it through, understand where each is coming from, and then move on. Now, as a whole firm, we are making sure we have conversations together so it is less of an e-mail culture.
ALB: In the next five years, what do you predict the Asian legal market landscape will look like?
WL: It will definitely be more competitive, and perhaps there will be more consolidation. In these next two years, we will likely see more and more Chinese firms trying to learn more from the experience of foreign firms and getting more involved in international matters. Also, I think one of the approaches for them would be to set up some type of relationship with the foreign firms. So I think that may result in more consolidation. On the other hand, it will not just be between Chinese firms and foreign firms. If we look at the other Asian firms, they might also be looking to set up relationships with Western firms.
SF: It is a challenge because with the many countries in Asia, the laws vary from jurisdiction to jurisdiction. Any strategy for a law firm has to be a client-led strategy, not a firm-led strategy. So you have to do things that will allow you to do more for your clients, and where they are taking their business. The big challenge for law firms, whether in five or ten years is that, in the current structure, law firms are not set up to do that. They do not cover enough jurisdictions; they cannot offer same brand or same experience to clients over enough of the jurisdictions where the clients are doing business. Compare accounting firms to law firms, and they are very different models. The ccounting firms have the benefit of international accounting standards, so there is some similarity. But they drive brand and consistency of service across more jurisdictions in which their clients operate. (And) that is a challenge for many law firms with a client-led strategy: How do you help your client across more jurisdictions through one brand and organisation? That is where I think there will be an evolution - in the way firms approach their structures, headcount, and their footprints. The markets are moving very quickly and the rate of change of what is happening in the U.S., European and Asian markets is quite significant at the moment.
ALB: Have your work and personal lives changed since the launch of the new firm?
SF: I have moved! So the biggest change for me was that I was made the chief executive of Mallesons and then became the global managing partner of King & Wood Mallesons in Hong Kong, and I moved here from Australia. My family does not move until the end of the year, so I go back to Sydney every weekend to see the family if I am not elsewhere. The firm changed, my job changed, and my place of residence changed, but it is terrific. I am meeting people all the time, dealing with clients and new market opportunities, and putting the firms together. It has been great fun.
WL: Compared to Stuart, I am lucky. My travel is not so frequent. We appreciate Stuart traveling so much, particularly in the first year and around the time of integration. For me, travel did increase compared with before, but I think dealing with it has been fine. On the other hand, the working focus, my work has transferred into looking after the integration matters of the combined firm.
Follow us on Twitter:@ALB_Magazine.
