We recently spoke with Tom Albrecht, managing partner for the Asia Pacific region and co-head of the firm’s Global Finance practice, who is based in Sidley’s Hong Kong office. He discussed the business landscape in Hong Kong and how the firm has burnished and diversified its services in Asia.
Tell us a bit about Sidley’s history in Hong Kong and what has distinguished us in the minds of those in the business community.
We launched our office back in 1994 but began to effect real change in the makeup of the office in 2000 when we hired two Hong Kong-qualified partners, each of whom was a Hong Kong native. In doing so, we were immediately able to provide clients with Hong Kong legal advice, in addition to U.S. and English law advice. Back then, offering Hong Kong advice was a real novelty – at least among U.S. law firms. Most of our U.S. competitors chose to not offer Hong Kong law advice, instead opting to concentrate solely on U.S. law. Most of our UK-based competitors offered English and Hong Kong law advice but not U.S. law advice. Having lawyers qualified to practice in all three jurisdictions gave us a big competitive advantage.
Our guiding principle in Hong Kong, and elsewhere in the region, has been that you can grow in any particular community only if you grow within that community. By hiring men and women who have grown up locally, the firm benefits from their deep understanding of the history and culture of the region. It also benefits from the relationships they have with young professionals in the community, some of whom ultimately become clients.
This strategy is, of course, based in part on economics. Fifteen years ago, it was not self evident that Hong Kong would emerge as a top-three global financial capital. Our new Hong Kong partners, however, convinced us that a few sectors of the economy, such as capital markets, would grow exponentially in Hong Kong as China continued its climb up the global charts. So we focused on those economic sectors when creating our business plan for the office. What Hong Kong’s economy has achieved in the past 15 years is truly remarkable. As a result of listening to the advice of our partners, we have grown in headcount and reputation, as well as enjoyed a big head start over all of our U.S. competitors.
How did that foresight impact our business strategy and success?
Hong Kong quickly grew as a center for IPOs, most of which involved China-based companies. The Hong Kong Stock Exchange became a magnet for those companies, and our local law practice gave us the opportunity to work on those IPO transactions. Many of those IPOs, however, were too large to finance solely from the Hong Kong Stock Exchange. They needed additional investors in the U.S. or Reg S marketplace. So our multi-jurisdictional capability allowed us to work on virtually any aspect of a Hong Kong IPO – whether it involved the actual listing rules under Hong Kong law or creating an offering document that complied with Rule 144A under U.S. law. We had a huge advantage over most of our competitors and we were able to build quite a following among international investment banks here.
But our colleagues realized that another great opportunity awaited. Many of those companies that launched IPOs went on to become very large and they started to have global ambitions. At the time, our corporate work was limited to representing U.S.-based companies that had expanded into the region. We thought we should expand that corporate practice to include these emerging China-based companies. So we pursued representing issuers as a way of developing relationships that would continue long after the IPO work we did for the client was finished. And that’s what happened.
I should point out that while we have enjoyed a strategic head-start in Hong Kong, I am convinced that we are now operating in the most competitive legal market in the world. Virtually every major UK-, U.S.- and Asia-based law firm has an office here. Still, we are enjoying the ongoing benefits of our original locally based strategy. Our office has not only local roots but also a sense of community due to the time we have worked with each other. We have colleagues who have been in this office for almost 15 years. Associates who joined many years ago are now becoming partners.
So that naturally is very important to clients who recognize that we have roots here; we’re not just setting up shop.
I think that’s right. There is a sense of permanence about our position in the market. We have demonstrated our commitment to Hong Kong and to the broader region and that’s very important to clients out here. We are not parachutists trying to take advantage of a spike in demand. Many other firms now boast of their local law capability, but very few have a nearly 15-year track record.
I mentioned already our success in generating corporate relationships using issuer representations in IPOs as a door-opener. Those corporate clients have continued to grow just as our colleagues said they would. They’re making acquisitions, so we’re representing them on M&A deals. They’re getting into disputes with third parties, so we represent them in dispute resolution matters. Those corporate relationships have really helped build the office. We now have 75 lawyers in Hong Kong. When you look at our corporate client list, most of our colleagues in the U.S. would not recognize any of them. Most of them are China-based and they do business in many different industry sectors. We now have a tremendous amount of diversity in our client base—instead of being dependent on one or two for much of our work—which I think is very healthy.
How would you describe the culture of the office?
I can give you an example that demonstrates the work ethic. A couple weeks ago, we had a Signal 8 typhoon in Hong Kong. An 8 signal requires you to stay wherever you are until it is lifted. Hong Kong has unusual geography. We’re a basin surrounded by mountains and we are also in the tropics. So when it rains heavily, it really rains, and serious floodwaters can result quickly because of the mountain run-off. We all worry about flash floods and landslides, which are called “land slips” here. Add to that typhoon winds. That typhoon came out of nowhere and the 8 signal was lifted at 10 p.m. It was still up at 10 a.m. the next day but at 10:30, it was lowered to a 3 flag, which means you can leave your home. It was still rainy and windy but it’s not life threatening. By noon, the office was full.
Our office also enjoys something special that we have inherited directly from the firm’s offices in the U.S.: the culture of communication, collaboration and cooperation. It’s really important to maintain that culture because just as in the U.S., it really distinguishes us out here.
Tell us about some of your future plans for Sidley in the region.
First, I should say that we view the six Sidley offices out here—Hong Kong, Shanghai, Beijing, Singapore, Sydney and Tokyo—as all part of the same initiative. We are all working together and have similar strategies, goals and objectives. We collaborate with each other on multiple projects every day. We are also trying to grow our interoffice cooperation with Europe and the United States. There are many ways in which we can collaborate together to work with clients in Asia and vice versa. So we try to export work as much as we can to Sidley’s other offices.
Our young lawyers in particular are attracted to Sidley because they want that interaction. We tell them, “You are joining Sidley Hong Kong, Sidley Singapore, Sidley Beijing, but the first word is ‘Sidley.’ You will have an opportunity to work with colleagues in New York and colleagues in Chicago.”
We also want to expand our footprint in the region. We want to diversify in a couple of practice areas, including private equity, which I think will be a great source of business in the coming years for this part of the world. The other area is infrastructure and project finance. Emerging regions such as Asia need infrastructure—everything from airports to highways to water treatment facilities—everything that we take for granted in the U.S. that was built 75 years ago. Those things need to be built now, here.
What have you found particularly gratifying about the work?
Part of it is our ability to respond to inquiries from colleagues and clients on the other side of the world and relay our on-the-ground experiences about the region to them. Often a client will ask us a specific legal question but the conversation then morphs into a broader discussion about a variety of issues—both legal and non-legal—that affect their business here. We are able to offer them a perspective that they can’t get from TV or newspapers in the U.S. or Europe.
This has happened to me a couple times recently, where people who were planning to travel out here asked, “Can you give us the real lowdown on whether we should come?” I said, “Yes, you really should come.” It’s the ability to tell clients, “This is what you should think about.” It comes out of living here and being on the ground, watching, breathing, hearing the culture and the conversation.
This is a huge strength of our firm and it’s going to become more and more valuable in the future as this part of the world continues to grow and intersects more frequently with the U.S. and Europe. Of course, this door swings both ways, and we offer the same perspective to our China-based clients who are interested in expanding to the U.S. or Europe.
The work is also gratifying in its complexity—not just the cross-border legal issues, but also the cultural issues that come up when you are trying to manage investors who, in most contexts, are western investors and have expectations born of their experiences on the other side of the world or vice versa. All of this, of course, is the future. Global integration is here to stay. This is an exciting time to live in Asia – it is changing so rapidly and offering our firm so many long-term opportunities. Being here continues to be a fascinating experience for me.