Around this time last year we wrote a similarly titled article, which made various predictions for the legal market in 2016. At that time, we were predicting a busy year for IPOs, regulatory teams, M & A, and speculated as to whether the implementation of the Competition Ordinance may see an increase in workflow to firms, or in-house teams.
In the beginning of 2016, an equities crash in China, fears of a hard landing for China’s credit markets, and concerns about Europe meant many managing partners in Hong Kong were predicting a “blood bath” in the legal markets here. Since then, the world has seen Brexit, a Trump presidency, the further rise of far-right populism, and concern about the global role of Russia. This has caused some fear and uncertainty in the markets. However, the attitude among both law firm partners and their in-house counterparts within the banks in Hong Kong, has been cautious optimism about the potential for increased transactional, and regulatory work, in 2017.
IPOs were 26% down in 2016 (although Hong Kong still claimed the Number 1 spot in world ranking), when compared to 2015. However, a number of Partners are more optimistic about the market this year, with a strong pipeline, including a number of rumoured “mega deals”, such as Alipay’s potential listing, hopefully keeping the IPO teams busy across the city.
A number of banks finished 2016 with strong numbers in fixed income markets, and continuing low interest rates and the quest for margins in DCM and lending has led to the re-emergence of more funky forms of debt, creating a demand for lawyers with an understanding of complex products, and the regulatory issues relevant to their sales and trading. Due to the stricter regulations applying to the banks, we increasingly see a demand for these lawyers on the buy-side, with firms increasingly advising these clients on these kind of deals, and also the growth in the in-house teams of such providers.
The Competition Ordinance has created some work for lawyers, but there has not been a huge growth in this practice, with not enough work flow for it to be much more than an additional service for most firms.
The primary issue for most firms for the year ahead remains that of profitability, highlighted by a number of US firms exiting the market, and discussed in the meeting rooms of the majority of firms around the city. Increased competition on fees, extortionate rents (leading to a number of firms moving out of central, and rumours of more to follow), and potential challenges from Artificial Intelligence and alternative legal services providers, means that the winning firms in 2017 will be those with strong, recognisable, market-leading practices, combined with lean operations and a move away from low-value, replicable work.
Ashford Benjamin services law firms, financial institutions and multi-national companies across a range of industries on mid-level through to senior level search assignments.
They are contactable on info@ashford-benjamin.com or at www.ashford-benjamin.com
Ben Cooper is the Managing Director of Ashford Benjamin – Hong Kong’s leading legal search firm. He is a barrister by training and has been providing executive search and consultancy to the legal sector for over 10 years. He can be reached at ben.cooper@ashford-benjamin.com or +852 3972 5746.
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