February 28, 2012 3:24 PM

Report: Linklaters, Aussie Legal Giant AAR in Talks About Joining Forces

Posted by Brian Baxter

When the merger music finally stops, it appears all of Australia’s largest law firms may well have entered into either formal unions or alliance agreements with their British brethren overseas.

The booming legal market Down Under has been the scene of many a major firm merger in recent months. And now leading Aussie shop Allens Arthur Robinson (AAR) is reportedly in discussions about  crafting a formal alliance with Magic Circle firm Linklatersaccording to U.K. publication Legal Week.

News of the interest by Linklaters, which has been dealing with internal issues over its leadership, about a potential Oz partner first leaked out in December on an Australian Web site, Legal Week reports. Now, following months of discussions, several senior Linklaters lawyers tell Legal Week on the condition of anonymity that the firms are inching closer to an agreement that would have them joining forces in some capacity.

A Linklaters spokesman told The Am Law Daily that the firm does not comment on market speculation, and provided the following statement on the reports in the British and Australian press: “Linklaters has a large Australian client base and we do a lot of work for international clients in relation to Australia. We work closely with all the leading Australian law firms and frequently meet them all around the world.”

A spokesman for AAR told The Am Law Daily that the firm’s position is also not to “comment on the nature” of certain discussions in the press and that it remains focused on its own clients and their needs. “As we’ve publicly stated previously, we have strong relationships with a number of law firms globally,” AAR said in a statement. “We meet regularly with them both in Australia and internationally to discuss developments in the market.”

In eyeing a possible union with 802-lawyer AAR, the 2,134-lawyer Linklaters becomes the latest international giant to consider expanding its presence in Asia via a beachhead in Australia. Indeed, The Am Law Daily reported last fall that Australia and Canada are proving to be the most fertile ground for big-firm mergers.

Earlier this month sibling publication The Asian Lawyer reported that while U.S.–based firms have fallen behind their British counterparts in entering Australia, Mayer Brown had held talks with AAR on a potential tie-up. AAR denied it was pursuing such a deal and Mayer Brown, whose presence in Asia stems from the firm’s 2008 merger with Hong Kong–based Johnson Stokes Master, declined to comment.

According to the latest Global 100 data compiled by The American Lawyer, AAR had $459.5 million in gross revenue in 2010, compared with Linklaters’s $1.85 billion. The Magic Circle firm’s profits per partner were $1.8 million last year, compared to an almost $1.1 million figure for AAR. The Sydney-based firm has roughly 175 equity partners, while London-based Linklaters has about 440according to our data.

AAR is one of Australia’s Big Six law firms, four of which have either announced or confirmed initiatives in recent months to enter into mergers or strategic alliances with other firms abroad.

One those firms, 955-lawyer Freehills acknowledged earlier this month that is was in “exploratory talks” with leading British firm Herbert Smith, which also confirmed that discussions between the two firms were under way. Ashurst partners, meanwhile, approved a deal last year to combine the firm’s Asian operations with 683-lawyer Aussie firm Blake Dawson in order to smooth the way for a full merger between the two in 2014.

And in December, 841-lawyer Mallesons Stephen Jaques announced that it would merge operations with Chinese domestic giant King Wood in a tie-up that will create the largest firm in the Asia-Pacific region when the combined entity of more than 1,800 lawyers goes live later this week.

The two Big Six firms lacking partners from outside Australia are Clayton Utz, which saw 17 partners defect for Allen Overy when the Magic Circle firm opened in Sydney two years ago, and Minter Ellison, whose Perth office was raided by Squire Sanders last August as the U.S.–based firm launched its own local office. (Minter Ellison chief executive partner John Weber told The Asian Lawyer this month that his firm has been approached by several U.S. shops about a potential tie-up.)

Other global firms, including Clifford Chance, DLA Piper, and Norton Rose, have also been active in Australia.

Clifford Chance opened in Sydney and Perth a year ago by picking up smaller shops in both cities, while DLA Piper became the world’s largest firm by attorney head count last May after absorbing its Aussie alliance partner DLA Phillips Fox.

Norton Rose, which has grown to become one of the largest firms in Canada through mergers with top local shops, saw its revenues surge a year ago thanks to its 2009 merger with Aussie firm Deacons.

Of course, some firms Down Under, such as Slater Gordon, a plaintiffs’ shop that happens to have been the world’s first publicly listed law firm, have been busy with outbound acquisition activity. Melbourne-based Slater Gordon announced last month that it would buy British firm Russell Jones Walker under the U.K.’s new rules for alternative business structures, according to our previous reports.

Click here for a list of Australia’s 30 largest law firms, courtesy of Australasian Legal Business.

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