COVID-19 has impacted the legal industry globally, and offshore law firms have not been immune. However, they have used the past several months to embrace change and transform themselves, and as a result, are well-placed to tap into the potential of the year ahead.
As a transformative and at times devastating year inches closer to its end, offshore law firms are looking back on the struggles and hurdles they overcame throughout the global pandemic and display surprising optimism for the times ahead.
“[The pandemic] has forced us to think about the status quo of our business, how we used to work and how we can change that going forward efficiently… Although COVID-19 has and will continue to be tragic health disaster globally, it has forced us to make decisions that we possibly may never have made and that has ultimately been a good thing.”
— Nicholas Plowman, Ogier
Nicholas Plowman, a partner in Ogier’s Hong Kong office, describes the past 11 months as “challenging, trans-formational and interesting.”
“It has forced us to think about the status quo of our business, how we used to work and how we can change that going forward more efficiently,” says Plowman. “Although COVID-19 has and will continue to be tragic health disaster globally, it has forced us to make decisions that we possibly may never have made and that has ultimately been a good thing.”
Flora Wong, a partner in the Hong Kong office of Conyers, agrees that 2020 has been an extremely challenging and bizarre year with an upside being the way it has transformed how work is done.
“COVID-19 has changed how we work, how we live and even how we breathe! In Hong Kong, we have been lucky to not have to go into strict lock-down like some other places but in view of the COVID-19 threat, like many other law firms and institutions in Hong Kong, we have introduced remote working in our office,” she says.
This has been a game-changer for sectors like the legal industry, which has sometimes been more resistant to change than others.
“As law firms are people-focused businesses and are traditionally more conservative, the idea of remote working over a period of time was foreign to us and some may initially wonder if it could work effectively. However, our experience has demonstrated that after a period of adaptation and adjustment, remote working can work remarkably well while providing a degree of flexibility,” Wong adds.
“There are of course some good and bad but so far, we have not seen major adverse impact on efficiency and quality. It is saddening to see the damage that COVID-19 has caused to many but 2020 has also taught us to stop and re-think the way that we work, do business, learn and live,” she notes.
The pandemic has highlighted the need for digital infrastructure and solutions not just as contingencies but as the new way forward. Those that have been investing diligently in their digital infrastructure have seen it pay off amid this pandemic.
“As a firm with two regional hubs in Hong Kong and Singapore with an Asia-wide coverage, we have historically travelled extensively to see our clients in the region and to attend industry events. In the current circumstances, we have found alternative ways to deliver know-how to clients and to engage with them,” says John Rogers, the managing partner of Walkers’ Singapore office.
“We were one of the earliest adopters of virtual presentations and we have conducted an extensive webinar programme during the course of this year. We have also been able to support a number of conference organisers and clients as they have sought to arrange and deliver webinars in the region. We believe this is a solid platform for conducting our business going forward and we are committed to increased investment in and use of technology to facilitate connectivity,” he adds.
Rogers also cites supporting the physical and mental health and safety of their people as a priority in this time, which has been made possible by technology.
“We have used videoconferencing and other measures to increase internal communication and support. This has been hugely beneficial, increasing internal meetings and collaborations,” Rogers says.
Rogers describes 2020 as “an educational year” but the push towards digital actually came from lessons learnt in the past. “In hindsight, the Hong Kong protests in 2019 gave us something of a jump-start and meant that we were pretty well positioned in terms of our business continuity. That foundation has been helpful as we continue to navigate the COVID related work from home requirements of 2020,” Rogers says.
“Having been in Hong Kong since 2003 and Singapore since 2009, we and our clients in the region have experienced some earlier difficult periods including SARS and the Global Financial Crisis,” he says. “During times like these, we can provide the professional, value adds support that our clients need. We have engaged with our clients and other law firms, often virtually rather than in person, as the regional business community has had to innovate and adapt to the challenges of the year.”
Even in the midst of this challenging period, some firms have still managed to grow.
“An important and exciting milestone for Walkers this year is the additional multi-jurisdictional capability we now have in Asia to service clients with Bermuda and Irish law needs. As our Bermuda office approaches its fifth birthday in December 2020, we are also celebrating the launch of Bermuda legal services from our Hong Kong and Singapore Offices. This sits well with our regional strategy to deliver high quality, responsive and time zone friendly Cayman Islands, BVI, Bermuda and Irish legal services,” says Rogers.
“While the effects of the pandemic have given rise to certain challenges, it has shown the resilience of our business and enabled us to make a step-change in the way in which we engage with clients and staff,” he adds.
TO 2021 AND BEYOND
It’s no secret that all eyes are on a vaccine to bring things back to a sense of pre-2020 normalcy.
“Things really hang on how quickly a credible vaccine is rolled out to the public in Asia. My hope is this will be July/August 2021 so we are travelling again in Q3,” says Plowman.
But some think that things are unlikely to return to the way they were before.
“The pandemic is affecting over 180 countries to various extents. We are hoping that an effective vaccine for COVID-19 will come around soon but even if and when it arrives, life post-COVID-19 will probably never be the same,” says Wong.
“As the world adapts to the COVID-19 pandemic, we expect to see an uptick in M&A activity as private equity firms begin to tap their glut of dry powder and to take advantage of distressed opportunities that are expected to emerge. This will no doubt result in a very competitive market and could place pressure on pricing.”
- John Rogers, Walkers
Rogers believes that the pandemic will actually lead to a rise in M&A deals.
“As the world adapts to the COVID-19 pandemic, we expect to see an uptick in M&A activity as private equity firms begin to tap their glut of dry powder and to take advantage of distressed opportunities that are expected to emerge. This will no doubt result in a very competitive market and could place pressure on pricing,” he says.
“We also expect persistent fund-raising at steady levels, with experienced managers able to launch quickly with re-up capital while newer managers probably raise with truncated timetables, as they struggle with the logistics of due diligence and marketing while travel remains restricted. The M&A dealscape may also shift as companies look to divest distressed assets or parts of their business to opportunistic buyers in the new pandemic environment.”
Rogers also expects equity capital markets will continue to be busy as investors chase yield.
“The level of ECM activity has rebounded significantly in Q3 2020 with the most active third quarter for global IPOs in the last 20 years by proceeds. We’re also seeing a trend of take private activity with delistings in both U.S. and Hong Kong exchanges, taking advantage of lower valuations with a possible view to relisting more locally,” he remarks.
Others also foresee busy times ahead in markets.
“Asia seems to be recovering faster. In particular, the latest GDP figure of China has shown encouraging signs of recovery. Most business activities have resumed in mainland China and corporate department in our Hong Kong office has been busy with privatisation of Hong Kong-listed companies, listings in Hong Kong and China, and debts issue by PRC property developers.”
— Flora Wong, Conyers
“China will be the key for us in Hong Kong. Once travel resumes to some extent, we should see confidence return and deal-flow pick up,” says Plowman.
“Countries in Asia seem to be recovering faster than the others. In particular, the latest GDP figure of China has shown slow but encouraging signs of recovery from COVID-19. Most business activities have resumed in mainland China and corporate department in our Hong Kong office has been busy with privatisation of Hong Kong-listed companies, listings in Hong Kong and China, and debts issue by PRC property developers,” notes Wong. “Our Asia dispute and restructuring group has also been exceptionally busy over the last six months. In terms of industries, we have so far seen strong fundraising activities in infrastructure, TMT and health-care/life science sectors and believe this will continue to be the trend.”
The U.S. election is also expected to send waves that will affect trends in the region, as that will mark where U.S.-China tensions will head in the future.
“In respect of the U.S.-China relations, a lot hinges on the results of the U.S. election. The hope is sense prevails, the hysteria is seen for what it is, and a middle ground is found where issues are resolved rationally and diplomatically,” says Plowman.
Hong Kong, in particular, may feel the reverberations of the U.S.–China trade war and ongoing tensions between these two powers and the U.S. election campaign. The ultimate result will likely have fairly acute impacts on the market.
“Although this creates a level of uncertainty, market players who are able to adapt quickly and respond smartly will be able to turn that into opportunity – and Asia remains the biggest market for growth globally,” says Rogers.
With the ongoing U.S.-China tension and growing popularity of the Chinese stock markets, many are noting a growing number of home-coming secondary listings of U.S.-listed Chinese companies in either China or HK, and also new red-chip listings on the Shanghai Stock Exchange (SSE).
“In February 2020, we advised China Resources Microelectronics in its IPO on the SSE Star Market which represented the first Cayman incorporated company listed in mainland China and the first red-chip structured enterprise in China to directly launch an IPO on the A-share market,” says Wong.
Conyers also recently advised Semiconductor Manufacturing International Corporation, a Hong Kong-listed Cayman incorporated company, in its IPO of RMB shares to Chinese investors and listing of A Shares on the Sci-Tech Innovation Board of the Shanghai Stock Exchange, or SSE STAR Market, marking the first dual listing of a Cayman incorporated company on both the Hong Kong Stock Exchange and SSE STAR Market.
“We believe that while the current political, social and economic environment presents significant challenges and uncertainties for the rest of the year and probably the first two quarters of 2021, there are also plentiful opportunities available with the changing market sentiment,” says Wong.
In the recent Walkers Asia Private Equity Survey, the firm’s respondents indicated healthcare, technology, pharmaceuticals and biotech; as well as distress investments as the top four sectors for growth.
“This stands as no surprise given the bullish sentiments for healthcare, pharma and biotech as a result of COVID-19 but it is also important to acknowledge the fundamentals driving these industries – an ageing population and increasing life-span points to increasing demand for products and services from these same industries,” says Rogers.
TIPS FOR TIMES AHEAD
Conyers’ Wong has a philosophical outlook for both the current struggles and the future. “We are all facing new challenges in this unusual time, but every challenge could bring an opportunity,” she says. “To stay ahead of the game, it is crucial for clients to maintain close relationship with their professional advisors to keep up with latest market trend, identify new opportunities and risks. We are here to help our clients to grow and succeed so please do not hesitate to contact us as we are only a phone call away, as always.”
Others say that all the changes made now are here to stay, and the new upgrades will be key to staying ahead of the curve.
“Look for efficiencies in your business now as a return to any kind of normal will mean those efficiencies will likely remain and a more flexible, hybrid work model will be adopted. Employees will expect it and clients will regard this as the ‘new normal’,” says Plowman.
In a year that has been characterised by uncertainty, Rogers believes that one of the key roles for offshore firms as a trusted adviser is to help clients manage risk.
“The easiest way to achieve this is to minimise actions that lead to greater uncertainty – that would be one simple piece of advice for the year. This message resonates with clients,” he says.
In Walkers’ recent Asia PE Fund Survey, the firm asked fund managers about the key drivers in selecting fund structures and the jurisdictions in which they set up their entities.
“The responses showed that investor familiarity and confidence was their primary driver in decision making, followed by certainty of tax outcomes, and availability of knowledge and expertise,” says Rogers.
It is also familiarity with what one can bring to the table that will help many businesses across different industries survive the storm.
“Although a number of our clients have been extremely innovative and entrepreneurial through the course of the year, the great success stories of 2020 so far have not been where people tried to re-invent the wheel,” says Rogers.
“The successes have been where clients brought their expertise and skills to bear within a trusted and tested framework, relying on the expertise of lawyers and other service providers that have successfully navigated crises in the past, or that have a deep specialist knowledge of the relevant area – whether it be regulation, litigation, or restructuring for example. In doing that we’ve been able to partner with them to manage and mitigate the risks in what has been a volatile period.”
Despite this game-changing bump in the road, all the lawyers Asian Legal Business spoke to believe the region will likely remain a beacon of growth.
“Despite the slowdown in growth for the PRC, the World Bank October 2020 report indicates that the China economy will grow by 7.9 percent in 2021,” says Rogers.
“The handling of COVID-19 by most Asian countries also bodes well for a quicker return to growth compared to the rest of the world.”
To contact the editorial team, please email ALBEditor@thomsonreuters.com.