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International China International China and an example that firms from other parts of the world can learn from, instead of trying to become one of the top US and UK firms.” Where else in the world have Similar ambitions are evident in The Lawyer’s inter- you seen a law firm growing views with Fangda chair of management committee by 27 per cent year-on-year Jonathan Zhou and Han Kun’s CEO Joyce Li. Han Kun for 15 consecutive years? We emerged as the fastest growing firm in last year’s China Land of report after tripling its annual turnover between 2013 expect to reach the $1bn and 2015. It also more than doubled its revenue per mark in five years” lawyer (RPL) over the same period. In 2016, its revenue Anthony Qiao, Zhong Lun grew again by 40 per cent from RMB320m in 2015 to RMB450m. the bold So why are these three firms striding ahead of the rest of Chinese firms and how can they reach their ambitious goals? Here are the key findings ofThe Lawyer’s research. Three firms from the China Top 30 “We’re not trying to duplicate the models of any suc- cessful global firms, because China is vastly different Dare to change stand out for their stunning growth from the US or the UK market,” says Zhong Lun’s part- All three firms are developing at an extraordinary pace and unshakeable belief that they will ner and CEO Anthony Qiao. “We want to be a global thanks to recent strategic overhauls and some hard Yun Kriegler be challengers to the global elite Chinese firm.” decisions. In Zhong Lun’s case, Qiao pinpoints the He uses the analogy of the global phenomenon of firm’s turning point to a major strategic review in 2007. Chinese technology giants, such as Alibaba and Tencent. Up until then, Zhong Lun was mostly known for its real “These companies don’t really operate in the same mar- estate and construction practice and foreign direct kets or offer the exact same products as their US tech investment advice. After the review, the firm expanded counterparts such as eBay and Facebook. But their dif- into capital markets, intellectual property and disputes. ferences have in no way stopped them from becoming Under the new strategy, Zhong Lun has added two global tech leaders.” new practice areas each year by hiring market-leading Zhong Lun’s confidence is based on the firm’s strong partners and teams from rival firms. Its most recent performance over the past decade. Qiao recalls that major bolt-on was in 2014 when it added 22 partners when he joined the firm in 2001, there were only 18 to its corporate and capital markets practice from legacy hile KWM has been dominating the partners, who collectively made RMB70m (£8.1m) in Beijing firm Kaiwen. headlines in the international legal press revenue that year. But by the end of 2016, its annual Zhong Lun has also adopted a corporate-style man- for the past year, the staggering progress turnover soared to RMB2.5bn (£290m) having agement structure, setting itself apart from most other of its closest domestic rivals remains on achieved a 25 per cent rise on the previous year. The large national firms, which operate like a federation of Wthe whole unknown to the wider world. figures present a 36-fold revenue spurt over the past 15 individual partners, teams and offices. In September However, The Lawyer’s research into the PRC legal years, and an average annual revenue growth rate of 27 2016, the firm appointed Shanghai managing partner market in the annual The Lawyer China Top 30 are salient per cent. Qiao as its first CEO and added a COO to support the reminders that it is not all about KWM. In particular, “Which other markets in the world have you seen a seven-member management committee. there are three practices that Western firms should be law firm growing by 27 per cent year-on-year for 15 In contrast, Fangda’s style of management is, in aware of: Fangda & Partners, Han Kun and Zhong consecutive years? If we continue to grow at the same Zhou’s words, “rather flat and informal” that “doesn’t Lun, all of which have exhibited extraordinary ambition rate, we can expect to reach the $1bn mark in five years,” emphasise hierarchy”. The management committee and rapid growth. he beams. puts a great deal of focus on strategic planning. Five The three firms differ in many aspects, but all share Zhong Lun’s rapid rise has made it a popular merger years ago, it made the crucial decision to diversify whilst the same aim – to be a premium Chinese legal adviser target for international suitors in recent years, which cutting back on lower margin practice areas. that can match the “qualities” of the top global firms, include Clifford Chance and Dentons. But following a “We aim to work with the best companies on their by which they mean the quality of advice and service strategic review in early 2016, Zhong Lun has restated most complex transactions. Those are mandates that delivery, management of the firm and the ability to its independent strategy. generate premium level legal fees,” says Zhou. Fangda’s charge top market rates. “We should be confident that we can create a unique investment a few years ago into launching a funds for- Unlike KWM, these three firms are not seeking global success model as a Chinese firm,” says Qiao. “We should mation practice with lateral hires has delivered good mergers nor aspiring to have a global network of offices. be inspired to be the benchmark for the legal market returns. Zhou says it is now the firm’s most profit- 54 The Lawyer | The Ambition Issue | May 2017 May 2017 | The Ambition Issue | The Lawyer 55 International China China’s three most ambitious firms firm started on a programme of internal reform in 2010, starting with strengthening its management system Zhong Lun including support functions such as HR and marketing, Revenue trends 2013-16 Total revenue (RMB millions) and most recently adopting a modified lockstep system per partner per lawyer of sharing profits among partners in 2012. 8 “The founding partners are the extremely high- 7 1,030 1,470 earning members of the firm. Moving on to a modified 6 lockstep meant they had to give up a big chunk of their 5 profit shares. But their determination to give uppersonal 2013 2014 4 gains for the firm’s long-term prosperity is the strongest 3 testimony that collaboration and specialisation is at the RMB millions 1,980 2,480 2 heart of Han Kun’s strategy,” says Joyce Li, a founding the highest RPL and PEP figures among the three, Han client that fits into the strategy. Similarly, China partner who became the first CEO of Han Kun in 2016. Kun is well known for setting the bar for top firms’ Resources, Evergrande and Vanke are also among 1 associate pay. In 2011, Han Kun raised the base salary Zhong Lun’s major group-level clients. 0 2015 2016 level for first year associates to RMB20,000 per month, “Many of our long-standing clients have diversified 2013 2014 2015 2016 or £27,000 per year. Its associate pay was the highest their businesses and become conglomerates. Their Fangda & Partners among all leading Chinese firms until recently, when needs can no longer be fulfilled by one or two partners,” several firms decided to match Han Kun’s level. Han says Qiao. Revenue trends 2013-16 Total revenue (RMB millions) We are even more confident Kun is also a pioneer in trainee recruitment; it was the “Many of China’s industries and sectors are still per partner per lawyer 12 that we can catch up with the first Chinese firm to attend New York job fairs to recruit growing rapidly. For example, the healthcare market will 480 630 magic circle firms” law students. see over 20 per cent year-on-year growth for some years 10 On the partner level, Han Kun has hired a banking ahead. We’re budgeting our annual turnover increase on Jonathan Zhou, Fangda 8 and finance team from King & Wood Mallesons in 2013 key sectors instead of on China’s slowing GDP growth 2013 2014 led by partner Wang Su, and the following year it rate,” he adds. 6 appointed antitrust partner Ma Chen from Fangda. Fangda and Han Kun’s development has also been in RMB millions 4 760 900 Most recently, it hired White & Case’s former China response to their clients’ expansion and diversification. head Li Xiaoming in Beijing and K&L Gates’ Alibaba is one of Fangda’s most long-stand- 2 High rate, high pay, high profit disputes of counsel Bonita Chan in Hong ing clients. The relationship goes back to 2005, 0 China’s legal market is highly competitive and as a result Kong. when they were both emerging players in their 2015 2016 2013 2014 2015 2016 it is challenging for law firms to increase their charge- “Because of our focus on venture capital and Our ambition is to be one of respective industries. Since then, Fangda has out rates. Many large Chinese firms are able to grow the new tech companies, a lot of what we do has been involved in all the Chinese tech company’s the elite Chinese firms but Han Kun top-line figures by winning more work on lower prices prominent offshore elements and complex major transactions that transformed it into a how high we can reach Revenue trends 2013-16 Total revenue (RMB millions) or recruiting more lawyers, but their average revenue structures.
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