Prince_Charles_Allan_Warren

Prince Charles, circa 1974, awaiting the throne. Will the right legal talent get anointed now for US/UK law firms working in Asia?

The arrival of a new prince at the Court of St‭. ‬James topped the news both in Asia and the West. This fresh, green dynastic shoot notwithstanding, the British royal family has become a story of missed opportunity – in a way that reminds me of what’s happening in Greater China with a number of the US/UK law firms.

But first, congratulations to William and Kate‭, ‬Princess of Cambridge‭, on their healthy boy, to whom we wish a long life. And bravo‬ Kate for staying thin through the pregnancy and immediately after‭ (‬oh the jeans on the Princess‭!). ‬However‭, ‬ this young family isn’t the reason for this blog post‭. ‬We are very happy for them‭. ‬We are however quite unhappy with Queen Elizabeth.

To be sure, she continues to conduct herself with grace and provides a bearing of dignity to her subjects‭.‬ My beef with‭ ‬the Queen has to do with her son‭, ‬Prince Charles, who is already a grandfather while his mother‭, ‬Queen Elizabeth, has been monarch for well over 50‭ ‬years‭. ‬ What more is she getting out of it that she hasn’t already gotten in spades? She mixes it up with her subjects less and less every year performing what is an ever narrower, more episodic ceremonial role‭. ‬

Prince Charles‭, on the other hand, ‬is still energetic‭, ‬if not at the peak he was in his 30s‭. ‬He’s been waiting with humility‭, ‬with dignity, and without making untoward comments‭. H‬e could readily step out of the palace every day and do what a monarch is supposed to: inspire‭, ‬motivate‭, ‬protect, and point to his subjects towards a higher pasture. Prince Charles would likely be a far more effective monarch than the Queen who‭, ‬given her age‭, ‬has a limited scope‭. ‬

But what’s most corrosive of all is that the longer Elizabeth reigns as monarch and the longer Prince Charles isn’t‭, ‬the weaker he becomes in the eyes of the British people and the weaker a king he’ll be‭. ‬This can still be fixed if the Queen resigns and publicly yields her loyalty to her son. The longer the Queen is queen the less support Prince Charles will have and the less stable the transition, and the less functional becomes the Windsor dynasty‭.‬

It’s time Queen Elizabeth resigned the throne‭. Do it for your people‬ and do it for your son. Let Charles be king‭!‬

This choking off of Prince Charles‭’ ‬blossoming reminds me how the new guard among US firms is being nurtured‭ (‬or not‭) ‬out of Beijing and Shanghai – particularly in the recently developed practice areas relevant to China‭, ‬namely outbound and high-end M&A and Projects / Project Finance‭.‬

Many US firms came to Hong Kong and then China in the mid to late 90s recognizing that eventually there would be a market for New York equity capital markets, but in the meantime their bread-and-butter would be foreign inbound direct investment.

This plan‭ more or less worked. Shortly after SARS‭, ‬equity capital‬ markets‭ (‬US Registered Offerings and 144As‭) ‬gained traction incrementally, with a robust uptick around 2007‭ ‬and then again 2011.

In the boom’s aftermath there’s a vast machinery of US ECM associates‭,‬ many of whom presently are not able to stay busy beyond 1,600‭ ‬hours per year. Because of sustained growth of capital markets in Greater China, a number of partners were made throughout the 10‭-year span: Some‬ of them are senior today and will likely to retire in 5‭ ‬years‭, ‬others in 10‭ ‬years, and others much longer thereafter‭. ‬

This deep bench of seasoned capital-markets partners among US firm would have been a positive development if deal flow had continued at the pace seen in 2007‭ ‬or 2011‭.‭ ‬It hasn’t – the flow today is about half‬ that of 2011‭. ‬

Moreover, building this cadre of now under-utilized capital-markets lawyers in Greater China was for US firms very costly. With a few exceptions, there are now regrets that after 10‭ ‬years, the investment came without ‭‭significant reward‭. ‬Looking back, knowing what they‬‬ know now, many firms ‭‭wouldn’t have invested this way‭. And most‬‬‬ corrosive and insidious of all is that the costs incurred fatigued many firms. Their scope has become narrower, they aren’t any longer thinking large‭, they’re no longer inspired‭.‬‬

That’s a pity, because there are signs that outbound M&A and Projects in the long term will yield far more value than has equity capital markets. And unlike capital markets‭, ‬these practice areas – with better realizations and rates‭ – ‬would also tap into other offices‭ – ‬ whether in SE Asia‭, ‬the Gulf‭, ‬Western Europe‭, ‬CIS and Russia‭,‬ the US, and Sao Paolo – benefiting parts of the firm beyond Asia‭. ‬

In addition‭,‬ these two practice areas are under-lawyered in HK and China at the partner level and there are fewer seasoned hands that can credibly execute the more complex deals.

A growing practice‭ that boasts stronger yields relative to capital‬ markets and benefits to other offices should be on the radar of law-firm management. It’s an opportunity worth exploring. And that means investing in the right kind of partners to build those practice areas‭. ‬

With the lingering bad taste from the push into capital markets, however, there seems little appetite just now to capitalize on the new opportunities. Firms aren’t investing in energetic‭, ‬capable partners who could step into the marketplace and mix it up. It’s just like what the Queen Mother isn’t doing, a monarch who seems to be in retirement without actually being so, taking up the room that would otherwise go to someone more energetic‭ – like a new king who would imbue Kensington‬ Palace with a new dynamism.

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