Q&A with Peng Xuefeng, founder of Dacheng Law Offices
By
Shangjing Li
http://www.legalbusinessonline.com/features/qa-peng-xuefeng-founder-dacheng-law-offices/68326
Peng Xuefeng, the founder of Dacheng Law Offices, speaks to Shangjing Li about how the merger with Dentons came about, issues that remain to be ironed out, and why more Chinese law firms should consider the merger route
ALB: Can you tell us how the merger came about? Who made the first move?
Peng: Dacheng Law Offices had been seeking a globalised development path for a while. We laid down our five development goals more than ten years ago: Standardisation, scale, professionalism, branding and globalisation. So globalisation has been one of our objectives.
To be frank, Dentons wasn’t the only major law firm we approached. But of all the law firms we approached, we decided to choose Dentons… and for good reasons. We had collaborated with Dentons in the past, but talks formally started only half a year ago, when Joe Andrew, their global chairman, and Elliott Portnoy, their global CEO, visited Beijing.
We share many things in common, including our values, philosophy when it comes to development, and a globalisation-oriented strategic vision – we are a perfect match for each other in all these respects. They are an established firm with a history of 270 years, whereas we are recognized as a major player in a dynamic part of the world. We each have our unique attributes which are highly complementary.
ALB: Could you shed some light on your motivations behind the merger?
Peng: As mentioned earlier, we had long been interested in a merger, and globalisation has always been an objective. We set up offices in Europe, the U.S. and other places in Asia, and built up our overseas presence through such an expansion model. However, our development remained slow. It was unsatisfactory to us. More importantly, it failed to meet the actual needs of our clients.
Today, we have entered a consolidation phase, and our offices overseas have started working together with Dentons. We have five major regional divisions worldwide. Dacheng’s offices in Europe and North America have merged with Dentons, while Dentons’s Asian offices became part of our network.
I have been asked many times: Did Dacheng acquire Dentons or was acquired by Dentons? I think the answer is: We are joining hands to create a new law firm. As we go ahead, the question to be asked is not who is the acquiror. We have strategic consensuses, shared values and very similar objectives.
ALB: Could you walk us through the overall organisational structure after the merger?
Peng: It will be a process of direct assimilation. Dentons lawyers in Asia will join our corresponding practice groups directly according to our existing internal department set-up. Similarly, our staff in Europe and North America will also be moved directly to relevant Dentons departments.
The process will be completed through regional integration of offices. There won’t be a Dentons New York office and a separate Dacheng New York office. We are now one family, so there will be a single office in any location.
ALB: Do you think the merger will result in any loss of opportunities in terms of cooperation with other multinational law firms?
Peng: The deal doesn’t cover the entire world, and we don’t rule out the possibility of partnering with other top law firms in areas not covered. The networks of Dentons and ours combined only cover around 50 countries in the world. We don’t have any office in the remaining countries. Of the over 200 countries worldwide, we have presence in less than one-third. There is plenty of room for us to build partnerships with other law firms.
ALB: So does that mean you will not be able to work with other international law firms in areas where you already have offices?
Peng: This is true in some sense, but we won’t need such resources going forward. For example, other international law firms may have large teams in New York. But we already have a large team there, so we don’t need to look any further.
ALB: After the merger, will there be some kind of uniform, globalised fee structure for different offices across the world?
Peng: During the three-year transition period, the merger will follow the Swiss Verein model under which there will be regional profit pools, and accounting systems are kept separate. After that, we aim to become a fully integrated firm. However, we will need to keep certain legal issues in mind.
Under Chinese law, there are certain restrictions when it comes to these arrangements, but many feel the laws will change soon. Needless to say, it would be ideal if such changes happen, so we can evolve smoothly. If realized, they will be good news for the entire legal profession in the country, and will make revenue generation more globalised.
ALB: How will decision-making work in the future?
Peng: Our new law firm will have a global governance structure and separate management teams for the five major regions.
We have a global board, a global advisory committee and a global management committee. Currently, the global board consists of members from the five major regions and I am the incumbent chairman, with my first term of office lasting for four years. The global advisory committee also consists of board members of the five major regions, and I am also acting as its chairman. For the global management committee, the CEO is Elliott Portnoy, and Joseph Andrew serves as the global chairman overseeing management operations at a more macro level.
We have gaps to fill in our global coverage. For example, South America, Australia, Japan, South Korea, Southeast Asia and India are all on our radar.
ALB: What is the biggest challenge after the merger?
Peng: The most difficult challenge is the massive workload. We have a lot of things to do, such as resolving conflicting protocols, increasing business cooperation and carrying out market expansion through joint efforts. We are facing a complicated situation, and everyone needs to take a pragmatic approach. I always stress that we must tackle one task at a time. The most urgent task facing us now is to make sure the transition is seamless for our clients.
ALB: What do you expect to achieve after the three-year transition period?
Peng: We hope we will become the strongest law firm in the world, not only in terms of scale but also professionalism, industry expertise, geographical and jurisdiction coverage. It’s easier said than done. We are fully aware that to achieve this goal we need to cope with the many tasks down the road one by one.
We are undergoing a process of integration, including building professional teams, client resources, historical institutional system of social resources. They are all works in progress.
ALB: Do you think more law firms in China will follow Dacheng’s footsteps to merge with foreign firms in the next a few years? Why?
Peng: This is certainly our hope. After 30 years of reform and opening-up, especially following China’s accession to the WTO, the Chinese economy is now closely integrated with the outside world, but legal services in China have not really reached beyond Chinese borders. Nevertheless, clients have ventured abroad, taking the need for legal services with them. Therefore, service providers need to follow suit. Otherwise they will begin falling behind, and face the risk of being eliminated over time.
The only solution is to catch up with the first movers. King & Wood made it to overseas markets first, setting a good example. And now, Dacheng has also gone overseas. But two firms alone are not enough. I hope the legal industry will become aware of the value and importance of going global, and law firms can join hands to catch up.
Otherwise, the services provided for clients will remain incomplete, only covering the domestic side of things, but failing to meet clients’ needs overseas.
I personally believe that in a market like China, even 100 more mergers among large law firms will not be enough to fully satisfy market demand. Legal professionals should appreciate this from a pragmatic perspective, and make concerted efforts towards this common purpose.
