Basically the mainlanders won’t pay international law firm bills, nobody can be particularly surprised by this.
The Financial Times reports
But when it comes to the tens of billions of dollars worth of Chinese outbound M&A advisory work at stake for global firms and their Chinese partners, one factor counts above all: cost. With a boardroom emphasis on price over advice, lawyers working for top firms tell tales of game show-style bidding sessions where they need to pitch for work before a prospective client — what one lawyer familiar with such contests calls “a bizarre kind of open outcry”.
This means that while lawyers should be making healthy profits from China outbound advisory work, the reality is often very different. Several top mergers and acquisitions lawyers have told the Financial Times that Chinese businesses, particularly state-owned enterprises, are unwilling to pay the kinds of fees western companies routinely budget for.
In a country where the legal system is relatively new, state-to-state negotiations and personal relationships are regarded as far more valuable than legal advice. “Some Chinese parties will still say ‘we’ve worked at the deal, now we just want the attorneys to draw up the documents’,” says a US lawyer whose firm has worked on some of the biggest China outbound deals of recent years. “Attorneys can just look like a cost centre,” he says, without a belief in the “financial and strategic value” that lawyers can add.
The problem is particularly acute for firms seeking work from China’s state-owned enterprises. Another M&A lawyer says the “vast majority” of the work done by his US firm was with private companies, where there had been a more “significant change in the sophistication of many clients in China over the past 10-15 years”.
With SOE clients, he adds, “it’s much more of a crapshoot” as to whether a company will recognise the need for legal services and pay accordingly — or, some lawyers warn, pay at all. “Lots of people chasing a relatively small number of clients and mandates has resulted in fierce competition, driving prices low,” says a Hong Kong-based M&A lawyer. “Added to that, the idea in China of needing a lawyer for transactions [as opposed to disputes] is new.”
Source & Full Article at … https://www.ft.com/content/2b4901bc-e414-11e7-8b99-0191e45377ec
