New Zealand’s Kensington Swan is all set to open its doors in Abu Dhabi – but where will the work come from?

Aside from the intrepid Duncan Cotterill, New Zealand firms have generally been reluctant to expand offshore, a major obstacle being a perceived lack of scale. In both Asia and the Middle East, the typical competitors are huge global firms from the US and the Magic Circle. New Zealand firms would need to find a unique value proposition to distinguish themselves from their super-sized counterparts.

Kensington Swan’s decision to open an Abu Dhabi office therefore comes as a surprise and on more than one count. Dubai is the usual destination of choice for international firms looking to penetrate the Gulf markets. But Kensington Swan, partly because of its strong government and public law practices, has opted for Abu Dhabi, the UAE’s seat of government. “The government sector is harder to get access to, but it’s certainly a vibrant sector and one where we felt we could add particular value,” said Quentin Lowcay (pictured), who will head up the new office.

Targeted approach

Kensington Swan is not planning to challenge the might of the Magic Circle in the Gulf. “We’re going in with a different proposition from, for example, a large finance or project finance firm – we’re going in at a much more targeted level and pursuing the kinds of areas which haven’t been the mainstay of the large firms to date,” said Lowcay. “If you take areas like structured finance or IPOs – firms like Allen & Overy are the absolute global experts in that area. But what we have found is that there is still a great need in the market for general contract and commercial advice,  government, technology outsourcing – these are the areas that the large firms haven’t been able to concentrate on, mainly because they’ve been too busy doing the financing side.”

Another important distinguishing factor is cost. New Zealand, with its highly skilled workforce and comparatively low rates, has long had strong potential as an offshore destination for legal work. That is not the model Kensington Swan intends to employ in Abu Dhabi, but the point is still relevant.

“We will have quite a few lawyers on the ground from day one and have a significant presence – but because our cost base is in New Zealand dollars, I think that gives an indication of the kind of cost savings possible over a US or a UK firm,” says Lowcay. However, he points out that this analysis only goes so far. “That cannot be the sole differentiating factor because there are already firms from countries such as India which offer the same advantage. Firms have to offer something more – such as specialisation and service”

Clients

Kensington Swan’s relationship with the UAE dates back to 2004, when one of the firm’s major clients relocated to Dubai. The move caused the firm to reflect critically on the potential of the UAE market and to build relationships in the area.

The Abu Dhabi office will cater to three broad groups of clients – locally based companies, New Zealand and Australian companies looking to set up business in the Gulf region or looking to attract direct foreign investment out of the Gulf region and the government sector. The work will range from international transactions, commercial structures and reorganisations, procurement and governance to legislative reform and strategic sourcing.  However, one thing Kensington Swan will not be doing is acting in the UAE courts, as the firm’s licence does not allow for this.

Big pond

Rival firm Russell McVeagh's CEO Gary McDiarmid once said that a New Zealand firm looking to expand internationally would find itself “chiselling on the side”. That is a fair summary of the lukewarm approach of New Zealand firms to the subject of overseas offices.

If  Kensington Swan can make the Abu Dhabi venture work, this may cause at least some New Zealand firms to have a change of heart.  The strategy which Kensington Swan is taking into Abu Dhabi could be equally applicable in other markets such as Asia – and indeed Lowcay is not ruling out any further expansion.  “It would need to be a consultative process – we wouldn’t rush into anything – but we’re open to options,” he said.

But there is also a question of market positioning. The prospect of firms such as Russell McVeagh and Bell Gully and Simpson Grierson, accustomed to being the premium names in their home market, lining up patiently for scraps left by Clifford Chance or Freshfields in Asia or the Middle East, may not appeal. It would be a modest path to tread for firms used to dominating the market. But it might just be the key to long-term strategic growth.