In the context of the global financial crisis and the Olympics aftermath, China's economic growth is experiencing a slowdown. The legal industry in the country's capital city is inevitably affected, but long-term domestic demand growth and domestic companies' international ambitions will offer new opportunities to the city's law firms. Beijing's legal fraternity believes that the legal services market will remain vibrant and prosperous

Mid-tier on path to prominence
The days when a handful of top-tier firms dominated Beijing's legal industry have gone, and the time has come for mid-tier firms to separate themselves from others and find their niche specialities or unique marketing strategies.

Many of these have advanced their position in the market by means of consolidation. The past few years have seen an active period of mergers between mid-tier firms. Notable new partnerships recently formed include JT & N, Hylands, Run Ming, V&T and Zhongyin.

"Law firm consolidation by merger is driven not only by the internal business needs of law firms, but also by the needs of their ever-expanding clients," says Jiang Jiang, a partner of Hylands. Hylands was founded in 2007 based on a merger between real estate power house Li Wen & Partners and established IP practice Hao Tian. "Larger clients require firms to provide the breadth and depth of specialised legal services."

As corporate clients are rapidly growing themselves through M&A, their legal advisers have to achieve the mass necessary to meet their expanding needs. Organic growth, through the addition of newly qualified lawyers or growth by lateral hiring, seems insufficiently aggressive in this particular market.
Having the necessary resources is important for mid-tier firms to expand into the upper end of the market, but defining their identities is as critical - if not more so.

Run Ming, another Beijing firm established in 2007 as the result of a merger, has also built a real profile in the business and legal community. "After 20 years of practice, we've come to realise that there is an exceptional opportunity for mid-tier firms with real niches in focused areas," says Wang Yadong, founding partner of Run Ming.

Wang, formerly a Jun He partner, is well known for his work in IP-related litigation, while another founding partner Liu Yi, the former managing partner of Jun Yi, has also gained an enviable reputation in his fields of aviation financing and infrastructure projects. These practices have been the cornerstone of Run Ming, and give the firm its competitive edge.

"While different clients have different philosophies on what is better, the trend is that clients prefer to work with the best practitioners in a particular area for different issues, instead of going to a one-stop shop for everything," says Wang. "So we don't do everything and we don't want to be very large, but we do something exceptionally well with crisp, quality teams."

As mid-tier firms move up the ladder, creating grater choice for large legal service buyers - and growing concerns about conflicts of interest - corporate clients have started to look at the array of mid-tier legal service providers. This is a sign of market maturity.

One of the main reasons driving clients to use mid-tier firms is that top-tier firms have been growing at such a fast rate that they can barely keep up with their most lucrative clients, so they are likely to be less responsive to other clients.

"We prefer to work with mid-tier firms, particularly those established by well-known partners from large firms. We like being treated like a VIP by our external counsel and being supported by their best lawyers regardless of the size and nature of our projects," says a senior in-house counsel of Bayer China in Beijing.

In addition, flexibility, client responsiveness and better access to partners are other advantages of being mid tier. With emerging market opportunities, leading firms in the mid-tier segment have successfully positioned themselves for achieving prominence and are certainly set to reap the rewards in the near future.

Strength in troubled times
Providing legal services for cross-border transactions, such as overseas IPOs and listings and M&A, is the most attractive market segment for law firms. Beijing firms have always enjoyed market dominance in that segment, so as the global financial crisis bites, they are the first to feel this and respond to it.
"Many Beijing firms have foreseen the impacts of the global financial turmoil on their businesses, and are actively seeking ways to weather the storm," says Xu Jiali, founder and managing of Beijing-headquartered Longan law firm. "Beijing firms have a good understanding of the legal service market and are closely monitoring market trends. So they are able to quickly adjust their strategies to changing economic conditions and market demands."

Xu's firm has adjusted to the new business climate by developing a stronger and larger dispute resolution practice. This has proved to be successful, with the firm experiencing an upswing in business since the beginning of 2009.

Beijing firms are also on the lookout for any opportunities that arise out of newly enacted laws and regulations. A number of these firms are spearheading the emerging practice areas of antitrust, bankruptcy and employment law. Recent highlights include: Dacheng's appointment to provide anti-trust related legal services to Coca-Cola's US$2.4bn acquisition of Huiyuan Juice, and Zhongzi's appointment as the co-administrator of the Beijing Food Grain Dojo Technological Development's bankruptcy.

While the global crisis has hampered deal activity and caused a decline in the number of transactions, Beijing firms are still dominant in the provision of legal services to large transactions, particularly to outbound M&A of Chinese companies.

As the saying goes, Beijing firms' strengths are most visible in times of adversity.

NEXT: Beijing firms lead international expansion

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