A greater regularity of large and high-profile transactions involving companies based in Shandong may well be the main factor driving leading national law firms to set up shop in China's second richest province. The increasing number of cross-border M&A transactions, such as Haier's recent US$121m investment in New Zealand white goods producer Fisher & Paykel, and sizable IPOs including Shandong Chenming Paper's US$410m Hong Kong IPO, are good reasons for them to have not only one but two full-capacity offices in the province.

King & Wood and Dacheng will soon become the first two Beijing firms to have an office in both Jinan and Qingdao - Shandong's two major commercial cities. King & Wood first opened in Qingdao a year ago by acquiring a group of 25 lawyers and partners from local firm Mingfeng.  It is set to launch its Jinan office in the next few months. Meanwhile, Dacheng, which opened its Jinan office in 2006, has just obtained the approval to establish an office in Qingdao.

"Companies in Shandong have plenty of demand for legal services, especially for high-end and sophisticated services," says Huang Tao, a partner of King & Wood. "Having a strong service capacity on the ground enables us to work more efficiently and helps save costs for our clients." The two offices in Shandong will work as an integrated team to service clients throughout Shandong.

Dacheng's two offices in Shandong will have different focuses. Its Jinan office handles mainly general corporate, banking & finance, insurance and real estate matters. As Shandong has the highest density of large state-owned enterprises (SOEs), helping them with restructuring and transactions is also an increasingly important part of the office's routine work. Its new Qingdao office, on the other hand, will have an emphasis on foreign investment, international trade and shipping practices.

It is rare for national firms to have two branch offices in the same province, and the expansion of King & Wood and Dacheng in Shandong spells out the growing importance of this nascent market.

Currently, most local firms will hardly feel the competition from the influx of large Beijing, Shanghai and Guangzhou firms. However, those targeting high-end clients have already felt the pinch.

Jinan-headquartered Kangqiao law firm, for example, has enjoyed a growing reputation and established itself as a leading advisor to many of the province's large SOEs and public and private companies. As a result, it has had to compete against leading Beijing firms for some large projects and cases in recent years.
 
"Local Shandong firms will face more competition from Beijing firms. That's an inevitable trend," says Cai Zhongjie, managing partner of Kangqiao. But Cai notes that the Shandong branch offices of Beijing firms haven't yet put any pressure on leading local firms; most competition still comes from the headquarters of these firms.

Deheng (Shandong), striving to be Shandong's largest law firm by both size and annual revenues, has cemented its position as ALB's Northeast China Firm of the Year for two consecutive years. The firm is already competing at a national level.

"As we have operations nationwide, we have to face competitors that are major firms from different cities and regions," says Hu Ming, executive partner of Deheng (Shandong). To gain a competitive edge, Deheng (Shandong) has a Beijing strategy to strengthen its Beijing office and increase its offering of high-end, international corporate legal services.

The Shandong legal market is not a zero-sum game but rather a great opportunity for all and one that is continually growing in line with client organisations.