For its recent in-house conference, ACLA must have thought it made sense to get an American to explain how the ripples of a US-originated crisis made it all the way across the Pacific. As Christopher Kell, partner with Skadden, Arps, Slate, Meagher & Flom in Sydney, turned slide after slide, explaining the system of mortgage-backed financial products, it became clear how this niche market could shake the global financial system.

 

As a corporate and structured finance specialist, Kell is the right man to explain the crisis, but to do this in under half an hour is, even for him, a feat that he wouldn’t want to repeat everyday. He compares it to trying to see the Louvre in Paris from top to bottom in just 6.5 minutes; you can do it, but you have to wear tennis shoes.

 

Kell finds less difficulty in explaining the impact of the credit crunch on Skadden’s Sydney office. He says the securitisation practice is the only practice in the firm that has been directly affected by the lack of liquidity in the market. He says the practice had a growing number of clients before the credit crunch hit the financial markets.

 

“Starting about nine months ago, this market has shut down, that is clearly the case,” he says. “But as for the rest of the market, we have seen a constant stream of equity and debt transactions and M&A deals. I think that is because the Asia Pacific market has not been hit nearly as badly by the access to capital as Europe and the US has been hit.”

 

Waldo Jones, partner with Sullivan & Cromwell in Sydney, agrees that there is still work in advising on US aspects of Australian M&A transactions, but says many deals have been shelved resulting in fewer closures. “This year has probably been one of the more difficult years in recent memory, as a result of the market turmoil caused by the credit crisis. While we have been kept busy this year, I don’t want to underplay the number of deals that have been shelved or sidelined because law firms ultimately rise and fall with completed deals by their clients.”

 

Although one would expect the law firms that practice solely US law in Australia to have been hit hard by the crisis and subsequent economic downturn back home, they all report only a minor impact on their practice. “In terms of the work that we do down here, that has all been extraordinarily strong,” says Bob Meyers, partner with Sidley Austin in Sydney. “It has not been materially impacted at all.”

 

Sidley opened an office in Sydney last year, when it took over Pillsbury Winthrop Shaw Pittman’s operations. Meyers says his team finds most of their work in capital markets and corporate finance transactions and haven’t undertaken any securitisation work, although Sidley has been working for Australian clients on securitisation deals from its US and UK offices.

 

Australia hosts offices from five US law firms if we include Baker & McKenzie, which arguably is only American in name since more than 80% of its lawyers practice outside the US. The fifth is Jones Day, which practises both US and Australian law. Chris Ahern, partner with the firm in Sydney, explains that the firms that have been hit the hardest by the credit crunch are the so-called ‘Wall Street’ firms.

 

“There are some US firms that had significant work in securitisations and collateralised debt obligations. Jones Day, for better or worse, is not a leader in the financial product, Wall Street-based work. We’re often acting for the companies that are raising the debts, while the banks are represented by the Wall Street firms.”