IFLR 1000
The Guide to the World's Leading Financial Law Firms

The past few years have seen a dramatic change to the traditionally strong and dominant local legal market. A fever of globalisation has hit the Australian legal market....

The past few years have seen a dramatic change to the traditionally strong and dominant local legal market. A fever of globalisation has hit the Australian legal market. International firms are moving in, tying up, merging or becoming 'best friends' with domestic law firms.

Despite the rocky economic outlook, Allen & Overy, Clifford Chance, Norton Rose, DLA Piper and Baker & McKenzie have all steadily gained strong traction in the market.

In addition Blake Dawson dropped its well-known moniker when it merged its Asia businesses with UK firm Ashurst, with a full merger expected in 2014. Mallesons jumped into a much hyped and much questioned combination with Chinese firm King & Wood, Allens Arthur Robinson dropped part of its name and became Allens when it joined in a strategic alliance with global law firm Linklaters and finally Freehills went all in with a full merger with Herbert Smith to become Herbert Smith Freehills.

The trend doesn't appear to be stopping, with the remaining large domestic law firms in talks with international contenders and UK and US firms showing interest in the last of the Australian independents.

The wave of change has also caused plenty of lateral movement among lawyers, with partners and sometimes whole teams shifting from firm to firm. It has made for a recruiter's dream, but left clients feeling a little bruised. As one said, "I used to know the strengths and weaknesses of all firms and partners on my panel, now I'm left reeling a little and trying to keep tabs on everyone is proving a bit of a headache."

Australia's two-speed economy continued unabated, with a widening gap being driven by the resources boom and the weak retail, housing and government sectors. Energy and resources deals continued to dominate the market, accounting for more than half of all transactions. Some lawyers are forecasting a potential slowdown in this growth, due to a number of factors. Foreign and domestic investors are looking towards Africa and Canada as the next jurisdictions for development and new or amended legislation is seen as hampering the Australian market.

Several industry changing amendments or new pieces of legislation hit the Australian market as well, including the Personal Property and Security Act (PPSA), the Minerals Resources Rent Tax (MRRT), the Clean Energy Legislation (commonly referred to as Carbon Tax) and the Banking Amendment (Covered Bonds) Act 2011 and the Future of Financial Advice (FoFA) Bill.

The PPSA came into effect in early 2012, creating a new system for dealing with security interests in personal property and making a single register where all types of security interests in personal property must be registered. Failure to register an interest could mean the interest is lost in subsequent dealings involving the property.

The MRRT legislation was passed in mid-2012 and is aimed at the top end of the resources industry. Companies who reach a profit of A$75 million ($78 million) will have to pay up. It is estimated to affect around 320 companies and could potentially put off investors into the Australian resources market.

After years of controversy, the Clean Energy Legislation, commonly referred to as the Carbon Tax, finally came into effect in July 2012. The legislation looks to hit 300 of the worst polluting companies, who will have to pay A$23 for every tonne of greenhouse gas produced. The tax will affect Australia's entire economy, but will hit the mining and energy sectors hardest and is likely to slow investment.

FoFA is aimed at improving the trust and confidence of Australian retail investors in the financial planning sector, sparking regulatory confusion and compliance regimes. The legislation was designed to deal with conflicts of interest that have brought into question the quality of financial advice provided to Australian investors.

CONTEXT AND TRENDS
With Australian corporates being encouraged to access new sources of debt financing, with covered bonds being the obvious example, the level of straight bank lending in the market has declined. Instead firms have been kept busy with restructurings, refinancings, project linked work and some acquisition finance....

CONTEXT AND TRENDS

With Australian corporates being encouraged to access new sources of debt financing, with covered bonds being the obvious example, the level of straight bank lending in the market has declined. Instead firms have been kept busy with restructurings, refinancings, project linked work and some acquisition finance.

New lending should not be considered in decline and the debt market themselves are not exactly free from trouble. It is also worth considering that while covered bonds are still viewed with novelty and excitement they are not the answer to everything and there is still a substantial part of the market that is best suited to straight bank lending.

With banks also still wary about which parties they lend to, mining companies and established corporates are likely to remain in a position to get the best rates, which may be a more difficult prospect for new market entities.

While the market itself is still dominated by domestic and some European banks there is a sense that banks from other parts of Asia, most notably China and Japan may start to get more involved in deals, especially those involving projects or mining work.

MAJOR LATERAL HIRES

Adam Stapledon
From: Herbert Smith Freehills
To: Allen & Overy

Nuncio D'Angelo
From: King & Wood Mallesons
To: Norton Rose

Minerals Resources Rent Tax Bill 2011
In effect as of March 19 2012

Personal Property Securities Amendment (Registration Commencement) Bill 2011
In effect as of October 19 2011

Banking Amendment (Covered Bonds) Act 2012
In effect as of September 15 2011

Clean Energy Legislation Amendment Bill 2012
In effect as of July 1 2012

Corporations Amendment (Future of Financial Advice) Bill 2012
In effect as of July 1 2013

RISING STARS

Gilbert + Tobin
Alexander Danne

CONTEXT AND TRENDS
In response to the increasing pressure for Australian banks to find alternative forms of debt financing, along with the growing trend in other countries to participate in the $3 trillion global covered bonds market, the Banking Amendment (Covered Bonds) Act came into effect in late 2011. The Banking Amendment (Covered Bonds) Act enables Authorised Deposit-taking Institutions (ADIs), which include banks, credit unions and building societies, to issue covered bonds....

CONTEXT AND TRENDS

In response to the increasing pressure for Australian banks to find alternative forms of debt financing, along with the growing trend in other countries to participate in the $3 trillion global covered bonds market, the Banking Amendment (Covered Bonds) Act came into effect in late 2011. The Banking Amendment (Covered Bonds) Act enables Authorised Deposit-taking Institutions (ADIs), which include banks, credit unions and building societies, to issue covered bonds. This essentially allows banks to diversify away from unsecured debt sources and allows the ADI's to reduce their reliance on offshore funding.

MAJOR LATERAL HIRES

Scott Miller
From: Corrs Chambers Westgarth
To: Norton Rose

RISING STARS

Ashurst
Stanley Mok

CONTEXT AND TRENDS
In August 2012, the Australian Securities Exchange (ASX) introduced amendments to its Listing Rules, with a three-month transitional period making it effective in November 2012. The new fundraising rules for small to mid-sized companies provide more flexibility and accessibility to raising added capital and have been designed with the Western Australian resources market in mind....

CONTEXT AND TRENDS

In August 2012, the Australian Securities Exchange (ASX) introduced amendments to its Listing Rules, with a three-month transitional period making it effective in November 2012. The new fundraising rules for small to mid-sized companies provide more flexibility and accessibility to raising added capital and have been designed with the Western Australian resources market in mind.

Under the old rules, a company was able to issue up to 15% of new shares every year without shareholder approval. The new rules allow companies not included in the ASX/S&P 300 and have a market capitalisation of A$300 million ($313 million) or less to issue an additional 10% of its issued capital, bringing its total placement capacity to 25%.

Familiarity with the pro-rata, accelerated institutional, tradable retail entitlement offers (PAITREO) appears to have set in. The structure, pioneered by Merrill Lynch in the A$2.3 billion capital raising by Origin Energy, is said to be the fairest form of equity raising developed so far, and combines traditional rights issues with an accelerated raising. The institutional part is accelerated and any shortfall is sold in a bookbuild, followed by a retail raising, which means retail shareholders have the choice of trading their entitlements on the ASX or through a subsequent retail shortfall bookbuild. Although only a few PAITREO raisings had taken place by mid-2012, with Goodman Fielder, Super Retail, BlueScope, Brambles and AGL Energy choosing to use the structure for their raisings, there was increase in the frequency these came on to the market.

The Australian Securities and Investments Commission (ASIC) is actively pushing the use of renounceable rights issues and warned of future legislation if widespread dilution in capital raisings appeared.

MAJOR LATERAL HIRES

Tony Sparks
From: Herbert Smith Freehills
To: Allen & Overy

RISING STARS

Gilbert + Tobin
Rachael Bassil

CONTEXT AND TRENDS
In past years a significant source of funding for financial institutions in Australia was RMBS. Structured credit products suffered in the financial crisis and although there was a slight increase in issues, their share in the market declined so steeply over the years that it is unlikely to return to pre-global financial crisis levels....

CONTEXT AND TRENDS

In past years a significant source of funding for financial institutions in Australia was RMBS. Structured credit products suffered in the financial crisis and although there was a slight increase in issues, their share in the market declined so steeply over the years that it is unlikely to return to pre-global financial crisis levels.

One issue that may increase the decline of existing RMBS is the Banking Amendment (Covered Bonds) Act. With the local market being more familiar with RMBS, the demand for covered bonds is more likely to come initially from overseas buyers, but will in time extend to both offshore and domestic investors.

As mentioned above, in response to the increasing pressure for Australian banks to find alternative forms of debt financing, along with the growing trend in other countries to participate in the $3 trillion global covered bonds market, the Covered Bonds Act came into effect in late 2011. The Act enables Authorised Deposit-taking Institutions (ADIs), which include banks, credit unions and building societies, to issue covered bonds. This essentially allows banks to diversify away from unsecured debt sources and allows the ADI's to reduce their reliance on offshore funding.

MAJOR LATERAL HIRES

Matthew Allchurch
From: Allens
To: Henry Davis York

RISING STARS

Ashurst
Stanley Mok

CONTENT AND TRENDS
The regulatory scene has stepped up a notch in the wake of Rod Sim's appointment to the Chairman of the Australian Competition & Consumer Commission (ACCC) and the launch of an updated Compliance and Enforcement Policy. The ACCC has been keen to use its new powers under the Australian Consumer Law (ACL), which was introduced in January 2011, to look at certain sectors and activities of particular concern, such as the need for greater transparency to customers, misleading and deceptive conduct and incorrect carbon pricing issues....

CONTENT AND TRENDS

The regulatory scene has stepped up a notch in the wake of Rod Sim's appointment to the Chairman of the Australian Competition & Consumer Commission (ACCC) and the launch of an updated Compliance and Enforcement Policy. The ACCC has been keen to use its new powers under the Australian Consumer Law (ACL), which was introduced in January 2011, to look at certain sectors and activities of particular concern, such as the need for greater transparency to customers, misleading and deceptive conduct and incorrect carbon pricing issues. Sectors under particular scrutiny are telecommunications, energy and resources, supermarkets and online businesses.

The ACCC will continue to closely monitor mergers and intervene where it considers a breach has occurred. The Commission will also build on closer cooperation between regulators in other jurisdictions.

MAJOR LATERAL HIRES

Liza Carver
From: Gilbert + Tobin
To: Ashurst

Ayman Guirguis
From: Ashurst
To: Corrs Chambers Westgarth

Daniel Preston
From: Ashurst
To: Herbert Smith Freehills

Nick Taylor
From: Gilbert + Tobin
To: Jones Day

Stephen Ridgeway
From: Ashurst
To: King & Wood Mallesons

MAJOR LEGISLATION CHANGES

Australian Consumer Law
In effect as of January 1 2011

RISING STARS

King & Wood Mallesons
Wayne Leach

CONTEXT AND TRENDS
Although the M&A market has seen an increase in transactions, the average deal size has been smaller than previous years. Australia's energy and resources sector has attracted foreign bidders, who are driving many of the higher value transactions in the market, although healthcare, IT and food and healthcare were seemingly also appealing to overseas investors....

CONTEXT AND TRENDS

Although the M&A market has seen an increase in transactions, the average deal size has been smaller than previous years.

Australia's energy and resources sector has attracted foreign bidders, who are driving many of the higher value transactions in the market, although healthcare, IT and food and healthcare were seemingly also appealing to overseas investors.

Energy and resources dominated both domestic and foreign deals, representing more than half of all M&A transactions.

Bear hug transactions are on the increase and although hostile takeovers are still common, nearly 30% of all deals in 2011 started with a bear hug approach. The approach is made by offering the a generous price in excess of the target company's value, in effect forcing the management of the company to sell in the best interests of the shareholders.

MAJOR LATERAL HIRES

Garry Besson
From: Gilbert + Tobin
To: Ashurst

Gary Lawler
From: Gilbert + Tobin
To: Ashurst

Peter Stirling
From: Ashurst
To: King & Wood Mallesons

Gemey Visscher
From: Herbert Smith Freehills
To: Minter Ellison

CONTEXT AND TRENDS
In spite of the global constraints on bank liquidity, the abundance of natural resources and a healthy economy means the Australian project finance market is looking very positive for the foreseeable future. 2012 showed an increase of 90% in volume compared to 2011 and this looks set to continue....

CONTEXT AND TRENDS

In spite of the global constraints on bank liquidity, the abundance of natural resources and a healthy economy means the Australian project finance market is looking very positive for the foreseeable future. 2012 showed an increase of 90% in volume compared to 2011 and this looks set to continue. The Australian mining industry's pipeline of work is said to be around A$200 billion ($208 billion) worth of developments intended to extend production capacity and supporting infrastructure.

LNG (liquefied natural gas) projects in particular have been attracting attention from banks. Although the discovery of massive shale gas reserves in the United States seemed on the point of inundating the global market and has already dramatically driven down LNG prices, many law firm partners feel that only a small amount of the cheap gas will find its way onto the Asian market.

There may be impediments to the development of the Australian LNG market, such as the high costs of labour and material, the setting aside of sufficient reserves to domestic reserve obligations, the new Carbon Tax and the uncertain gas content of some projects and these may hamper the market, but one partner noted that, "Australia will adjust to meet the projects budgets and timelines," adding: "Australia has to step up to demand, we're recognised as an important LNG supply for the world."

As well as the astounding growth in the resources and minerals sectors, the Australian Government continues with its privatisation of state assets and its support to renewable energy sources , with a projected growth of 6% a year to 2035.

RISING STARS

Gilbert + Tobin
Alexander Danne

CONTEXT AND TRENDS
Australia saw a peak in corporate insolvencies in 2011, although the majority were small to mid-sized companies, which at first seems to be contradictory to the boom town reputation, but highlights Australia's split economy. The appreciation of the Australian dollar, bought on in part by overseas investment in the energy and resources sector and high interest rates, has badly affected the manufacturing and retail sectors....

CONTEXT AND TRENDS

Australia saw a peak in corporate insolvencies in 2011, although the majority were small to mid-sized companies, which at first seems to be contradictory to the boom town reputation, but highlights Australia's split economy. The appreciation of the Australian dollar, bought on in part by overseas investment in the energy and resources sector and high interest rates, has badly affected the manufacturing and retail sectors. The collapse of overseas corporations who have businesses in Australia is also a source of work for the firms.

The collapse of several investment schemes have given rise to a continuation of work for many law firms, who compete with inadequate legislation to manage these insolvencies, which often results in litigation, which is likely to result in future amendments to the regulations in question.