Top Japan law firm to let foreign lawyers become equity partners

Anderson Mori & Tomotsune has become the first of Japan’s Big Four law firms to let foreign lawyers become full equity partners, as the quartet fights international rivals for advisory work on cross-border deals.

The decision comes amid a rising wave of merger-and-acquisitions activity involving Japanese companies and a surge in foreign private equity and activist fund interest in the world’s third-biggest economy.

AMT’s move is expected to prompt Japan’s three other top-tier law firms to follow suit. Lawyers familiar with plans at the country’s largest, Nishimura & Asahi, said it was “actively considering” doing the same.

The tradition-breaking shift involves AMT establishing a foreign law joint enterprise. That is the same structure under which global firms such as White & Case, Clifford Chance and Morrison Foerster operate in Japan, enabling them to gain significant market share as M&A activity has surged.

“Although the change is quite straightforward in the technical sense, it is something that represents a big change of mindset for the firm. This will allow the firm to attract talent at a time when the future of the legal market in Japan will increasingly see its main growth coming from cross-border transactions involving Japanese companies,” said Len Matsunaga, partner-elect at AMT.

AMT is betting that permitting foreign lawyers to become equity partners will make the Japanese firm significantly more attractive to the best global talent.

Lawyers in the US, UK, China and elsewhere have typically avoided joining a firm at which they have no hope of attaining the same status and profit share as their Japanese counterparts. The new structure will permit AMT to offer equity partnership to four non-Japanese lawyers currently in senior positions. 

The change was registered with the Japan Federation of Bar Associations this week and will come into effect January 1.

It follows a new law introduced this year reducing the level of experience required for foreign lawyers to be registered in Japan and expanding the scope of business in which they can engage — part of Tokyo’s drive to position itself as an alternative financial centre to Hong Kong and Singapore.

M&A in Japan has long been driven by local companies turning to large overseas acquisitions to offset a shrinking home market. But pressure from foreign and domestic activist shareholders is increasingly forcing companies to consider a wider range of domestic dealmaking options, while the historic taboo of hostile takeovers appears to be fading.

In October, Nomura, Japan’s largest investment bank, reported one of its strongest half-yearly performances in 20 years citing a marked increase of M&A activity involving its Japanese corporate clients. Takumi Kitamura, the bank’s chief financial officer, said M&A-related consultations were 20 to 30 per cent higher than usual and that the increase “is not a temporary thing”.

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