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

Hong Kong's private equity market has seen a good deal of changes this year, as many US firms with international private equity relationships have continued to carve a place for themselves in the Hong Kong market by following their international clients to Asia. One notable aspect of the Hong Kong private equity scene is that the majority of the work is not done by mega-firms but rather boutique firms that have specialised in representing international private equity clients in Asia for a number of years, as well as smaller, newer-entrants who are establishing their Hong Kong presence.

"Before, you had capital markets firms coming to set up shops in Hong Kong, and all of their other practices developed from there," says one leading practitioner. "But now you've got the private equity firms coming over here with their international clients and then developing its M&A practice from there. Most of those are US firms. It's a trend that has developed quickly, and is changing the market."

This phenomenon underscores Asia's unique private equity landscape, and the importance of maintaining relationships with the relatively small number of international private equity houses.

All of the major international private equity players in the region have also been teaming up with Chinese counterparts in order to tap the expanding market. This is good news for the legal community across the board, as both international and domestic firms have an important role to play in bringing these types of funds to fruition.

In another, similar trend, the sources of private equity funding in Hong Kong have become increasingly diversified in the past few years. Government sovereign wealth funds like the National Council for Social Security Fund in China and Singapore's Government of Singapore investment corporation have become increasingly active in the private equity space, and show a tendency to make regional investments instead of those overseas. Private individuals in Hong Kong (of which there are quite a few) also are involved in private equity funds through services launched and managed by the city's top international banks.

According to PricewaterhouseCoopers, China private equity will become even more attractive in the next four years as the Asian markets continue to buck the global economic downturn. As private equity houses pour resources and talent into the Asian markets-and as Hong Kong continues to be a leading financial centre in the region-the city is likely to continue to be a hotbed of private equity activity in Asia.

Cleary launched a local Hong Kong law practice in February 2011, brining it in line with a number of US peers. The new local team is boosted by former Norton Rose partner Freeman Chan who is already making an impact: "I've really noticed a difference since Freeman joined," says one client, "it has already brought the firm to another level."

Christof von Dryander has also been hired to enhance the firm's connections to European investors looking to enter the Chinese market.

Cleary's private equity practice is particularly well positioned in assisting companies and private equity houses in potential "go-private" transactions, for which there looks to be a growing demand in the months to come, in one such deal, the firm represented the buyer consortium made up of existing shareholders in relation to the go-private proposal submitted to the board of directors of Funtalk China Holdings.

Another highlight saw the firm represent TPG in its equity acquisition in China International Capital from Morgan Stanley. This was part of Morgan Stanley wider 34.3% equity divestiture in CICC to, alongside TPG, KKR, the Government of Singapore Investment Corporation and The Great Eastern Life Assurance Company.

Clifford Chance is a leading practice because of its ability to expertly advise a wide range of private equity players across diverse investments and industries. As one client notes: "Clifford Chance's private equity practice really has a good bench. We have worked a lot with Andrew Whan - he's great. The team as a whole is excellent and very commercial."

The team has faced challenges recently with a number of departures across the globe, including private equity funds partner John Fadley in Hong Kong.

The team recently advised First Media Holdings on its investment in Hong Kong listed Qin Jia Yuan Media Services, which is a new company established by funds from Advantage Partners. First Media Holdings' investment in this deal was valued at approximately HK$185 million ($24 million), and approval is contingent upon a number of conditions.

Another highlight saw Terence Foo assist Temasek Holdings on its $179 million acquisition of a stake in China Life Insurance. This consisted of Temasek's own investment and an additional 1.5% acquisition through Temasek by Standard Chartered. With insurance being highlighted as a key area of growth in China the investment is easy to understand and represents one of the few times when a private equity entity has been permitted to take a stake in the Chinese insurance space.

Another area of growth in China is luxury goods and last year Foo was again involved advising L Capital Asia as it invested HK$140 million into Hong Kong listed Emperor Watch and Jewellery. The deal necessitated subscriptions for convertible bonds and warrants in a Hong Kong-listed company issued pursuant to a general mandate granted to the directors by the shareholders.

Paul Weiss is a relatively small private equity shop, but what they do they do very well. The high regard of peers and clients enables this firm to be one of the dominant players in the Hong Kong scene.

Partners Jack Lange and Jeanette Chan guide Paul Weiss's team in advising on mandates with strong value-added components, and the practice boasts a list of top private equity houses including The Carlyle Group, KKR and Morgan Stanley.

Paul Weiss' team seems to have a special acumen in acting for private equity houses in telecom-related deals, although the firm's work spans a large spectrum. One example saw a team including Jack Lange and Greg Liu advise KKR on the take private share acquisition of Yageo for $1.6 billion, in light of a proposed LBO. Once complete the deal will be one of the largest private equity buyouts in Asia in 2011

In 2010, Jeanette Chan led Paul Weiss' team advising the Carlyle group on the sale of 80% of its majority stake in the in Taiwan TV operator kbro. The stake was sold to Wealthy Joy Media Company (which is owned by the high-profile Tsai family) for approximately $2.4 billion. The transaction was initially set to be a sale to Taiwan Mobile, but was then restructured as a cash deal to the Tsai family for regulatory reasons.

Simpson Thacher's leading private equity practice has been augmented this year by the firm's establishment of a local Hong Kong law practice, brining it into line with many of its US contemporaries.

In a deal that closed in November 2010, Hong Kong partner Kathryn King Sudol led Simpson Thacher's team in advising Primus Pacific Partners on the sale of their 4.5% stake in New China Life Insurance. After closing conditions are achieved, an affiliate of Temasek Holdings will acquire 67% of Primus Pacific Partners' stake, and Standard Chartered Bank will acquire 33%. Sudol also advised Blum Capital Partners in connection with its investment in Pacific Alliance Group Holdings.

On the mainland side, the Beijing office advised Chalco's acquisition of a stake in Lao Service Mining. The deal effectively creates a joint venture between the two entities.

Davis Polk claims to be prioritising the growth of it's M&A and private equity practices, and they seem to be putting its money where its mouth is. The Hong Kong private equity team continues to develop this year with the addition of Paul Chow and Antony Dapiran from Linklaters and Freshfields respectively. Both were former Beijing managing partners at their old firms and will no doubt prove to be shrewd acquisitions.

A partner at a rival firm notes that, "Davis Polk is clearly positioning itself to move beyond its reputation as a US capital markets firm. They're rapidly expanding, with a Hong Kong law practice and more of a focus on M&A and private equity."

The practice has had a robust year, as the group worked on a number of M&A and private equity transactions involving Chinese and Hong Kong companies, notably advising Warberg Pincus on a number of investments into China and also China Investment Corporation on outbound investments.

Recently, Kirtee Kapoor led Davis Polk's private equity team in representing Stable Investment Corporation (SIC) and CITIC Capital China Access Fund (CITIC Capital), a private investment fund managed by a subsidiary of CITIC Capital Holding, in connection with their investment in China Lumena New Materials (Lumena). SIC is a wholly owned subsidiary of China Investment Corporation, while Lumena and was one of the largest thenardite producers in the world in terms of production capacity as of December 2010.

Freshfields Greater China private equity team is led by Rob Ashworth in Hong Kong. May 2011 brought the addition of partner Simon Weller, who relocated from the London office and Weller's addition may significantly augment the firm's private equity practice on the island. The firm's top equity capital markets practice in Hong Kong means that the firm is well positioned to offer private equity clients successful IPO exits in the Asia market. This high-end capability had led to an impressive client list of key global and regional private equity players.

In 2010, the team advised Newbridge (TPG Capital) on the sale to Ping An Insurance of its 16.76% stake in Shenzhen Development Bank (SDB). Alongside the transaction, Ping An Insurance also agreed to subscribe to new shares in Shenzhen Development Bank for a subscription price of up to $1.5 billion. After completion of the transaction and share subscription, Ping An was set to own less than 30% of Shenzhen Development Bank. The deal allowed TPG to successfully exit its investment in SDB.

Ashworth also led a team advising TPG capital in its first investment into China's solar power sector, with the $150 million acquisition of a stake in Comtec Solar Systems Group.

The strength of Herbert Smith's energy and infrastructure practices has led to many strong (confidential) mandates this year in the private equity sector. The team is especially savvy at advising companies in relation to pre-IPO investments in those sectors, especially when it comes to inbound China private equity.

Clients note that "Herbert Smith's network and expertise is very good both in China and internationally. We were very pleased with their service."

As Herbert Smith continues to move from strength to strength in the Asia and China-related energy and infrastructure space, the practice should continue to gain major private equity instructions in the near future.

Linklaters enjoys a good strategic position within the Hong Kong private equity space, as leading private equity firms know that the firm's top capital markets and M&A practices can support any acquisitions or IPO exits that may arise during the lifecycle of their investments. For example, Linklaters recently advised the Carlyle Group on their Hong Kong listing and IPO of Yashili Guangdong. "Linklaters deserves to be in tier one because its capital markets capabilities make sense for investors," says a partner at a rival firm. "They have some top private equity clients, and people choose them because of their market position in Hong Kong."

In 2010, Linklaters private equity team advised Lone Star on the sale of its 51% interest in Korea Exchange Bank (KEB). Lone Star sold its share to Hana Financial group for W4.7 billion ($4.3 billion), in a transaction that triggered a tag along clause for the Export-Import Bank of Korea for its holding of 6.12% of the share capital issued. Because this is the third time that Lone Star has agreed to sell its KEB interest since 2006, the transaction has been closely watched and subject to many political sensitivities.

The Hong Kong private equity practice also represented an organisation controlled by HTC Taiwan founder Cher Wang in relation to its proposed creation of a consortium with Charles Kwok Keung Chan and Providence Equity Partners in order to acquire Shaw Brothers Limited, which holds 26% of the share capital in Hong Kong-listed television company TVB. TVB is one of the largest distributors of Chinese language TV content worldwide, and is one of only two free-to-air broadcasters allowed in Hong Kong.

Skadden Arps Slate Meagher & Flom's Hong Kong and Greater China practices have had a robust year, advising private equity houses on their investments into China and around the region. Last year partner Michael Gisser transferred to Beijing in order to boost the firm's Greater China offering.

Clients appreciate both the firm's expertise and practical advice: "I rate them very highly," says one client. "The legal opinions they give are very sound and detailed, and presented in a way that is understood by commercial colleagues. If I just want the law then I can read it myself. Their solutions are very practical, and their opinions are tailored to assist us."

This year, Skadden's private equity team advised the Carlyle Group on its $190 million acquisition of a strategic minority interest in China Fishery Group by way of a PIPE investment.

The team also represented News Corporation on its sale of a controlling stake in its Chinese language television channels and language movie library to China Media Capital (CMC). The deal involved substantial reorganisation of the entities as the two parties sought to establish a joint venture. The deal is also notable as the first investment by CMC, China's first dedicated private equity fund.

Weil has successfully applied its top international name in private equity to its work in Hong Kong, with the practice that seems to be continually growing and garnering increasingly prominent mandates from the top private equity players. Clients seem impressed with the expertise and accessibility of Weil's partners, as one says: "They are very responsive, and always available when we need to speak on urgent matters relating to China private equity deals. They're really on top of things - many firms seem to rely on their PRC (People's Republic of China) associates too much because they don't really know what's going on with Chinese law, but Tony Wang really does know what's going on."

Weil's private equity practice in Hong Kong is headed by partner Peter Feist, who is well respected by clients:"Weil has very technical legal abilities and is very very detailed. Peter Feist is a top private equity lawyer."

In January 2011, Weil advised an investor consortium comprised of Charles Chan, Cher Wong and Providence equity partners in the high-profile acquisition of a 26% stake in Television Broadcast (TVB). The deal was closely watched in the market because of TVB's fame in Hong Kong and its status as one of the world's leading Chinese broadcasters. The consortium acquired their stake as a result of purchasing Shaw Brothers (Hong Kong) from Sir Run Shaw and Mona Fong.

Last year, Weil also represented Unitas Capital on its $758 million acquisition of international transport solutions provider Hyva holdings. A lot of interest was generated in the deal with a number of other bidders taking substantial interest before the deal was closed. This was partly due to Hyva's presence in the Bric countries and the great potential for growth in such areas.

Allen & Overy's private equity practice has a high profile client list, winning repeat mandates from funds like Ontario Teachers and the private equity arms of major financial institutions like Goldman Sachs Private Equity, InfraRed NF Fund (formerly HSBC NF Fund) and Macquarie. The firm has also routinely works for the Carlyle Group and has acquired Blackstone as a new client.

Allen & Overy's private equity practice showed its ability to innovate this year when it represented Carlyle Group on its HK$20.6 billion ($2.65 billion) disposal of part of its interest in China Pacific Insurance by way of two block trades. The disposal was among the largest block trades in Hong Kong, and the deal was put out to tender to a number of investment banks due to its large size.

Clients are particularly complementary of Baker & McKenzie's international and regional capacity. "They have excellent relationships and international capabilities," says one client, "and great geographic coverage."

In 2011, Baker's private equity team advised EQT Greater China II Limited in its acquisition of top Taiwanese television provider Gala TV (GTV). The transaction for one of Taiwan's largest cable operator was done by way of a leveraged buyout and secondary buyout transaction.

Hogan Lovells' Greater China private equity and venture capital team is the result of the recent merger, as the combination of the two well-established firms has led to a broader private equity client base and a deeper combined team.

Recently, partners Andrew McGinty and Jun Wei advised Intel Capital Corporation on the subscription of Series D Preference Shares and Warrants in United Information Technology. United Information Technolgoy provides enterprise-class storage to the telecommunications, media, financial services and energy sectors and has significant operations in China.

Based on the strength of Latham & Watkins' Hong Kong and US law practices, the Hong Kong private equity team has received a number of significant instructions over the past year. While Latham's first established itself in Hong Kong via advising on US and Hong Kong IPOs, the strength of the private equity and M&A practices show that this firm is more than just a typical "capital markets shop".

Latham's team works with many major private equity houses in Hong Kong and China. Also, because of Latham's US law and capital markets expertise, the firm is particularly well positioned to capitalise on the growing "go-private" trend in the market. Recently, partner Tim Gardner advised on the privatization of NYSE-listed Chemspec International, as Primavera Capital Group sought to take the Chinese operating company private. Chemspec's market capitalization is valued at approximately $270 million, and the transaction may be a bellwether for similar going-private deals in the future.

O'Melveny & Myers' ability to handle complex private equity practice puts them among the top firms in terms of cross-border work in China. "The partners understand all the issues," says a client, "they are very creative in terms of solutions, which is often needed in the private equity space. They are a firm we would use on an ongoing basis. I'd be happy to work with them again and happy to develop a long term relationship with them."

One headline deal this past year saw the team representing Eddingpharm (Cayman), a China-based company that licenses, markets and distributes pharmaceutical products, in its $24 million Series B round of financing that included a $3 million repurchase of ordinary shares held by the founder. The investors were funds managed by OrbiMed Advisors, Domain Associates, and Sequoia Capital.

The team also advised Shanghai-based eHi Car Service (eHi) in its equity financing by a consortium of investors led by Goldman Sachs. eHi is a leading car rental company in China, and the financing was valued at approximately $70 million. Co-investors included Qiming Venture Partners, CDH Ventures, Ignition Capital, JAFCO Asia, and New Access Capital.

Paul Hastings Hong Kong and Greater China private equity team has experience across a range of private equity areas with a particular focus on real estate funds, in keeping with the firm's historic strengths. Paul Hastings' private equity team has also grown this year with the additions of Roger Peng and Steven Winegar (previously managing director and senior counsel at Goldman Sachs Hong Kong).

Clients are complementary of the firm's responsiveness and bilingual capabilities. One client tells us that, "Paul Hastings was very accessible-we could get a hold of them any time and they always responded quickly, which is important to us. They also have abundant experience in the venture capital and private equity industries and I think that the language skills of their partners are superior to other leading firms."

In December 2010, Roger Peng led the private equity team's representation of Vancl.com (China's biggest online clothing retailer) in its $100 million equity financing deal with a consortium of investors including Ceyuan Ventures, Tiger Global Management, IDG Capital Partners, and SAIF Partners.

Shearman & Sterling's Hong Kong private equity practice is led by veteran practitioner Paul Strecker, and the team boasts an impressive list of top private equity clients including TPG and Bain Capital.

Clients seem impressed with the firm's service. "We were very satisfied with the firm's knowledge, expertise and innovation in solving issues." says one client. Shearman & Sterling also added a Hong Kong law practice in 2010, which means that the practice will now be able to provide private equity clients with an array of options for their exit strategies.

Shearman & Sterling's private equity team recently advised Tiger Group Investments on a $5 billion maritime joint venture with the Carlyle Group, in a move that would allow the joining venture to acquire over $5 billion in dry bulk, container, tanker and other shipping assets. Carlyle and Tiger Group plan to deploy up to $900 million in equity capital over the next five years by way of zeroing in on key shipping strategic shipping segments in China, Taiwan, Hong Kong and Macau.

Sidley Austin's team is uniquely positioned to be able to give private equity clients a "one-stop shop" for all of their transactional needs. The firm's Hong Kong offices have supporting M&A, financing, securities and employment practices, among others.

Unlike the practices of some of its peers, Sidley advises a range of private equity clients across the region - beyond the China based funds that are common clients.

One client we spoke to had particular praise for partner Scott Peterman and his team. "His knowledge and expertise and suggestions on our documents (in terms of regulatory and requirement work) were helpful," the client says. "We are a unique fund compared to other funds, so he helped present us to institutional investors and that was very helpful." Another client adds that, "They're excellent. It's their general competence and ability to advise on a wide range of areas. They give practical commercial advice based on technical knowledge. I view them as being proactive and innovative."

Peterman recently advised Mekong Capital in forming a $150 million private equity fund aimed at Vietnam investments - the Mekong Enterprise Fund III Limited Partnership. Peterman also represented an Indonesian Coal operator as it attempted to invest in a mezzanine strip of securities in a distressed Australian coal operator. The value of the investment was an initial $30 million followed by a contingent investment of over $1 billion.

This past year, partner Joseph Chan represented a leading Chinese dairy-based nutritional products manufacturer as the investment holding vehicle of controlling shareholders in connection with a $60 million exchangeable bond and/or equity sale deal. Chan is also representing a prominent Chinese private equity fund with respect to a pending $200 million investment into a clean technology company.

DLA Piper's Hong Kong office has a relative strength in working with local Hong Kong and China entities in cross-border private equity deals because of its strong grounding on the domestic markets in each jurisdiction. This past year was one of change for DLA Piper with partner Steven Liu's promotion to the head of the firm's Beijing Corporate Group. From Beijing, Liu will oversee private equity and venture capital matters for the region and bring his deep experience in to advising the firm's regional private equity clients.

In March 2012 Mallesons Stephen Jaques merged with King & Wood to form King & Wood Mallesons, the first Sino-Australian firm. In the first phase the two firms will combine their Australian, Chinese and Hong Kong partnerships under a Swiss Verein structure. Full financial integration plans are yet to be announced.

The firm's top-tier Australia presence means that the firm may be well-positioned as cash-infused Australian private equity firms look to invest across Asia and into China. The team has several significant relationships with private equity firms, including regularly working with the Orchid Asia fund.

Recently, partner Conrad Chan led the team in advising Investor AB and Orchid Asia on a Series D financing by a US based venture capital fund. Malleson's lawyers advised on the complicated restructuring and re-organisation of the equity arrangements and rankings.

Morrison & Foerster's private equity team has experience in fund formation, the structuring and placing of offshore investment funds, and representing funds in their investment transactions.

In a deal that closed on March 2011, Thomas Chou led Morrison & Foerster's private equity team in representing Rakuten's travel unit operator RS Empowerment in travel and tour product retailer Tuniu Corporation's $40 million Series C Preferred Shares financing. The $40 million raised by Tuniu in the series C round was led by Sequoia Capital, which invested $25 million.

Orrick Herrington & Sutcliffe has a sizeable list of international private equity clients, including some of the top PE funds presently active in Asia. The firm also has a relative strength in representing IPO candidates as they accept investments from major private equity firms, as Orrick has a strong presence in representing issuers in Hong Kong.

In November 2010, partner Maurice Hoo advised Warburg Pincus in its investment in the leading Chinese education company Xueda Education Group. The investment closed concurrently with Xueda's US IPO and was a deal of first impression. Hoo also led Orrick's team in advising Warburg Pincus in its investment in leading Chinese classifieds advertising website 58.com.

Sullivan & Cromwell's private equity team in China is supported by the firm's worldwide abilities in M&A and capital markets. Sullivan & Cromwell's team is not the largest group of private equity lawyers in Hong Kong, but the team does work on select number of transactions for major private equity houses. Sullivan & Cromwell's fund formation practice is also correlated with its private equity work.

Clients praise the firm's private equity offerings. "I've worked with Michael DeSombre's team in Asia for private equity and strategic transactions," one client told us. "He's a very good negotiator, and looks after our interests. His team is very dedicated to business demands, and we're really glad to work with them."

Recently, Sullivan & Cromwell's private equity team advised Telstra on the sale of its SouFun Holdings shares. Telstra sold a portion of its remaining shares in leading Chinese real-estate advertising Internet portal SouFun concurrently with the IPO and NYSE listing of SouFun. Telestra sold its shares to private equity funds managed by Apax Partners and General Atlantic, as well as two existing shareholders of SouFun.