‘Wrongly complex’ law is also preventing city’s M&A companies making significant inroads to mainland
BRYANE MICHAEL
PUBLISHED : Monday, 18 January, 2016, 5:12pm
UPDATED : Monday, 18 January, 2016, 5:14pm
If the city really is the “Gateway to China”, Hong Kong’s merger and acquisition advisers must be better trained to make more of opportunities on the mainland. Photo: AFP
Many call Hong Kong the Gateway to China, so why do so few big investors use Hong Kong advisers?
Since 2000, Chinese companies have gone on a spending spree – snapping up companies worldwide – yet Hong Kong’s merger and acquisition (M&A) advisers have grabbed a very small part of that work.
According to our research, we find that Hong Kong’s financial law is “wrongly complex.” The law is too complex in the areas that don’t matter, and not complex enough in the areas that do.
Securitisation law and the law of lending represent two areas which need more complexity. We find that US and UK law provide Chinese companies and their African, Asian and Latin American targets with much better law.
Walking through Central, you can see all the big names such as JPMorgan and Baker & McKenzie. You can also see many companies aspiring to become like these advisers. That’s Hong Kong’s problem. We find that Hong Kong’s M&A advisers don’t stand out from the pack like their peers in Germany and even South Africa. To compete with the big boys, smaller advisers elsewhere have taken a different approach. Hong Kong’s firms exhibit no new wow factor.
So who is to blame? Many point to the usual culprits – the Securities and Futures Commission, the Monetary Authority and the assembled partners and CEOs of our law firms and investment banks. Yet we find a more surprising culprit – law schools.
When we peel away the layers of complexity using complicated statistical analysis, we find that law schools are partly to blame. Good cities with good law schools grow great advisers. Australian advisers have grabbed so much of China’s M&A business because of their law schools. The University of Melbourne, University of Sydney and the University of New South Wales have trained regulators who know how to craft local laws to Chinese investors’ needs. They produce top-notch lawyers who advise even the I-bankers. And they balance law like a game of Jenga – putting together deals that tackle the imagination.
Hong Kong has three major law schools at City University, Chinese University and, of course, the University of Hong Kong. They train good lawyers – but don’t provide for the “social goods” which help all our M&A advisers. Refocusing our law schools to improve the system will take time – and money. Our lawyers spend too little time focusing on ways to make the whole system better.
Interestingly we find that the quality of the economics and finance department has no effect on our advisers’ competitiveness. Knowing finance theory better doesn’t help us assist Chinese companies. Maybe we need to make our economics and finance education more relevant for the market.
Could Hong Kong’s law schools provide the secret weapon needed to make give us advisers preferred status with mainland companies in future? Only if they focus more on the market.
Dr Bryane Michael is a senior fellow with Hong Kong University’s Asian Institute for International Finance Law (AIIFL)
http://m.scmp.com/news/hong-kong/law-crime/article/1902325/hong-kongs-stumbling-merger-and-acquisition-advisers-and
