The little firm that made it in China.
FORGET expansion to Sydney and Melbourne. A small Adelaide litigation firm has moved straight to mainland China to solicit new business. Three years on, the gutsy move is just beginning to bear fruit for the seven-partner firm, Tindall Gask Bentley. In April, one of the firm’s corporate clients made history when it became the first company based wholly in mainland China to list on the Australian Securities Exchange. Tianwaitian (TWT), an umbrella and outdoor furniture manufacturer from Zhejiang province, south of Shanghai, raised $5 million in the float. Its shares, which originally listed at 50c, are now worth about 65c.
The move to China was spearheaded by partner Brendan Connell, who for two decades specialised in personal injury litigation. Now, in an unlikely switch, Connell works full-time with Chinese clients, helping them to list on the stock exchange or representing them in transactions involving Australian mining companies. “After 2O-plus years of doing one type of work, to turn around and do something different is a bit of a shock to the system,” he says. However, he is having plenty of fun along the way. The original idea to pursue work in China came from another
Tindall Gask Bentley lawyer, Fai Peng Chen, who completed his law degree in Adelaide. Chen, who speaks fluent Mandarin. was keen to attract Chinese clients and to help them list on the ASX. In China, companies can wait five or six years to list on the Shanghai or Shenzhen stock exchanges, only to be refused permission by the government. A plan was hatched for representatives of Tindall Gask Bentley to conduct seminars in China on listing in Australia. The aim was to forge relationships with Chinese law firms or business people interested in investing in Australia. The firm was joined on its original mission by Westpac, Adelaide accounting firm Basso Newman, Austrade (a govemment body that helps Australians do business overseas) and Invest Australia (the government’s inward investment agency). Austrade and Invest Australia smoothed the way, helping to arrange visas and advertise the seminars in China. About 100 people attended each seminar, held in three provinces on the east coast. Through the seminars,
Tindall Gask Bentley formed alliances with three law firms, including one of China’s largest, AllBright. Since then, AllBright has been vetting clients interested in listing on the ASX. “The advantage of going through the lawyers is that the companies are already clients of theirs” Connell says. “We’re not accessing dodgy fly-by-night companies. They’re already solid and using good law firms.” Culturally, there have not been any major problems. “We originally had the standard South Australian cultural cringe, but the Chinese actually love it here. The first thing they point to is the sky because it’s very clean,” he says, with a chuckle. “And it’s quiet - it’s spread out.” The language, too, has not been a serious obstacle. “I have read that 300 million Chinese speak English as a second language, and there’s always the provision of good interpreters for us. So there has been less difficulty with the language barrier than you might expect,” Connell says.
Chen jumped ship earlier this year to Minter Ellison in Adelaide, where he is now a special counsel. Following that, Connell hired a Chinese language teacher to help him communicate with his clients. Other cultural differences have been more a source of entertainment than frustration, Connell says. One thing he has had to get used to is the fact that clients never turn off their mobile phones. “I could be sitting in a meeting with nine mining company people, all of whom are on the phone,” he says. . Timing is also very approximate. "For example, if you and I have a meeting at 9am, you ring at 9am. The Chinese one is more of a Chinese nine - it can be 9am, 9.15am, 9.30am, 9.45am. You’ve got to put up with that, but it’s hardly the end of the world.” A more fundamental difference, however, is law firm retainers. Chinese companies are accustomed to paying lawyers a percentage of a deal on a success basis. The idea of billing for one’s time, regardless of the outcome, is “completely alien”, Connell says. “The Chinese pay on result. If you get a deal done for them they pay perfectly happily and very well, but no deal, no payment,” he says. Connell says he does not feel comfortable billing on a percentage basis, and the firm charges a fixed fee if a deal is completed. “At the start it was extremely challenging to have an idea about what might be fair. I didn’t want to scare them off, and overprice, but on the other hand we didn’t want to under-price,” he says. “Having done it now for three years, I have a much better idea of how long it might take and what work is involved, so I’m better at guessing what is a reasonable figure.”
Connell has also found the Chinese companies he has worked with to be slow and deliberate in their decision making, requiring a great deal of hand-holding. For instance, none of the companies that have looked at listing on the ASX have agreed to appoint Tindall Gask Bentley before meeting with them on at least three occasions. (‘They’re cautious about making a decision, which is understandable, because they’re listing in a country that is as foreign to them as China is to Australians’, Connell says. Given all of these factors, it is not surprising that the practice was loss-leading for the first two years. It is just breaking even now, in its third year. However, the firm has branched out from IPOs into mining work, which is very lucrative, Connell says. It has acted for companies seeing to invest in or purchase Australian mining companies, and in offtake agreements, in which clients fund a mine’s production in exchange for resources.
Connell is quietly confident the practice will become profitable over the coming year. He has attracted some new clients and hopes some early clients that have not yet closed any deals will do so. “The rest of the partners understand, because we’re small enough, that it’s worth a go. So at the moment we’re continuing to give it a go,” he says. It’s a punt that might be brazen enough to work.
THE AUSTRALIA FRIDAY JULY 13 2OO7 STRATEGY
Nicola Berkovic