Chinese law firm Yingke goes beyond routine legal help
Dealing with legal complexities in the UK requires advice on the local culture, says company
Leading Chinese law firm Yingke is following Chinese companies' rapid expansion into the United Kingdoms and European markets, providing them with legal guidance and as well as local market advice.
"We go beyond our normal work of just advising clients on law. We advise them also on culture and ways of thinking in the market they are expanding into, so our role is more encompassing than, strictly speaking, the lawyer's role," says Linda Yang, global partner and executive chairman of Yingke's global board of directors.
"This is rewarding because we are able to participate in our clients' international expansion journey," she says.
Yingke international partners celebrate the 15th anniversary in 2016 in Beijing. The Chinese law firm is optimistic about doing more deals in the UK, which has become a popular destination for Chinese investors. Provided to China Daily
Yingke originally established a UK subsidiary in 2010, but its presence has significantly grown since it established an exclusive strategic partnership with London-based, mid-market corporate firm Memery Crystal in 2015.
Its UK subsidiary, Yingke UK Consulting, is not a direct subsidiary of Yingke Law because Chinese law firms aren't allowed to be shareholders of foreign entities, although the UK entity is directly controlled by the managing partner of Yingke Law.
The two law firms have so far collaborated on half a dozen deals, ranging from property investment to cross border acquisitions in fields including football, software technology and industrial technology, although details of the deals are kept confidential.
Most of those deals represent Chinese outbound investments originating from Yingke's clients in China. The deals signed in the UK follow UK local law, with Memery Crystal playing a crucial part in seeing the deals through on the ground, as well as occasionally proposing local market acquisition targets if their existing UK clients are looking for investors.
Yang is optimistic about doing more deals in the UK, as her team has witnessed more interest from Chinese firms in acquiring UK targets after the June referendum vote when the UK voted to leave the European Union, leading to a depreciation of the pound.
In recent years, the UK has become a popular destination for Chinese investors. According to a new study, released in November 2016 by Cass Business School, there were 91 Chinese cross-border M&A investments in the UK from January 2012 to June 2016.
Popular sectors of these M&A activities include football, property, healthcare and high technology, says Yang. "These deals allow Chinese investors to gain technology and expertise very fast, and allow them to quickly internationalize."
Founded in Beijing in 2001, Yingke has quickly grown to become one of China's most famous law firms. According to a league table released in September by The American Lawyer magazine, Yingke is China's largest law firm by headcount and ranked sixth in China by 2015 revenue.
Its 2015 revenue also represented a 38 percent year-on-year increase, according to The American Lawyer.
Yingke signed a new partnership agreement with the UN Development Program in November focusing on South-South cooperation. The agreement made Yingke one of the five founders of the Global Coalition of Think Tank Networks for South-South Cooperation, focusing on risk management and research in law, regulations and policies. Yang says Yingke was selected by the UNDP mainly because of its global network.
Yang says Yingke maintains an open corporate culture, meaning partners can "express their own opinions and carry out services in ways they would prefer".
Another unique characteristic of Yingke is the array of opportunities it offers young lawyers, as some of the firm's young partners are only in their 30s. Yang says this youthful culture keeps the company vibrant.
As an established firm in China, Yingke began its international expansion in 2010, championing a model of forming partnerships with law firms in each of the international jurisdictions it practices in.
It refers its existing clients hoping to expand overseas to its partner firms abroad and, once a deal is done, revenue from the legal advice is shared between Yingke and its overseas partner.
"We think this way of expansion is more effective than sending our own teams of lawyers abroad because our partners' mature teams allow us to expand quicker globally as a law firm and also because law is such a regulated profession, lawyers need to understand local laws and regulations. We believe this type of partnership creates the best value for our clients," she says.
Yang says Yingke's grasp on cultural understanding is a big advantage in helping clients secure cross-border deals. "Cultural differences can be a big setback for major international deals, but it only takes a little bit of effort to explain things to our clients and make sure they understand."
She recalls one incident, when a Yingke client was setting up a joint venture with a Western partner. The Chinese CEO wanted to show his team's interest and commitment so he made a casual remark as a gesture of friendship that the Chinese side will be the majority partner, but the Western firm insisted for this point to appear in the contract.
The Chinese firm refused to include this point in a contract, believing it was only an unofficial friendly remark, so the deal was in jeopardy for a long time - that is, until Yingke stepped in to explain the cultural misunderstanding, that the Chinese firm made the comment only as a message of commitment, not in a legal sense.
Examples of such cultural misunderstandings are plenty in Yang's team's daily work, she explains. For instance, Chinese people do not like saying no, so they often just say 'sure' while listening to a point their Western partner makes, but this does not necessarily mean they agree.
"So it's important to really understand what the Chinese company means when they say 'sure'."
On a more serious note, Yang says Yingke firmly believes Chinese companies should seek legal advice throughout the global expansion process, instead of relying on legal advice from their joint venture partners in an international market.
She recalls a client who once expanded into Portugal initially without a legal advisor, and did not understand that all legally-binding decisions from board meetings in Portugal must be written in English and Portuguese.
Its unreliable Portuguese joint venture partner took advantage of local law by translating all decisions favorable for the Portuguese side into Portuguese, leaving the decisions favorable for the Chinese side in English.
The Chinese investor suffered a lot from these legal disadvantages, and in the end their Portuguese JV went bankrupt.
Championing local market understanding with an extensive legal background, Yingke now has a global network covering more than 30 countries, including the UK, Germany, Poland, Czech Republic, Slovakia, Hungary, Spain, Italy, Greece and Israel.
In the UK, Yingke chose to partner with Memery Crystal due to similar corporate cultures.
"They are international-minded and inclusive, and keen to take on new challenges."
Speaking about this open-minded attitude, Yang remembers when two partners from Memery Crystal visited Shanghai and asked her to take them to a local restaurant to try a famous Shanghai dish called 'hairy crab' they had heard about.
"We were impressed by their willingness to try new things, so we took them to a restaurant. They tried to eat hairy crab actually, but it was very difficult to break the shell and eat it and they ended up making a mess. But we were impressed by their ability to try, as we know a lot of Westerners would just not bother at all."
Memery Crystal CEO Nick Davis also speaks fondly about the Yingke partnership.
"Our two companies have a shared focus on serving clients and our teams share a similar outlook. Memery Crystal is a company which has a history of serving private entrepreneurs, so our corporate culture is very similar to Yingke's," Davis says.