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Succeed or fail, the merger talks between China’s Zhong Lun and Jun He are something of a game changer

With the weight of economic power widely-regarded to be shifting east, a tie-up between Chinese merger talks partners Zhong Lun and Jun He would give the merged entity unrivalled breadth in the People’s Republic of China (PRC) and beyond, although UK partners say they have no immediate concerns that the firm would be competing with them for deals on the world stage.

The talks, understood to be being held between the managing partners of each firm: David Liu at Jun He and Zhong Lun’s Shanghai managing partner Anthony Qiao, would create a firm with over 1,000 lawyers and offices across China including Beijing, where both firms are based, as well as Hong Kong, London, New York, Tokyo and Silicon Valley.

Already one of the largest firms in China, Zhong Lun has been in acquisitive mode, recently having absorbed 140 lawyer firm Kaiwen, which is understood to have broken off its merger talks with Beijing’s Grandway to do the deal. Lawyers from Kaiwen will join Zhong Lun’s offices in Beijing, Shanghai, Shenzhen, Guangzhou and Chengdu, while Zhong Lun will add a Chongqing office to its offering through the tie-up.

Two of the other largest firms are Zhong Lun’s merger partner and Slaughter and May’s local alliance partner, Jun He, and King & Wood Mallesons, after its ground-breaking Sino-Australian merger in 2012, followed by a tie-up last year with the UK’s SJ Berwin.

While both the Chinese firms in talks have international referral offices – Jun He opened a New York office in 1993 and a Silicon Valley office in 2010, while Zhong Lun opened in New York and London in 2012 and 2013 respectively – according to one partner with an insight into the firms, if they were to combine they would be likely to continue focussing on local deals, commenting: ‘They are committed to a PRC law strategy.

‘They have small offerings in Hong Kong and London but I don’t view them as competitors.’

One big hurdle for the firms will be modernisation and investment in areas such as business development. For this reason it is not clear whether, particularly given their cumulative size, they yet have the sophistication to manage a merger of this complexity. The fact that King & Wood stood apart from this fairly atypical mould helped to facilitate its global and groundbreaking tie-up.

But with Chinese M&A last year hitting a record high of $260bn according to figures from PwC, and firms including Norton Rose Fulbright, Eversheds, Clyde & Co and Milbank, Tweed Hadley & McCloy all opening offices in China, succeed or fail, even the attempt to consolidate the legal market in China to this extent marks a change of mindset is something of a game changer, heralding what is to come.