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What Determines M&A Legal and Financial Advisors’ Competitiveness in an International Financial Centre: Using China's Going Out Policy as a Natural Experiment

81 Pages Posted: 18 May 2015 Last revised: 9 Aug 2015

Bryane Michael

University of Hong Kong Faculty of Law; University of Oxford

Dariusz Wojcik

University of Oxford, St. Peter's College

Douglas W. Arner

University of Hong Kong - Faculty of Law

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Wilson H.S. Tong

Hong Kong Polytechnic University - School of Accounting and Finance; Hong Kong University of Science & Technology (HKUST) - Department of Finance

Simon X. Zhao

The University of Hong Kong - Department of Geography

Date Written: May 17, 2015

Abstract

Roughly 60% of all publically announced advisors to China’s "Going Out" M&A transactions from 2000 to 2014 were from international financial centres (representing over 70% of deal value). Why did advisors, located so far away from both acquirer and target, manage to dominate the M&A advisory market in the early stages of the "Going Out" policy? What can we learn from the smaller advisors located outside of these financial centres who managed to capture a growing share of this business in "Going Out’s" more recent stages? In this paper, we hypothesize the existence of a "legal complexity externality" that had the effect of increasing a financial centre’s ability to attract international business. We look at the way Going Out advisors have responded to advisory opportunities using what management theorists call "blue ocean strategy." We show that relationships across geography changed, as large global advisors lost their share of advisory business to advisors outside of international financial centres due to the interplay of these legal complexity externalities and blue ocean strategies. As cities helps foster changes in the law governing Going Out transactions – and as financial and legal advisors adapted their strategies to compete – cities gained or lost Going Out business. We provide 5 recommendations to existing and aspiring international financial centres looking to capture a larger share of global M&A and other investment advisory business.

Keywords: Going Out, international law firms, global investment banks, blue ocean strategy

JEL Classification: K40, G34, N35, O53

Suggested Citation

Michael, Bryane and Wojcik, Dariusz and Arner, Douglas W. and Lin, Chen and Tong, Wilson H.S. and Zhao, Simon X., What Determines M&A Legal and Financial Advisors’ Competitiveness in an International Financial Centre: Using China's Going Out Policy as a Natural Experiment (May 17, 2015). University of Hong Kong Faculty of Law Research Paper No. 2015/017; Oxford Legal Studies Research Paper No. 30/2015. Available at SSRN: https://ssrn.com/abstract=2607348 or http://dx.doi.org/10.2139/ssrn.2607348

Bryane Michael (Contact Author)

University of Hong Kong Faculty of Law ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

HOME PAGE: http://web.hku.hk/~bmichael/

University of Oxford ( email )

South Parks Road
Oxford, Oxfordshire OX1 3QY
United Kingdom

HOME PAGE: http://users.ox.ac.uk/~scat1663/

Dariusz Wojcik

University of Oxford, St. Peter's College ( email )

New Inn Hall Street
Oxford, OX1 2DL
United Kingdom

Douglas W. Arner

University of Hong Kong - Faculty of Law ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

HOME PAGE: http://hub.hku.hk/rp/rp01237

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Wilson H.S. Tong

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M715, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong
852-2358-7679 (Phone)
852-2358-1749 (Fax)

Simon X. Zhao

The University of Hong Kong - Department of Geography ( email )

Pokfulam Road
Hong Kong
China

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