Maples Group is reassessing its China strategy, said Michael Gagie, the new regional managing partner for Asia at the law firm.
Gagie, who was appointed to the role in March, told China Business Law Journal that the firm’s focus would continue to be corporate work, in particular, equity capital markets-related mandates involving initial and secondary public offerings and M&A transactions, in the short term but, at the same time, the company is taking stock of opportunities in private wealth and funds.
“Maples already has some exposure to the private client world,” said Gagie. “We help high net worth individuals who are setting up their own fund management businesses, or in a pre-IPO scenario, the founders of a business that are looking to IPO overseas. They often set up employee benefit trusts to incentivise their long-term employees.”
Gagie said many wealthy people in China were looking at setting up family offices in popular jurisdictions like Jersey. He said he had seen an uptick in mainland-based private equity funds developing new offshore vehicles this year. “We have seen a real increase in new structures, trusts or other offshore being created, and more money being raised. So there is the opportunity to work with clients in terms of deploying that.”
Gagie said the majority of Maples’ clients came from China. “Equity capital markets have been a very big part of our China practice,” he said. “Historically, and right now, with SPACs [special purpose acquisition companies] and with the listings in Hong Kong, the Shanghai Star Market, NYSE and Nasdaq in the US, and now with the Singapore Exchange permitting SPAC listings, we have got a very big stable of listed clients that we’re working with.”
Gagie noted that the increasing demand for offshore vehicles by Asian companies in the past five years has been fuelled by the growth of Chinese businesses establishing pre-IPO structures to list in Hong Kong and the US with offshore vehicles.
Despite both China and the US tightening regulatory scrutiny on Chinese IPOs, Maples is confident of helping its clients navigate headwinds caused by market volatility, regulatory developments and other factors such as the pandemic.
US IPOs by Chinese companies have come to a slowed down since July as both governments set new requirements targeting companies using the variable interest entity (VIE) structure, development affecting offshore as these are commonly used as the holding companies and ultimately issuer vehicles in public company listings.
But this also provides new opportunities for law firms as more “homecoming” listings are expected, according to Matt Roberts, head of corporate practice for Asia at Maples. “The HKEX at present is the main potential alternative listing venue to NYSE and Nasdaq thanks to its deep pool of investor liquidity, pre-eminent position, weighted voting rights (WVR) regime and fast track for secondary listings,” he said. Chinese firms with VIE structures could also sell Chinese Depositary Receipts (CDRs) on the mainland.
Shortly after the HKEX’s listing reform in 2018, Maples acted for Xiaomi, which was the first in Hong Kong to go public with a WVR structure. The firm has represented tech giants, including Alibaba, JD.com and Baidu on their secondary listings in the city.
“We believe Maples is therefore well placed to assist our clients as we navigate what is clearly a fluid space,” Roberts said.
Gagie said the firm had been busy assisting Asian corporates in pre-listing and raising funds overseas. “What we’ve been finding over the past couple of years is that there is increasing interest in the jurisdictions where we operate, particularly for businesses from Asia looking for exposure into, or access to investors in Europe,” he said.
The trend has persisted throughout the pandemic. “A lot of tech companies are being funded by investors using Cayman vehicles including Cayman fund structures,” he said. “In turn, those tech businesses are then looking for access to public capital markets using offshore vehicles for their listings.
“Cayman has been the first choice for private equity and hedge fund structures and for public company work. I think the more sophisticated clients that we work with have both Cayman and BVI in their group structures.”
With global asset managers from Goldman Sachs to Standard Chartered seeking to make inroads into China’s market, Gagie. China’s opening up of its financial sector may unleash opportunities for international law firms and jurisdictions, he said.
“It’s a further step in terms of the evolution and development of the financial services industry in mainland China, and hopefully there will be a role for ourselves and other jurisdictions that we represent to participate in that,” he said.