Following are excerpts from a CNBC interview with Paul Rawlinson, Chairman of Baker McKenzie, from the World Economic Forum 2017 with Steve Sedgwick and Geoff Cutmore.
SS: Yes, well let's get straight to Paul Rawlinson, the man's been standing in minus 17 for long enough, so let's get straight-, you're not a Davos man, it's your first time here, isn't it?
PR: It's my first time, I'm really enjoying it, yes.
SS: Okay, are you enjoying it?
SS: Actually, seriously, for someone who's an outsider from the Davos bubble, what do you actually think of it? You can tell us the good and the bad.
PR: So I've been to conferences but nothing on this scale, and it's not just the sort of networking and being amongst some great people. It's about really understanding what the themes are of the day. This theme of responsible and responsive leadership, it's kind of relevant to me as Chairman of Baker McKenzie, it's kind of relevant to the UK, to my home, to global, you know, global world-,
SS: Okay. Alright, well we've got a question from Pauline in the studio, who's basically just saying, what about this no pullback in Asia, which I read in your notes?
PR: Yes, so we're pretty optimistic about Asia. The transactions report that's just come out on Monday, we talk about being pretty confident across all regions, but Asia is still the powerhouse for growth. Obviously China, we heard yesterday about their vision for globalization. We're in China, we're growing in China, and we see real opportunities both for Chinese domestic work, now that we've got license to practice in Chinese law, which was a, sort of, big breakthrough for us, but also outbound work from Chinese companies, and you heard the vision yesterday from President Xi himself, so we're really excited about not just China, but Asia in general.
GC: Just to be very clear here-,
GC: I mean, we're talking about M&A, and we're talking about business advisory.
GC: Is this still about China recycling its trade dollars by taking that a capital overseas and acquiring businesses that it thinks will be useful assets to own, because the domestic Chinese market is a little too hot and a little too competitive. So it's about outbound dollars, outbound deals.
PR: Well, I think you heard, yesterday, from the President himself, that they've found a way of making globalization work for China, and this is the next iteration, and I think the, you know, having that center stage yesterday, explaining the vision for China, it's coming into a new era. So I think it's both domestic growth, we heard him talk about the consumer-driven economy, and obviously the urbanization in China is producing domestic growth, but absolutely, there's also an agenda now to really push on internationally, which is very exciting.
GC: And what about the UK? I mean, it seems to be the one area where your report is quite negative, and suggests that actually business activity is going to slow considerably.
PR: Yes, so the M&A report globally is more positive than negative, we think there'll be a pickup in 2017, in the second half, and then much better in 2018, but we've already seen a drop off in IPOs, particularly in the UK. We think that will come back, a little bit, but overall we're predicting that there will be a downside effect in the UK in M&A activity.
SS: See, I don't want to bang the drum, because obviously I think there's a trepidation from all of us here, but surely companies that had an EU base, after the split, whether it takes two years, or five years or whatever it may well be, are going to need a UK and an EU base. The UK's not going to disappear as a financial center overnight, so I'm just wondering if there will be more activity, in both centers, both in, somewhere in Europe, and in the United Kingdom, a s well.
PR: Yes, so I think what you're talking about is the way financial institutions will gear up to, sort of, you know, spread their bets in terms of-,
SS: Yes, they're going to need subsidiaries, they're going to need headquarters here and there, yes.
PR: Yes, and you know, for us as a firm, most of our deals are cross-border, so we don't see, for our London office, any less activity overall. It'll be still doing those cross-border deals. If you look at the FTSE 100, most of their deals are international markets. We do very little UK to UK M&A deals. Some firms do, and then t here's going to be a bigger impact, but overall we see, you know, London staying as a key financial center. It's not just the lawyers, it's the bankers, the, sort of, the whole institution of the rule of law and English law deal making. US and English law are-, you know, the majority of deals are done in that way, and I think that will continue.
GC: But, but I see on the-, the legal bulletin boards a lot of worry, especially by young solicitors in the UK, about what the prospects will be of getting a job with a large American legal firm.
GC: Surely the American law companies who have based themselves in the UK, to operate in Brussels and other parts of Europe, now will think twice. Instead of beefing up their London ops, they will take that business to Frankfurt or to Brussels.
PR: Well, I'm not sure. I think there is different sorts of law firms in London. Those who've been there, I mean, w we've been in the London market since the 60s, we're a, sort of, nearly 400-lawyer firm, we've got lots of different practices. Some other firms are much more dependent on M&A activity of a certain type, and maybe that, you know, makes them more exposed to the ups and downs of the pure London market. But certainly for us, we've got lots of trade lawyers salivating because, you know, negotiating these agreements, what Theresa May has set out, is a five, ten year plan.
SS: It's a five-year bonanza, minimum, for your industry.
SS: I hear what Geoff's saying about solicitors at one end of the spectrum, but for international law firms like yours, cross-border law firms, it's a massive bonanza, isn't it?
PR: Yes, well that-, we certainly are positioning ourselves, we've got trade lawyers, international trade lawyers who are really geared up for advising on those, hopefully lots of, hopefully not just for the UK, but we're hearing it right across the piece.
GC: Is what's good for lawyers good for us?
SS: Not necessarily. Not necessarily.
GC: Is that right? Is that right?
PR: Well, actually, actually what we really want is the M&A activity to be smooth and stable, because that is really the bread and butter of law firms, international law firms. The trade stuff is also great, but what you don't want is uncertainty where people aren't doing business, and waiting to see. That's what we don't want. So clarity is key.
SS: Well, very nice to see you.