Editor: Mr. Ahern, would you tell our readers something about your professional experience?
Ahern: I have been a corporate lawyer in Australia for close to 18 years. My practice is focused on mergers and acquisitions, primarily in the technology space, where I have represented clients such as Microsoft, Yahoo! and First Data Corporation. Prior to joining Jones Day, I was a partner at one of Australia's largest law firms.
Editor: How did you come to Jones Day? What attracted you to the firm?
Ahern: I worked with Steve Brogan, now Jones Day's Managing Partner, on a matter in 2000. We got to know each other and maintained contact from that time. When the firm expressed an interest in expanding its presence in Sydney, I thought it was a terrific opportunity. The Australian economy has been moving into the global arena for some time, and a law firm such as Jones Day offers Australian practitioners an opportunity to participate in that process on a much accelerated basis. At the same time as this process is underway, we have been able to maintain, and even expand, our domestic Australian practice. In a sense, the two are intertwined, and almost everything we do in an Australian context has some sort of global implication. That is what makes Jones Day such an attractive platform for someone in my position.
Editor: Can you share with us what was going through Jones Day's mind when they were considering opening an office in Sydney?
Ahern: Jones Day was taking a long look at the Australian economy, both from the standpoint of oil and gas, mining interests and other domestic Australian industries, and also from the vantage point of that economy's reach. Australian property trusts are engaged in major transactions in the U.S., and Australian investment banks are involved in a variety of very large transactions all across North America and Europe. I think they had come to the conclusion that Australia was becoming a very serious player in the global economy and that having an Australian presence made a great deal of sense.
Editor: Did the Australia-U.S. Free Trade Agreement have anything to do with the decision to open an office in Sydney?
Ahern: The Australia-U.S. FTC has meant that Australian professionals - including lawyers - are able to work in the U.S. very conveniently, and vice versa. That has opened up a kind of two-way flow of some very bright people and enhanced the quality and quantity of business between the two countries. With enterprises in both countries entering the global arena in an ever increasing volume, we are going to see many more Americans in Australia and many more Australians in the U.S.
Editor: Would you tell us about the work of the Sydney office?
Ahern: The office was launched in 1998 for the purpose of handling U.S. capital markets work emanating from Australia. It was staffed initially by U.S.-admitted lawyers. I joined in February of this year for the purpose of commencing a domestic practice. In a few weeks time we will have about 10 or 11 domestic practitioners and another five U.S. practitioners. That base of 16 or so will permit us to grow out significantly as a reflection of the market.
Editor: What disciplines and practice groups are represented?
Ahern: At the moment we are very much focused on capital markets and mergers and acquisitions, practice areas that reflect where companies are when they first arrive in Australia. Over the next few years we will add new groups to reflect the needs of our clients. That will include acquiring a group of Australian lawyers engaged in domestic oil and gas work. Another area which is very attractive is the property trust and project finance area.
A legitimate question, of course, is why someone entering Australia would choose Jones Day to represent it in, say, the acquisition of an Australian enterprise. The fact is that, with the increasing globalization of the Australian economy, that enterprise might have assets in Europe, in North America, in China and Japan, and the kind of expertise that Jones Day possesses is very necessary to bring the transaction to a successful conclusion. As one firm we can deliver an awareness of issues that isn't limited by the legal jurisdiction that is chosen to govern the deal.
Editor: I gather you are saying that the Sydney office is in a position to draw upon the resources of all the other Jones Day offices to address these projects.
Ahern: Absolutely. The Australian legwork we will take care of here. In a practice such as this, however, there are many global issues, and being able to call upon the expertise of practitioners from all across the world is a real differentiator. We are one firm worldwide, not a collection of local partnerships that trade under a convenient banner. In just the past six months we have worked with the Cleveland, New York, Atlanta and Washington, DC offices on transactions within this region. We have also worked with Shanghai, Beijing and Hong Kong and with Singapore on regional transactions, and our interactions with the offices in Paris, London and Milan on transactions further afield have been extensive. This office is truly part of a global practice.
A good example of the type of project this single-firm structure permits us to handle is a recently completed transaction involving the acquisition by Suntory Brewing Company of a Shanghai operation housed in an Australian company under the Foster's Brewing Group. On the legal side, this was an Australian share acquisition, and the business and due diligence features concerned China, Japan and a variety of other jurisdictions. A Bank of America agreement was also part of the transaction. From initial instruction to completion, we consummated the deal for Suntory in two and a half weeks. We could not have done so without the regional, and worldwide, resources of Jones Day at our call.
Editor: What is the statutory regime that governs incoming investment in Australia?
Ahern: The Foreign Acquisitions Takeovers Act governs transactions in excess of $800 million for U.S. companies and involves notification of the relevant regulatory body. Australia welcomes foreign investment, and the approval process is almost always perfunctory. The Australia-U.S. FTC symbolizes the attitude of the country toward incoming investment. While we do have a requirement that a foreign investment must be in the best interests of Australia, the only time this test has been invoked to prevent such an investment, at least in the last 15 years, was in Royal Dutch-Shell's proposed takeover of Woodside Petroleum, our major oil exportation and production facility off the coast of Western Australia. I think the principal fear here was that the facility would not be exploited quickly enough if it did not remain under local ownership.
Editor: Do you ever encounter resistance to foreign investment from domestic interests?
Ahern: There is a certain sensitivity about foreign companies owning a proud Australian brand. That has attracted some media interest, particularly during the Japanese investment cycle of the 1980s. At the end of the day, there is a general recognition of how much the country has benefited from foreign investment, and we welcome it.
Editor: I understand that a Free Trade Agreement between Australia and China is under discussion. How is this proceeding?
Ahern: This agreement is in, I believe, the fifth round of negotiations, and it is going to be a more complicated FTC than that between Australia and the U.S. One reason is that this is China's first attempt at a FTC with a Western developed economy, and I think they wish to use it as a blueprint for similar undertakings with other Western economies. The Chinese are being very careful in terms of what they wish to negotiate on, for example, the market exit issues. When finally completed, an Australia-China FTC is going to give the Chinese a strong negotiating position with other developed countries with respect to a two-way market access route. This, I believe is why the process is taking so long.
Editor: What about the future, how do you see the Sydney office developing over the next few years?
Ahern: Obviously, we would like to see our mergers and acquisitions practice continue to grow. In addition, the transactions that emanate from our domestic pension funds are only going to increase in importance. The volume of money here is sufficiently large to attract asset managers from the U.S. and Europe to the country for the purpose of starting up funds, and at the same time our domestic pension funds are becoming interested in having their assets managed through structures in the U.S. and Europe. All of that is going to generate a substantial amount of work. The Australian oil and gas sector is also going to be very active, particularly in light of the increasing demands of the Chinese and Indian economies. The Australian mining sector is also going to generate a great deal of work in response to the needs of these economies. I should mention, however, that environmental concerns are adding to the expense of extraction in Australia. In this regard, we expect our transactional lawyers to be very busy on one side of the equation, while an increasing number of environmental lawyers are active on another side.
The accumulation of capital in Australia has been astonishing. The pension fund industry started about 15 years ago as the consequence of a statute requiring income earners to contribute nine percent of their income into pension funds. That has given a rise to an accumulation of about $600 billion, U.S. - which is about double the value of the Australian stock exchange - and every year another $40 to $50 billion is added to what is under management. That is what has compelled Macquarie Bank to look pretty far afield for investment opportunites and, for example to acquire a toll road in Chicago or an airport in Spain. In Australia we are repeating one of the important experiences of America: we are becoming the source of capital, not the recipient. This represents a fundamental economic change.
Between the Australia-U.S. FTC, and other free trade agreements that we will negotiate over the next five years, and the presence of spectacular capital resources in this country, I expect that Jones Day's Sydney office can look forward with great confidence to the future.