A stereotype it may be, but if talking about the weather was an Olympic sport, Great Britain would be sure to take home gold every four years. If one nation could knock the Brits off top spot, however, it may just be Japan. This year’s research trip coincided with the end of a long, drawn-out rainy season, a topic which many lawyers were keen to discuss throughout my week-long stay in Tokyo, as well as the impending summer games due to be held in the nation’s capital next year.
While preparations for the games are well underway, their potential legacy is raising more than a few eyebrows. So far, London is one of few exceptions to the ‘Olympic curse’ which stipulates a sharp drop in real estate prices and economic growth in host countries following the games. Most experts I spoke to confidently explained that a steady flow of foreign investment into Japan and the capital’s solid real estate market will stand the test of the games.
On the subject of investment, the majority of corporate and M&A practices reported little more than ‘steady as she goes, Captain’ as foreign private equity continues to proliferate in Japan – the fact that KKR declared Japan its ‘highest priority’ after the US was certainly a statement of intent – while Japanese investment firms continue to streamline their portfolios and look for new markets overseas.
The subject of venture capital, and its significance to Japan’s legal market, was also a hot topic of conversation. Seemingly inspired by Softbank’s Vision Fund, Japanese trading houses have set up platforms to invest in start-ups in Israel and Silicon Valley, especially in the pharmaceutical, biotechnology, and life sciences sectors. Attributed by some to the ‘copycat’ effect found among Japanese investment giants, the trend has spread fast and wide. Others, however, credit common sense.
‘Japan-based outbound venture capital investment is growing leaps and bounds,’ said Mayer Brown partner Gordon Palmquist. ‘The Japanese market is full of copycats; most trading houses here have a venture capital or tech investment platform simply because their competitors have one.’
‘Venture capital is absolutely a hot topic, to the point where the government sometimes co-invests with the trading houses for a 5-10% stake,’ explained Ashurst partner Tracy Whiriskey.
Some remain sceptical, however, as to the significance of this. Ken Siegel, head of corporate at Morrison & Foerster and key counsel to SoftBank, explained: ‘Venture capital is not material from a corporate perspective. Most deals are so small they are barely worth mentioning.’
‘It’s not the kind of work that big practices will do. For now, one M&A deal is still worth about 30 venture capital deals,’ concurred Karl Pires from Shearman & Sterling.
Will trading houses have the appetite to see venture capital through? Will the success stories outweigh the failures? ‘We can almost consider these investments to be joint ventures,’ said Lance Miller of DLA Piper. ‘This kind of financing is still very rare in Japan so these deals are negotiated in great depth to offset fears of failure. Japanese investors will either partner up with a foreign entity experienced in venture capital or throw such staggering amounts of money at their target that they can’t possibly fail.’
And speaking of throwing around money, a key sign of a thriving market is mobility. Conversation was ripe regarding high-profile moves. A ubiquitous appetite for team growth across Tokyo made these updates all the more notable as, in some cases, they significantly impacted firms in a highly competitive recruitment market.
Arguably, the most notable move this year was the departure of Noah Carr, Ivan Smallwood, and Stuart Beraha from Morrison & Foerster to Latham & Watkins, doubling the partner headcount at their new firm. While peers were eager to speculate on the potential future of Carr and Smallwood’s corporate practice – considering their relationship with SoftBank was 'sure to stay' at MoFo – the significance of Beraha’s brand-new technology transactions practice somehow stayed below the radar. And having just appointed project finance expert Stephen McWilliams as new head of the Tokyo office, it will be interesting to see how Latham & Watkins looks a year next year.
Meanwhile, Withers recently made a substantial push in the real estate and funds market by hiring Gerald Fujii from White & Case alongside Naoki Ueyama and Steven Wheeler who joined from Masuda & Partners and Wheeler Law Offices, respectively.
Elsewhere, Ashurst, Orrick and Herbert Smith Freehills experienced a reshuffling of the deck in Tokyo. Ashurst’s David Wadham moved from London to Tokyo following Matthew Rickards’ and Anna Hermelin’s relocation to New York and the departure of projects and energy practice head Dominic Gregory to Bryan Cave Leighton Paisner’s Singapore office. Herbert Smith Freehills sent Lewis McDonald back to London as global head of energy (he also remains the firm’s head of the Asia corporate practice).
Also returning to London is Orrick’s head of projects and energy, James Atkin in order to run the firm’s global practice, while intellectual property litigator David Case relocated to the US to start his own boutique.
Continuing market trends include the adaptation of corporate culture to the regulatory requirements of an international market which places an unfamiliar emphasis on corporate governance and transparency, specifically with regards to disclosure obligations, and employment disputes that revolve around harassment claims arising from allegations of abuse of power by senior team members.
Coming full circles, parallels can certainly be drawn between the Olympics and trends in Japan’s legal market, which is clearly adapting to modern times. While skateboarding and sport climbing have replaced equestrian vaulting and handball in the 2020 games, venture capital investment and proactive shareholder transparency replace traditional corporate dogmas. You could say that now, more than ever, Japanese and international clients rely on lawyers to make them ‘Faster, Higher, Stronger’.