Strong through the storm

K&L Gates guides businesses through myriad pandemic-related challenges

JULY 2021 Investing in Japan / Text by Toby Waters / Photos by Michael Holmes

With a business culture founded on in-person interaction and lengthy consensus-based decision-making processes, Japan Inc. wasn’t prepared to respond quickly to the changes the pandemic demanded of it.

“The pandemic has significantly impacted the way we all do business,” says Ryan Dwyer, managing partner of the law firm K&L Gates’ Tokyo office. “But it has been particularly challenging for Japanese companies to adapt.”

However, over the past year, many companies have successfully responded. They have implemented measures as simple as introducing new remote-work protocols and videoconferencing technologies, or have had more innovative responses, such as rethinking corporate governance paradigms and streamlining traditional Japanese internal approval processes. To more smoothly make the necessary changes — and better prepare for what’s to come — some of these businesses have been looking to law firms, such as K&L Gates, for guidance.

A global firm with an emphasis on local capabilities

Consistent with the firm’s global mandate, K&L Gates’ Tokyo office has been using its local experience to support its Japan-based clients during this time of major change.

K&L Gates was established as a global brand through a 2007 merger between Kirkpatrick & Lockhart, headquartered in Pittsburgh, Pennsylvania, and Seattle’s Preston Gates, a legacy firm with a history stretching back to 1883. Today, K&L Gates has more than 45 offices around the world and over 2,000 lawyers globally. It has eight offices in Europe, including its newly opened Luxembourg office, and seven offices in Asia, including its Tokyo office.

“Some other large global law firms are actually networks of firms under a brand-sharing agreement, but we are different — we are a single, integrated firm,” says Dwyer. “That enables us to provide the best service for our clients. Our offices do not compete against each other to retain work or revenues. We can also easily tap the lawyer with the most relevant experience to meet our clients’ needs to assist us with each matter — regardless of where they are located within our global network.”

K&L Gates is in a strong position to advise on both international transactions and Japanese domestic legal issues. The Tokyo office has grown from two foreign lawyers and one Japanese lawyer in 2010, when it was founded, to 25 lawyers today — roughly half of whom are bengoshi or benrishi (domestic Japanese lawyers and patent lawyers). In other words, it is a full-service Japanese law firm with extraordinary cross-border capabilities.

The right advice for today

K&L Gates’ strengths include M&A, finance, healthcare, intellectual property, employment, and litigation.

“A lot of our European client base is actually in the pharmaceutical and healthcare space,” Dwyer says. “We also work for many global technology companies, generally with smaller operations in Japan. We often act as outside general counsel for these companies because they have no locally based legal team.”

However, the core of the Tokyo office’s business is mergers and acquisitions (M&A), an area of focus for Dwyer and partner Dale Araki. Since the start of the pandemic, they have been advising their clients on new and emerging issues. These include the ramifications of restructuring struggling businesses, the need to create new strategic alliances to alleviate supply chain disruptions, and how to adapt new products to the Japanese market.

“The pandemic has resulted in increased costs of doing business, and clients remain unsure of whether those increases are transitory in nature. This has introduced some concerns about the reliability of projections and feasibility studies, which may have negatively impacted deal flow, particularly in the first half of 2020,” Araki explains. “So, a lot of the discussions I’ve had with clients recently is about which transactions should proceed and which should be put on hold, how transactions might be restructured to reflect the current situation, and whether force majeure clauses for certain transactions could be triggered and relied upon.”

However, he expects to see a spike in M&A activity soon and is advising his clients to act when the timing is right.

“As the pandemic eases, I think the M&A market is poised to explode. Many deals are on hold in Japan right now,” he states. “Despite the strides made in the area of remote work, many Japanese clients are hesitant to commit significant funds to a merger or acquisition without corresponding face-to-face meetings and on-site due diligence. In addition, many Japanese companies have used time in lockdown to build up cash and restructure their operations. We sense significant pent-up demand, and many of our clients are already looking for transactions that can go forward once pandemic-related restrictions are lifted.”

With the way the coronavirus has shaken up so many firms, both domestic and international, K&L Gates has frequently been asked to advise on employment law-related issues companies are facing.

“One immediate need many companies had was how to implement a telework policy,” says Dwyer, “and we worked with them to develop the policies required under the rules here.”

Today’s unprecedented circumstances have also forced some foreign companies in Japan to restructure their workforce.

Flexibility and growth

Thanks in part to its ability to adapt quickly and its fee-related policies, K&L Gates’ Tokyo office has continued to grow throughout the pandemic.

“The way we interact with our clients has been significantly impacted, so we have had to develop new ways to connect, since a big part of business development in Tokyo revolves around attending networking events or having dinners with existing or potential clients,” Dwyer says.

Araki adds: “So the big question for us has been, how do you attract new clients during a pandemic? With traditional business lunches and seminars shut down, we’ve looked at other avenues, such as online roundtables and educational events tailored to a company’s specific interests. Japanese companies have been surprisingly receptive to participating in online events these days.”

K&L Gates has also established a policy on fees that ensures its rates are reasonable for domestic clients. This makes them very attractive to businesses overseas.

“Compared to some of our competitors whose billing rates are set to a New York or a London standard, our billing rates are set to a Tokyo standard,” says Dwyer. “We are locally competitive in this market, and recognise that a one-size-fits-all approach does not work in all markets.”

“We can get the job done with local people on the ground, which makes us more effective and means we are also able to price inbound deals at a domestic rate,” Araki adds.

With the right team, the right network, and the right guidance, businesses are better positioned to weather the storm and come out stronger on the other side.

“We know how to work within the Japanese legal system and understand the culture. We also know how to translate that in a way that Western companies will understand,” says Dwyer. “We think that’s our real strength.” •