BARING PRIVATE EQUITY
Sometimes referred to as the dean of the corporate counsel bar in Asia, Baring Private Equity Asia’s William Hay has a longstanding pedigree in establishing and running pan-Asian legal functions. His long tenure in the region has been fuelled by his passion for Asian culture and traditions, particularly those of China. A fluent speaker of Mandarin, he has also become an expert at bridging the divide between western and Asian business expectations. He speaks to Catherine McGregor in Hong Kong.
B U S I N E S S T H I N K I N G
GC: Did you always know that you wanted to be a lawyer, or did you have other career plans at first?
William Hay (WH): No. I started as a journalist, studied that at university and worked for a small newspaper in California for two years. I was always interested in Asia. I learnt Mandarin at graduate school and then had a year studying and working in Taiwan. At that point I realised that journalism would be five cents a word for the rest of my life. I had an interest in law as when I was a reporter I’d covered the courts as part of my beat, so I decided to retrain as lawyer.
Going into law was a good way to keep up my focus on Asia. After I graduated from law school, I went to New York and worked for my mentor Jerome Cohen at Paul Weiss and then ultimately at the firm that is now Covington & Burling’s office in New York City. GE Capital was one of my clients and when they were setting up in Asia it seemed a natural move. I did that for five years then moved into private equity and set up the legal function in Asia for Colony Capital.
GC: What made you first want to go in-house?
WH: There was no really great thinking – I’d always enjoyed the intersection between law and business rather than being a pure lawyer in an ivory tower. There’s more scope for this in companies, because you can become part of the business team over time.
GC: Many private equity firms have been late coming to the table in regard to establishing a legal function, and often staff legal teams quite leanly. How difficult was it moving from GE into the private equity sector?
WH: The CEO of Colony Capital, the first private equity firm I joined, told me that private equity firms are essentially artists’ colonies - where the deal people are the artists. It’s certainly not a bureaucratic environment but a highly creative and entrepreneurial one; every day is a new and different challenge. It’s a level of challenge and excitement higher than the more staid end of the financial services sector. The flip side is that you are creating the institution as you go along. You can’t borrow on authority of being the chief lawyer in the bank, rather you have to persuade people that they should follow your advice because it’s the right thing to do.
GC: You have a serious pedigree of setting up legal functions. What are the lessons you’ve learned from doing this a number of times?
WH: My role was to set up the legal function in Asia at all the companies I have worked for in Asia. The GE role was created to support the growth of the GE Capital finance business across Asia. I eventually ran the whole legal function for that part of the company in Asia.
The challenges of set up are often one of margin expectations with the parent company. For example, where the company isn’t that familiar with Asia, when you hire a lawyer you need to convince them that it’s not just about hiring the best person on paper, but hiring someone who really understands the cultural challenges and risks they will face in the job based on real experience. In China in 1995 there weren't a lot of Chinese trained lawyers. The bosses at GE would say: “This person has good English; they must be a great lawyer,” and we would have to push back to explain the importance of the cultural dimension.
Since coming back to Asia, I have generally always covered pan-Asia roles. That presents challenges when trying to put together a team that covers such a large and diverse area. You can’t expect to have a team that answers all the problems. Generally what we have done is create a network of external advisors to make sure that we have all areas covered. In this framework the in-house lawyer becomes an organiser and project manager. As GC there’s a pressure to get your in-house lawyers to know enough so that they can actively assess and make decisions on legal risks rather than passively rely on outside counsel. I never want lawyers who just turn to their Rolodex for every problem.
For those reasons, it helps if you go into a start-up legal function with at least 10 years’ experience. You can’t be effective in an entrepreneurial company unless you’ve had enough experience in more established companies to be confident of your judgement, and knowledgeable about proper processes. In start-ups, which tend to be peopled with strong personalities, you need a certain amount of gravitas to hold your own. Starting up a legal function is not really a “learning on the job” sort of role.
GC: What’s the best thing about working at Baring Private Equity Asia?
WH: I just love coming to work everyday. Every day is different. I really have no idea in the morning what I will face that day. There’s always a range of challenges and creativity with a very high cultural dimension, as well as the usual legal issues.
GC: What’s your favourite part of your day at the office?
WH: I come to work at 8.30am and I work until about seven. I often pop out to see lawyers for coffee in the afternoon, so it’s nice to get that contrast of interacting with the outside world.
GC: What’s your least favourite part of your day at the office?
WH: Interminable meetings, but to be fair we don’t have too many.
GC: What has been the highlight of your professional life so far?
WH: It’s really the cross-cultural dimensions. Studying Mandarin and having made so many friends across Asia, understanding the different cultures and how to be effective in those worlds.
GC: What legal issues or challenges have you got coming up on the horizon over the next few months?
WH: An ongoing issue doing business here is the fundamental contrast in the East Asian attitudes to business relationships compared to Anglo Saxon attitudes. Anglo-Saxons tend to be specific and relate in terms of a well thought-through contract. We Anglo-Saxons tend to want all the questions addressed and the answers written down. The East Asian model is more one of: “Let's make sure we have a good relationship and then set out general principles for how we will work together”. There’s often a collision of attitudes when we’re doing deals: Westerners don’t understand why something is not in the contract, and Easterners don’t understand why something is in the contract. Finessing this needs extra time and negotiation.
If you have a problem in most of East Asia then going to court is not usually a solution. Most Asians look to more informal means to resolve their disputes.
GC: How much do you outsource as a team, and how much do you keep in-house?
WH: In-house, we have four lawyers plus me: we have a lawyer who covers China; one who covers South East Asia and India; a tax lawyer and a compliance director. We also have a consultant who takes care of all our fund documentation. It’s a pretty senior team, ranging from 10 years’ PQE to about 35 years’ PQE in my case.
Every single deal we do at has least one law firm mandated to run it, depending on jurisdiction. In many transactions we will often also have a local law firm onshore and an international firm offshore.
GC: What do you expect from an external lawyer?
WH: Fundamental is being really good at what they do and understanding our business inside out. Private equity looks like hedge fund or corporate M&A, but the business and regulatory issues are really quite different. Most of our deals are controlled buyouts or growth equity. The balance of rights in growth equity deals need someone who has a lot of experience – someone who has done it not only in the relevant jurisdiction, but internationally as well.
Personally, they have to be flexible and persuasive to the business people. There is no such thing as perfect structuring in Asia. People who have experience in doing these deals can see what risks are real and which are only imaginary.
GC: What are you reading at the moment?
WH: Francis Fukuyama’s Political Order and Political Decay. I also just finished Tim Clissold’s new book Chinese Rules which is really excellent.
I have just had a fortnight off so I have read a lot, including some trashy detective novels. It has been about half proper books and half trash.
GC: What’s your favourite film?
WH: Groundhog Day because it’s philosophical and funny. One man’s redemption through living the same day over thousand times.
GC: If you weren’t practising law anymore, what would you be doing?WH: I enjoy mentoring and consulting and hope I would be be in a position to mentor young lawyers and young entrepreneurs, and help them progress in their businesses.
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