The future of the Australian legal market
By Lawrence Ward
Megafirms: Are they the future of the Australian legal market?
For many years, Australia was seen as a relatively unprofitable legal outpost. The content of work was principally domestic and well covered by the ‘Big 6’ Australian commercial firms. Aussie firms were also largely inactive within the Asia-Pacific region. Instead, it was the UK/US firms staking their claim in the burgeoning Asian markets. In more recent times, as business ties between Asia and Australia have strengthened, the need for closely aligned legal service providers has increased.
In Perth there has been an unprecedented level of activity, which has been as rapid as it has been widespread. Firms of all sizes are fighting to get a piece of the resources pie. A mark of distinction between firms has been the manner in which they have established a foothold in the local market. Some, like Allen & Overy, have chosen to attack Perth without a merger (albeit with considerable poaching of local talent). Others, such as Norton Rose and Clifford Chance, have merged with smaller local firms. More unusual is the “integrated global alliance” of Allens Arthur Robinson and Linklaters. Mallesons, on the other hand, has merged with Chinese firm King & Wood to form a regional – rather than a truly global – powerhouse.
Although Perth has also seen the arrival of a number of Australian mid-size firms, such as Middletons and Gilbert + Tobin, it has been the international big names drawing most attention. The global firms have added another dimension to the Perth marketplace. Where once we talked about the well-established ‘Big 6’, we now find many firms claiming that title – particularly those who now boast an international reputation.
The situation is reminiscent of the former ‘Big 8’ global accountancy firms, which have since been whittled down to the current ‘Big 4’. The demise and rise of those firms raises serious questions about the very comparable legal market: Are we heading the same way?
It appears many of the Australian firms have got the message: The Australian outpost has been found out and invaded. It is now up to the firms themselves to decide whether to merge with the invaders or to battle on alone. However, in a legal market hosting a plethora of big names and with a finite supply of local talent, that battle for supremacy looks to be heating up. And it is a battle that the international contenders seem to have every chance of winning. Backed by thousands of partners and big clients all over the world, the global firms have the resources to finally open up the Australian market. On the other side of the ledger, the Australian firms have a greater degree of local expertise and well-established business connections with local clients. While this is a war of attrition that will likely continue for many years, it appears to be good news for Western Australian law graduates. We now have more numerous and varied options than ever before – all of which are clamouring for local talent.
What has become clear in the past few years is that Australia’s legal market is no longer exclusively focused on servicing the Australian marketplace. Foreign investment has necessitated a more regional approach as firms look to facilitate Asia’s thrust into the Australian economy. As these links with Asia become stronger, it seems to me that firms refusing to embrace a more regional approach will either be forced to downgrade their operations or will be swept aside. Similarly, large Australian firms that do not merge with the newcomers must prepare themselves to battle for market share in the unfamiliar global spotlight.
The arrival of international firms has placed Perth’s legal market in a global context. Perth is no longer a legal outpost. Instead it is a reflection of the worldwide legal market. And although it remains to be seen who will prevail in the stoush between the newcomers and the old guard, it seems to me that – regardless of the victor – megafirms are here to stay.
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