Publication:
ALB Legal News
Date:
5 August 2008
Page No:
N/A
Author(s):
N/A
Publisher:
Key Media Pty Ltd
ALB 30: Australasia’s largest firms
Australasia’s largest firms had a good start to the 2007–08 financial year, but halfway through the
year clouds started to gather when it became evident that the effects of the subprime mortgage
crisis in the US would spread across the globe. Managing partners, however, have remained
stoically optimistic and have the figures to back it up
“Capitalism without financial failure is not capitalism at all, but a kind of socialism for the rich,”
wrote James Grant, editor of Grant’s Interest Rate Observer, in an opinion article in The New York
Times at the end of 2007. He made the comment in an article that criticised the US Federal
Reserve Bank’s policy of lowering interest rates to avoid deflation at all costs, which he felt
contributed to the subprime crisis having such a severe impact on the US economy.
Grant argued that downturns in economic cycles are necessary to return to healthy borrowing and
lending patterns, and thus to a healthy economy. Inevitable as it might be, it does mean that many
economies across the globe are currently faced with the realities of reduced liquidity in the
markets.
From the second half of the financial year 2007–08, Australasian law firms started to feel the
effects of the global liquidity shortage in their banking and finance practices, and, to a lesser
degree, in their M&A practices, where fewer deals have been taken to the table. “There certainly
are a lot of corporate transactions that are waiting for the go-ahead once there is more stability in
the market,” says David Fagan, chief executive partner of Clayton Utz. His colleague in New
Zealand, CEO Gary McDiarmid of Russell McVeagh, agrees. “M&A work is very quiet; anyone that
says differently is delusional.”
But as the economy slows down, the number of businesses that get into problems increases,
which leads to more work for a firm’s insolvency and restructuring practice. Therefore, for many
firms the change in the economic climate has meant a shift in the type of work. “If you have styled
your firm around one type of work, you lose out in the shift that has taken place,” says Robert
Milliner, chief executive partner of Mallesons Stephen Jaques. “For law firms on the sophisticated
end of the market, a recession means more work because a lot of things need to be sorted out.”
Australasia’s 30 largest firms
Rank
Firm
1
Minter Ellison
2
Total
lawyers/
partners
Country of
origin
Managing
partner/CEO
Total
lawyers
Total
partners
No of offices
Australia
1031 Australia
Guy Templeton
764
267
10
Mallesons
Stephen Jaques
949 Australia
Robert Milliner
770
179
5
3
4
Clayton Utz
Freehills*
867 Australia
832 Australia
David Fagan
Gavin Bell
643
619
224
213
6
4
5
Allens Arthur
Robinson
797 Australia
Michael Rose
627
170
4
6
DLA Phillips Fox
779 Australia
Tony Crawford
619
160
8
7
Blake Dawson*
768 Australia
John Atkin
590
178
5
8
Corrs Chambers
Westgarth
524 Australia
John Denton
408
116
5
9
Deacons
472 Hong Kong
Don Boyd
262
210
5
10
Australian
Government
Solicitor
391 Australia
Rayne de Gruchy
391
n/a
8
11
Gadens
368 Australia
Ian Clarke
237
112
6
12
315 US
Mark Chapple
209
84
2
13
Baker & McKenzie
Australia
Sparke Helmore
298 Australia
John Davis
240
58
8
14
Middletons
289 Australia
Nick Nichola
230
59
2
15
Russell McVeagh
Gary McDiarmid
227
44
2
16
Juan Martinez
165
98
7
17
HWL Ebsworth
Lawyers
Simpson Grierson
271 New
Zealand
263 Australia
245 New
Zealand
Rob Fisher
197
48
2
18
Hunt & Hunt
229 Australia
Maureen Peatman
156
73
10
19
Bell Gully
223 New
Zealand
Roger Partridge
180
43
2
20
Chapman Tripp
51
3
Dibbs Abbott
Stillman
Andrew Poole,
Mark Reese
Alan McArthur,
Duncan Hart
160
21
211 New
Zealand
211 Australia
141
70
5
22
Maddocks
196 Australia
David Rennick
146
50
2
23
Henry Davis York
178 Australia
Sharon Cook
130
48
1
24
McCullough
Robertson
170 Australia
Brett Heading
135
35
1
25
Gilbert + Tobin
160 Australia
Danny Gilbert
108
52
1
26
Holding Redlich
156 Australia
Chris Lovell
112
44
3
27
Kensington Swan
153 New
Zealand
Chris Heilbronn
111
39
2
28
Buddle Findlay
144 New
Zealand
Peter Chemis
107
37
3
29
30
Moray & Agnew
Piper Alderman
144 Australia
143 Australia
Michael Pitt
Gordon Grieve
91
92
53
51
5
4
* Freehills, Blake Dawson: FTEs submitted
Note: This table does not purport to be exhaustive. Figures are provided by the firms themselves
and are accurate to June 2008. Where firms are unable to supply figures, websites have been
used
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Firms and figures
Mallesons is one of the Big Six firms that have done well, reporting revenue growth of 10.7%. The
firm is closely followed by Clayton Utz, which reported an increase of 9% in revenues, but top gong
goes to Blake Dawson which realised an increase of 11.9%.
Although Minter Ellison is the largest law firm by total lawyer and partner numbers, it came in as
the fourth largest firm by revenues. Last year it was in third place but had to step down in favour of
Clayton Utz, whose consistently solid performance has placed it in the top three this year.
Other remarkable performers were Gilbert + Tobin, which revealed a revenue increase of 14.9%,
and Baker & McKenzie, which posted top line revenue growth of 13.2%. Meanwhile, in the midsized segment of the market, Holding Redlich (+20.4%) and Maddocks (+17.1%) stood out.
On the other side of the spectrum we find the Australian Government Solicitor, which saw income
increasing by just 1.8%, while Thomson Playford achieved only 1.1% growth. The worst performer
in the ALB revenues table, however, is TressCox, which reported a meagre 0.5% increase in
revenues.
New Zealand’s secrets
Many firms in New Zealand have a financial year that corresponds with the calendar year and,
therefore, they are halfway through their financial year. In 2007, Bell Gully broke through the
NZ$100m mark, says the firm’s CEO, Stephen Macliver. “We have comfortably exceeded 100
million dollars for the first year ever. It was a significant double-digit uplift on 2006.”
Macliver did not want to specify by how much the firm has broken the mark, but in the New
Zealand tradition his remarks are already generous. While in many countries law firms are moving
towards more transparency, with the UK leading the way by publishing profits per partner, most
firms in New Zealand don’t reveal any financial details and, instead, claim every year to have
realised another record year of growth. The reason for this shyness seems to have been lost in the
catacombs of tradition. “There hasn’t been a history of, or demand for, disclosure of this specific
financial information,” offers Macliver.
International expansion
For future revenue growth, many law firms rely on expanding the share of work that comes in from
outside national boundaries. Mallesons’ Robert Milliner expects the highest growth to come from
the Asia region. “Growth in Australia will be moderate, as opposed to high growth in Asia,” he says.
But despite the opportunities there, he is not looking for hasty expansion. “It’s not a question of
having dots on a map; we want to build solid offices and do things that we do really well. Our
priority is to build up the Beijing and Shanghai offices to the same level as our Hong Kong office.”
Australian law firms have taken different views on the best way to reel in international advisory
work. On one hand there are firms such as Mallesons and Minters that which have set up
extensive networks of offices in the Asia-Pacific region. On the other hand there are firms that
favour law firm alliances, such as Clayton Utz which is the Lex Mundi member for Australia.
Interestingly, it doesn’t seem to matter which approach is taken as the share of revenue coming
from cross-border work is roughly the same. All of the firms mentioned above estimate that the
percentage of revenue coming from offshore activities amounts to 10%.
“Each firm has their own strategy that they are pursuing and different people have different views
on what works best,” says David Fagan. “For us, the approach we’ve taken is quite successful.
We’ve committed a lot to our regional offices. For example, our Perth office will grow this year by
about 18% to $45m in revenues. In the last three years, our Brisbane office has doubled in size
and this year we expect the office to contribute about $80m. There are not many firms in our area
that have significant offices in Perth and Brisbane.”
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Clayton Utz might not have offices in Asia, but it does have partners on the ground there,
sometimes for extended periods of time. “We have had a number of lawyers and partners based in
Taipei for the last five years, working on the Taiwan high-speed rail project. We have a large power
project in Vietnam and we’ve been running litigation in Kazakhstan; it ranges all across the globe.”
Fagan says the decision not to set up offices in these jurisdictions is largely explained by cost
control. “You can have an offshore office that wouldn’t even contribute A$50m and you pay a lot of
costs to service that office.”
For many law firms 2007–08 has been another good year in terms of revenue growth and this
seems to justify the unabated optimism of law firm managing partners. But there is a catch to
continued good conditions, warns James Grant in his before-mentioned opinion piece. “People get
carried away, prices go too high and economic resources go where they shouldn’t.” Let’s hope that
the legal industry is the proverbial exception to the rule.
David Fagan – Clayton Utz
Clayton Utz is set to post revenue growth of 9% this financial year, an increase to A$470m and
another strong result after last year’s 11% increase. “It’s a year of two halves,” says David Fagan,
chief executive partner of Clayton Utz. “Up to December, it was a very buoyant corporate and
banking market, while beyond December it was a very buoyant litigation market.”
It’s clear that the economic climate has changed since December, but Fagan says it’s not all down
to the liquidity crisis stemming from the subprime mortgage industry collapse in the US. “The
subprime crisis, the packing up mortgages with very problematic credit quality, we’ve not had that
here. In the US one in every five houses has had a foreclosure notice, in Australia that’s 0.2%.
We’ve not had that asset problem and, correspondingly, I don’t think we’re going to have the
litigation they had over subprime issues.”
Fagan does acknowledge that some of the fallout of the subprime crisis has trickled into the
Australian market and he says Clayton Utz is advising Lehman Brothers on products that the
financial services company sold into the Australian market. But the large corporate collapses that
Australia has seen in recent months are not tied to the US-originated crisis, he argues. “The work
that is related to Allco, Centro and MFS, that is more about their business models than the credit
crunch.”
The slowdown in the Australian market is a result of the culmination of factors, including a rising oil
price, record low consumer confidence and fewer corporate sales, and there is no telling when the
climate will improve. The firm is, therefore, budgeting for more subdued growth next year, says
Fagan. “There is uncertainty in what the next 12 months will bring; a degree of caution is probably
sensible.”
John Denton – Corrs Chambers Westgarth
Corrs Chambers Westgarth’s revenues have increased by 3.4% to $240m in the financial year
2007/08. This is not quite as high an increase as in the previous years. Last year the firm reported
a growth of 11.5%, while over the last three years the firm’s total revenues grew by 25%. For next
financial year, the firm is looking at single digit growth – around 5 – 6%.
Chief executive officer John Denton of Corrs says the slowdown in revenue growth is caused by
the firm’s efforts to develop its industry groups. “Partly, it is us doing things,” he says. “We are very
committed to our 2010 strategy and that does take up a lot of capacity. We’re not skinnying the firm
up here, we are investing very heavily in L&D [learning & development] in particular, and in
information systems.”
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“We could suck in more revenue if we wanted to, and I do notice that used to be a focus of some
people in the market place, but what’s the point if you’re not generating additional return from that?
All you’re doing is adding revenue. We’re not competing on scale; we’re large enough to do the big
deals.”
Denton discards the idea that it’s the influence of the credit crunch. “What has been surprising for
us is how strong corporate advisory has actually been this year. We’ve closed some pretty
amazing deals; we’ve done five of the top 10 deals that have been closed. So the areas that we
are seen by some of our competitors as being softer, in fact, haven’t been soft for us.”
Guy Templeton – Minter Ellison
Minter Ellison is the largest law firm in Australia by total lawyer numbers, but this financial year the
firm lost its place in the top three largest law firms by revenue to Clayton Utz. Minters came in at
fourth place, reporting $460m in revenues, while its competitor posted A$470 in revenues.
Despite having to digest a drop on the size-by-revenue ladder, Minters still managed to grow
revenues by 5.3%. CEO Guy Templeton says that the insolvency and restructuring practice has
been the main driver of growth. “We’ve maintained a full-sized insolvency and restructuring team
throughout the boom times. That is now paying off,” he says. “Our restructuring and workout team
is firing in all cylinders; it’s one of our strongest areas.”
The firm is advising ANZ on the legal issues surrounding the collapse of stockbroker Opes Prime
and the bank’s exposure to Centro. It also continues to act for PwC as the liquidator of seven of the
mezzanine finance companies within the Westpoint Group.
Templeton says that inbound work from Asia has been unaffected by the global credit crunch and
he expects this to be one of the main drivers for the next financial year, particularly for the firm’s
energy and resources practice.
He also predicts a strong year for the firm’s infrastructure practice, driven by major projects
undertaken by state governments. For example, Minters advises the Port of Melbourne
Corporation on the channel deepening project. “[These projects are] starting to flow through now.
The pipeline for the whole of Australia has been full for some time and will remain so for some time
to come.”
Mark Leibler – Arnold Bloch Leibler
One of the most remarkable deals of last year was undoubtedly the public listing of plaintiff firm
Slater & Gordon. Not only did the IPO provide some challenging legal and regulatory issues, but it
also sparked a debate on the ethical merit of the adventure. Some critics said the listing of a law
firm would dilute the responsibility lawyers feel towards the court and their clients.
Arnold Bloch Leibler acted for the law firm on the IPO and senior partner Mark Leibler says he
looks back on the transaction as one of the firm’s highlights of last year. “Slater & Gordon probably
has to stand out simply because of its uniqueness,” says Leibler “This was the first time that a law
firm – forgetting about Australia, but internationally – has gone public. It raised a whole lot of
interesting and fascinating issues, which had to be considered, for the first time […], but we
overcame them all and as you can see Slater & Gordon are flourishing.”
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But the successful listing hasn’t tempted the firm to go public themselves. “We have a different
model,” he says. “We don’t rule out anything, but at this moment I don’t see us seriously heading in
that direction.”
Arnold Bloch Leibler realised a healthy revenue growth of 7.6% in the financial year 2007/08.
Leibler expects to further grow the Sydney office of the firm. “There is a huge potential for growth
there,” he says. “We think there is going to be a lot more commercial litigation; some things have
gone wrong in the credit crisis.”
The expansion will depend largely on the ability to find the right people. “Because of the economic
downturn there will be a bit of a shakeout, but to get the right quality people is difficult.”
Robert Milliner – Mallesons Stephen Jaques
Like the year before, Mallesons Stephen Jaques dominates the revenue table in the financial year
2007/08. And what’s more, the firm has broken through the half a billion dollar barrier, reporting a
total revenue growth of 10.7% to A$545m.
It took the firm 175 years to get to this size, and so ALB magazine asked the firm’s CEO, Robert
Milliner, how long it will take before it reaches a revenue figure of a billion dollars?
“That’s a quantum jump,” says Milliner. “For the Australian firms, a billion dollars would not be a
sensible aspiration. It’s a very competitive market here; there are a lot of good firms. I doubt that
any Australian firm would think that doubling its size in Australia would make sense.”
But Milliner does aim high when talking about expansion in Asia. The firm generates roughly 10%
of its revenues in the Asian region, particularly in China. Milliner says that although he expects to
grow moderately in Australia, the real growth story is in Asia. He wants to build up the Beijing and
Shanghai offices to the same size of the Hong Kong office, which has over 70 lawyers.
Milliner illustrates the importance of China for the Australian economy by a quote of Ian
MacFarlane, the former Governor of the Reserve Bank, who said that Australia’s economy is
simply a factor of the global economy. “That was true of the early 2000s,” says Milliner.
“Interestingly, the resources dependence of China has made it more the case that Australia’s
economy is a factor of China’s economy.”
Although some have doubted the profitability of the Asian adventure, Milliner waves away this
criticism. “This used to be the classic rhetoric of the early 2000s: you don’t want to invest offshore
because you can’t make any profit out of those offices. Well, I can tell you that we can make very
significant profits out of our Asian offices.”
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