The legal landscape in Australia is undergoing a transformation and nowhere is that more evident than in NSW. In a state where almost 26,000 lawyers practice in a mix of global, national, newly merged, boutique and mid-tier law firms, as well as government and corporate entities, Stephanie Quine discovers why staying focused in a distracted market is crucial to remaining competitive.

Laura Hartley, the managing partner of Sydney-based firm Addisons Lawyers, believes the arrival of global law firms is the biggest thing that has happened in the legal profession for a very long time and she is watching movements with “a heck of a lot of interest” on a number of levels.

Hartley started her career at what is now DibbsBarker and worked her way up to partner, but after 20 years she left the partnership of 36 to join one of 12 and a completely different business model.

One thing which immediately impressed her when she arrived at Addisons just over two years ago, she says, was the firm’s insistence on hiring top-tier quality people.

“Lots of firms worry about the client but not everyone worries about the quality of their people … [Addisons] is absolutely obsessive about the technical expertise of its lawyers, believing that if you get that right you can do a better job for clients and partners can get other clients of their own,” says Hartley, adding that the firm pays top-tier salaries in an effort to retain top talent.

Hartley found that DibbsBarker tended to compare its salaries with other mid tiers.

“So they would participate in MRC surveys and see what their other mid-tier competitors were offering … When I came here I was quite staggered at that change, this firm sees itself as competing with the top tier and therefore it’s got to pay top-tier salaries and there is no begrudging that,” she adds.

Speaking at the NSW Practice Management 2012 conference last month, the general manager of Hunt & Hunt Lawyers, Steve Sampson, emphasised the importance of quality staff for firms looking to move into the emerging “upper mid tier”.

He told delegates that “it will get ugly” for firms that don’t engage good people “to start moving the business forward” and improve internal capability to carve out a place in the top half of a bunch of very capable, sizeable, sophisticated, focused firms.

Mid-tier firms are now in a good position to land big clients as the top-tier firms enter international partnerships and tip out practices no longer considered a strategic fit, argued Sampson.

“The mid tiers who do not adapt and build sustainable and competitive advantage will have enduring issues with relevance, client and staff attraction and retention, succession and – ultimately – longevity,” he said.

But for some, the arrival of global law firms is of little interest.

Workplace lawyer Gavin Hanrahan is the managing partner of Turnbull Hill Lawyers, a large regional Newcastle-based firm with partnership of four and 22 lawyers. He says he hasn’t felt any impact from global firms in Australia but one thing he has noticed is the increased number of boutique firms operating in the Newcastle region.

He believes boutique practices, while they often work at increased margins, run the risk that they “may well be working in a very narrow area of law” and if there are changes in those areas problems present themselves.

“If you were someone who worked exclusively in personal injuries law 10 years ago then the legislative changes would have caused you to have to make some significant changes and to look at other areas of law. You don’t want to have all your eggs in one basket,” says Hanrahan.

Close to you

At the heart of any relevant and competitive practice is client trust and rapport.

A tight team model, where a firm doesn’t “whack a six pack onto every single thing we do”, is something Hartley says both DibbsBarker and Addisons share.

“I think that’s very different from a top-tier model where leverage is everything,” says Hartley. Her sentiment has been echoed by a number of firms in the mid-tier market.

When Addisons ran a client review program last year, Hartley said one big issue raised by clients who use large firms as well as Addisons was their uncertainty due to a “trickle-down approach” in large firms.

“They are not sure which information is trickling down from the partner to whatever tier of person their dealing with in the firm; whereas we’re much more hands on and partnership, partner access and senior lawyer access are an enormous priority for us.”

Pins on the map

Another obvious difference to Hartley upon joining Addisons was how “uncluttered” the firm’s model was, being a Sydney-only firm, but still serving national and global clients.

“With technology, you don’t have this feeling of needing pins on the map … all that comes at a cost quite frankly, so when you can have a lower overhead structure you can present a better offering to a client base,” she says.

The managing partner of Allen & Overy in Australia, Grant Fuzi, agrees that mid-tier firms and the growing number of upper mid tiers are excellent in providing specialist, cost-effective service to increasingly sophisticated clients.

In certain practice areas, for example in employment law, which Fuzi says is very much a domestic market requiring “local expertise”, A&O doesn’t look to compete.

“Some firms are extraordinarily good and have good people providing that expertise, so as a firm we ask is there something A&O can do differently using our global expertise and the answer is no, so that is where we say ‘no, there’s no point us coming in and competing with them’,” says Fuzi, adding that A&O has good relationships with a number of mid tiers and works in a seamless manner alongside them if that is what the client desires.

But when it comes to cross-border work global firms like A&O differentiate their offering.

“Take an energy and resources cross-border deal where a Chinese enterprise wants people in Beijing and Australia or a covered bonds transaction that the big banks have just done where we can bring in our leaders from London and Australia …that’s something we do that others can’t,” says Fuzi.

Sixty per cent of A&O’s work globally covers two or more offices of the world and Fuzi says that statistic is almost identically replicated in Australia.

“We’re finding about 60 per cent of our work will involve some element of cross-border work in it,” he says.

Fuzi is not fazed by the upper mid tier emergence. While admitting it is a “very good observation”, he says the firm hasn’t felt any more competition than usual and, besides, “we’re not looking to compete at that level”.

Eyes on the prize

With the hype around recent link ups like King & Wood Mallesons, Ashurst and the Allens Linklaters tie up, the memory of original Australian brands like Blake Dawson, Mallesons Stephen Jacques and Allens Arthur Robinson is fading fast.

Hartley was quick to sound a warning, similar to Hanrahan’s, about firms putting all their efforts into the Asian market.

“Some firms are giving off a perception that it’s all happening in Asia and really Australia doesn’t matter … those firms are a little distracted by worrying about having a presence in Asia and reconstructing themselves. That might be client driven and, fair enough, they also obviously see [Asia] as the growth area, but I think you’ve got to be careful with that sort of strategy because you don’t want to disenfranchise the existing client base that has been with you for a long time,” says Hartley.

Addisons, which services clients like Bega Cheese, Coca-Cola, Colgate-Palmolive, Hillgrove Resources, Mulpha Australia, Petronas and Virgin Enterprises, has “a little bit of Corrs” in its philosophy, says Hartley.

Corrs Chambers Westgarth stands out as one large national firm which has a deliberate strategy to “drive Australia’s competitiveness and its engagement with Australia”.

The firm’s CEO John Denton told Lawyers Weekly that Corrs doesn’t see itself as “some kind of branch office of a large global law firm” and that it did not plan to get caught up in a firm-driven strategy where it’s “all about the firm, what the firm’s going to do, who the firm’s going to merge with and what benefits there will be for the partners”.

Remaining focused on clients is the top priority of Corrs and Addisons, according to their leaders.

Hartley believes the division in the market and the heavy focus on Asia will create opportunities for Addisons.

“Mergers are hugely distracting for a business, they take a lot of partnership hours and angst and time away from the coalface of doing work for good, loyal, existing clients. Law firms are very simple in that sense; you get on with the work and keep your clients happy,” says Hartley.

Hot spots

Getting on with the work is all well and good if that work is readily available.

While personal litigation, family law, medical negligence and contested wills continue to be strong sources of legal work at Turnbull Hill, Hanrahan says plaintiff personal injury work has become extremely competitive.

“Not only because there are a lot of firms that do that work, it’s also because the market has narrowed, the quality of personal injury work out there has narrowed because of the changes that the Carr government made 10-plus years ago,” says Hanrahan, adding that the Civil Liability Act 2002 has “a real sting in the tail to it” around the costs that a claimant can recover from an insurance company or other party.

“It just means claims are more risky for the clients and if the lawyer’s doing their job properly and giving advice around that risk then I’m certainly experiencing that many more claimants aren’t choosing to proceed with those claims.”

The workplace space is booming for large firms working on large enterprise agreements and providing OH&S advice on recent changes in the legislation but, for small firms like Hanrahan’s, work is, if anything, harder to come by.

“For the small-to-medium sector [workplace law] can often be a discretionary spend; it’s not an imperative to spend money on policies or employment agreements. Times are tough out there broadly and some of the small-to-medium organisations can often close up shop in terms of the discretionary spend,” says Hanrahan.

At the big end of town it’s all about E+R, global and large domestic financial institutions and tracking capital flows, be that for private equity or sovereign wealth funds.

“We provide strategic and complex advice across all sector areas including antitrust, litigation, M&A and tax, where more complex legal solutions are needed,” says Fuzi.

With $70 billion in infrastructure projects off the back of the resources boom, Fuzi says “it’s not earth-shatteringly surprising” the firm is focusing its efforts on that area.

“The other story that seems to be not as well documented is the great de-leveraging of the global financial system; the availability of capital is changing and fundamentally changing from five to six years ago,” says Fuzi, adding that, despite economic uncertainty circulating in the NSW market, A&O’s Perth and Sydney offices are on par financially.

The new normal

With so many consumer-facing business clients, Addisons offers a mixed skill set.

All businesses need to protect their intellectual property, so the firm has a strong IP practice along with competition and antitrust practices.

The firm advises clients on their day-to-day business; offers commercial litigation and commercial property advice; has a strong gambling practice and is active in M&A-style transactions.

“It’s been interesting to watch a business that’s so new to me. You might think being a small firm, with five of the 12 partners in M&A or the corporate space, how have we coped? But we’re on budget as a firm, we’re doing well financially and I think that’s because we have a mix of relationship-based clients and transactional clients,” says Hartley.

With two insolvency partners, the firm has to find a balance, in the business sense.

“I think those two areas are countercyclical and that’s how you make sure a firm as a business keeps going through good and bad times,” adds Hartley.

Addisons has taken on board what some economists and legal recruiters are predicting: the current economy being the “new normal” for some years ahead.

The firm has continued with marketing projects, including the relaunch of its website this year, which resulted in a significant jump in the number of graduate applications to the firm, a project Hartley believes other firms would have put on hold in a touch-and-go environment.

While firms consider their own marketing efforts, Hanrahan believes the NSW Law Society and regioinal NSW law societies could be doing more to promote the profession as a whole.

“A few years ago certified practicing accountants (CPAs) were doing advertisements on TV and they were warm and fuzzy and you felt like you wanted to ring up and arrange a meeting with your accountant. That is what we believe law societies should be doing; really trying to promote the profession to the wider community,” says Hanrahan.

Whether firms adopt what John Denton describes as a ‘firm-driven strategy’ or a ‘client-driven strategy’, or both, top and mid-tier lawyers will continue to carefully watch strategic firm movements while small law firms focus on keeping general and specialised practice ticking over in a tight and uncertain NSW market.