For the Australian legal profession, 2012 was a year where lots happened but nothing really changed.

Law firm tie-ups that were hinted at in 2011 morphed into full-blown merger madness this year.

The entities formerly known as Middletons, Mallesons Stephen Jaques, Freehills, Allens Arthur Robinson and Blake Dawson all linked up with global firms. 

To gauge a look at the relative strength of the negotiating position of the Australian firms when merging with overseas suitors, consider this:

The first and last firms on the above list have lost their identity completely, having in effect been taken over by a more powerful global firm.

Mallesons and Freehills play second fiddle on their respective new mastheads, while Allens formed an alliance with Linklaters only after dropping the Arthur Robinson from its moniker.

There has also been a plethora of local law firm mergers. HopgoodGanim, Advent Balance, TressCox Lawyers and Lavan Legal have all linked up with former domestic rivals.

These mergers have consolidated the tiered structure of the private practice legal market, leaving boutique practices as the most diverse group of law firms existing in the legal pyramid.

The white-hot level of competition in the Australian legal market has led to firms increasingly having to provide alternate fee arrangements.

A few firms, such as Marque Lawyers, have ditched the timesheet altogether, while others, such as People + Culture Strategies, are moving in that direction.

“[Law firms] know that I will pay them what is fair, but don’t rip me off, and make sure that your people are working efficiently,” said Kate Munnings, the chief risk and legal officer and company secretary at Transfield Services, when speaking to Lawyers Weekly in January.

Munnings is one of several corporate legal heads that have sought alternate fee arrangements for certain areas of work, something which Baker & McKenzie provides her company.

While general counsels have had some success with billing structures, 2012 has been a tough year for in-house lawyers. Hiring freezes, reduced budgets and a greater workload have taken a toll on the fastest-growing area of the Australian legal profession.

A Taylor Root survey of 300 in-house heads last month found that less than 25 per cent of companies surveyed recruited lawyers into their in-house team this year, compared to almost 50 per cent last year.

“This trend confirms that most legal teams and in-house lawyers are now asked to do more work with fewer resources available,” said the survey.

The lot of in-house lawyers in 2012 demonstrates that there is still much more work to be done on its most important issue: how we treat our members.

On the diversity front, progress is being made, with the female partner numbers at most mid-to-large law firms creeping up. King & Wood Mallesons is to be applauded for setting an “aspirational” female partnership target of 30 per cent by 2015. Currently, it sits at around 25 per cent.

At the Bar, it is still a poor indictment on the profession that less than 10 per cent of silks in Australia are female.

While diversity is starting to be tackled, albeit at a glacial pace, the profession has still not come to grips with the high rate of depression among lawyers.

“Unfortunately, the sentiment that ‘if the kitchen is too hot you need to get out’ is still alive and well in the profession and lawyers feel they need to go it alone,” said Marie Jepson in July when accepting the LitSupport Advocate Award at the 2012 Lawyers Weekly Law Awards.

In 2013, instead of constantly thinking about clients or chasing a buck, making the Bar, law firm or in-house environment a better place to work should be the number one priority.

CAN'T SHAKE THE BLUES

Awareness of mental health issues in the legal profession may have improved in 2012, but economic pressures are weighing lawyers down.

Lawyers are a high-achieving bunch. They are ambitious, competitive and hard working.

These traits are sought after by employers and prized by clients; being in possession of these characteristics can help propel you to the highest ranks of the legal profession. 

But being driven has its drawbacks, according to Guy Humble, managing partner of McCullough Robertson, who believes the desire to excel is behind the high incidence of depression in the law.

“Lawyers are traditionally high achievers and put a lot of pressure on themselves,” he says.

Already susceptible to depression, ambitious lawyers didn’t stand a chance in 2012, with market forces conspiring against them. Humble believes economic factors, including Europe’s financial troubles and pessimism in the Australian market, have piled an extra layer of stress on lawyers.

With less work around, the legal market has become over-lawyered and, consequently, highly competitive, he adds. “Recent macro-economic events have put pressure on us all ... and increased the level of competition.”

Marie Jepson, co-founder of the Tristan Jepson Memorial Foundation, agrees that traditional stressors have been intensified by the uncertain economic climate in 2012. “There is simply less work, which means less income, and this increases stress,” she says, pointing to cost-cutting by in-house teams, which has resulted in less work being outsourced to law firms. 

Personal tragedy inspired Jepson to establish the Foundation, which aims to raise awareness of mental health issues in the legal profession. Her son, a law student, was diagnosed with clinical depression and committed suicide at the age of 26.

Since then, Jepson has been on a crusade to discover why a high percentage of lawyers suffer from depression and is currently assisting a national study of the Australian legal profession that is being conducted by the University of New South Wales Law School.

In 2009, the Foundation was involved in a similar research project with the University of Sydney. Even though the Courting the Blues report dates back a few years, Jepson claims the findings still apply today. 

In the report, lawyers identified the burden of excessive work demands, a sense of ‘dog-eat-dog’, a lack of support, bullying and sexual harassment, a culture of ‘toughness’ and billable hours as some of the factors contributing to depression.

Bar none

These issues are also affecting the mental health of barristers, reveals the Victorian Bar’s newly-appointed chair, Fiona McLeod. She explains that the practise of law, especially at the Bar, is often “incredibly demanding”. 

“The workload is dynamic and the issues are sometimes confronting,” she explains. “People’s lives are affected and their liberty may be at stake.”

Often working in isolation, barristers may not have access to the same support structures as lawyers in firms, which prompted the Victorian Bar to develop its own health and well-being program. 

McLeod adds that, through her involvement with the program, she has witnessed a shift in barrister attitudes towards depression.

“There appears to be a greater realisation today that depression is an illness that can be addressed and managed,” she says, but also admits that barristers tend to be reluctant to reveal to colleagues their personal struggles.

Jepson is also heartened by growing awareness of mental health issues across all areas of the law. She points to the proliferation of employee assistance programs, which may include training human resources staff in mental health first aid, as a sign that firms are taking positive steps to tackle depression. 

McCullough Robertson’s employee assistance program, for example, involves a team of qualified psychologists who run group sessions on a variety of mental health topics. The firm’s intranet also hosts a range of online resources that deal with depression.

But the effectiveness of these initiatives will be limited as long as firm culture remains indifferent to depression, says Jepson.

“The reality remains that, despite their availability, services are not being accessed and they lack positive outcomes,” she says. “Real change requires a change in culture.”

Jepson fears firms and lawyers won’t prioritise depression initiatives because they do not contribute to career prospects or directly impact a firm’s bottom line. Nevertheless, she urges managing partners to set the tone of their firm’s culture by promoting mental health and recognising that, just as they have a responsibility to protect lawyers’ physical safety through OH&S programs, they must also be diligent in preserving the psychological well-being of their staff.

Jepson hopes that 2013 will see a continued push for the creation of standards for psychologically-safe workplaces within the legal profession.

“It is becoming increasingly apparent that there is a need for standards to provide the opportunity for firms to improve the general psychological well-being of lawyers,” she adds.

THE GREAT DIVIDE

The diversity spotlight shone starkly on the legal profession this year, exposing its holes for all to see. 

More than half of all law graduates in Australia are female; yet only around 20 per cent of partners in Australian law firms are women. NSW appointed a record number of female silks this year (12), but, still, less than 10 per cent of silks in Australia are female. 

“There’s obviously not one answer, otherwise we would have managed to change the numbers as they are today,” says Anne-Marie Allgrove, a partner at Baker & McKenzie.

A report released last week by the Victorian Equal Opportunity and Human Rights Commission (VEOHRC) gave many reasons for the great divide and, if the Victorian experience is anything to go by, it’s not surprising women are leaving the profession in droves.

Forty per cent of the female lawyers surveyed had experienced discrimination, and around one-in-four had been sexually harassed. Respondents said this treatment had mental, physical and career-related consequences, but most hadn’t spoken out about it.

The VEOHRC survey also revealed that four-in-10 respondents thought discrimination was part of a broader pattern of behaviour within the workplace.

Diversity policies in Australian law firms are gathering steam and will no doubt be pushed along by incoming reporting requirements of the Workplace Gender Equality Act, passed by Government last month. However, as Caroline Counsel, former president of the Law Institute of Victoria (LIV) points out, diversity policies can be simply window dressing if firms don’t “walk the talk”. 

“We need to ensure that we’re not just ticking boxes without delivering,” she told Lawyers Weekly recently.

While 79 per cent of women who applied for flexible work arrangements had their requests approved, many said employer attitudes then ranged from outright hostility to lack of support, while others felt devalued by work allocation that did not meet their capacity and experience.

“There can be an approval or an acquiesces of a flexible work arrangement without real support,” says Justin Dowd, president of the NSW Law Society, which last month released a resource with practical tips to help firms implement flexible work practices.

Give and take

The conversation around flexible work arrangements is also a two-way street, says Bronwyn Pott, CEO of Swaab Attorneys.

The difficulty in a smaller firm, says Pott, is that a lawyer’s ability to progress to partner is limited, to some degree, by their ability to build a practice. “If people don’t have the time or the inclination or the desire to take it up then it’s really hard for them to meet those criteria,” she says.

With five children, her youngest 18, the five times she took maternity leave in her career are now a vague memory; a “blip” in her career, she says.

 “It may be that for those five years you can’t have the lead in a matter because you’re not there all the time, or you can’t be the main client contact of a really needy client who needs 24/7 access, so you have to think; it’s not just about what the employer is prepared to give up,” she says, adding that the employer gives up profitability because part-time workers are usually more expensive.

“I worry when people start trumpeting [flexible work arrangements] as an entitlement; ‘I demand, I deserve, I need’. It’s not all about the employee, just like it’s not all about the firm.” 

Level playing field

Diversity quotas have been a hot topic this year, with Corrs becoming the first national law firm to launch an ASX-compliant diversity policy.

 “Targets can be token or they can be real and if you really work toward targets … they can be incredibly effective,” said head of diversity at Norton Rose, Sally Macindoe, when she received the Female Partner Award at the inaugural Women In Law Awards in October.

Pott says she’s conscious of the numbers at Swaab, but is not a fan of targets or quotas.

“In the last year I’ve been asked three times to either join a board or an association on the basis of ‘we need gender diversity’ and each time I said ‘my, that’s flattering’ …I’m just not sure [it] sends a particularly good message,” she says.

Allgrove believes targets are a good way of directing everyone to think about issues facing women in the law but says it’s ultimately a matter of others understanding the “incredible physical and emotional demands” of trying to maintain some form of home life with young children, as well as a busy practice.

Allgrove helped launch the BakerWomen initiative this year to provide networking and career-mentoring opportunities to women at the firm. 

Annabel Crabb, who spoke at the inaugural BakerWomen event in March, said fathers missing out on seeing their children is a silent tragedy because of the “utterly stupid idea that a male part-time employee is an anomaly”.

Allgrove shares the sentiment and says that, with generational change, a greater involvement of men at home will lead to better understanding and an even playing field.

“I thought that 10 years ago … I’m still hopeful,” she says.

A LITTLE DEFLATED

The legal recruitment sector this year has been a bit like that slowly deflating beach ball you often see lying idle on the sand. 

Initially buoyant and bouncing, gradually the air has seeped out of the legal recruitment market to the point where it sits limp and listless, uncertain whether anybody will pump life back into it. 

“There is definitely no need for concern, the demand is there,” Ryan Webster, head of legal recruitment at Robert Walters, told Lawyers Weekly in April.

Fast forward to last week and Elvira Naiman, managing director at Naiman Clarke, had this to say: “We have some of best lawyers that we’ve seen in a very long time finding it hard to get work at the moment.”

This juxtaposition highlights the peaks and troughs experienced by the sector in 2012. 

What started sturdy has ended worryingly wobbly.

“This year has definitely seen a tightening in the market,” says Peter Slattery, managing partner at Johnson Winter & Slattery.

“There are fewer opportunties for lawyers looking to move firms. There’s always going to be people that are highly sought after ... but at the moment, candidates have fewer options available to them.”

Even the usually stout demand for resources and mining lawyers has waned during the spring.

“I don’t know how they call it buoyant when only a few weeks ago we visited 20 clients in Perth and there was a grand total of two jobs,” says Naiman, in response to law firms painting the picture that everything is rosy in the resources capitals. 

Naiman, who says these are “interesting times” for legal recruitment in Australia, adds that significant government job cuts in early August, added to a slowdown in mining and resources projects, all but shut down the Brisbane legal recruitment market for a period. 

“In the first half of the year there was lots of activity in Brisbane, not so much lately. Perth is similar, firms have practically stopped recruiting on the back of their clients — the larger energy and resource companies — scaling back,” she says, adding that there are currently lawyers sitting around in Perth with no work.

Half full and half empty

This contrasts with the demand for lawyers during the early part of the year, when the market was relatively stable and increases in hiring that occurred in some sectors were offset by decreases in others.

In the first quarter of 2012 — a year that saw unprecedented movement among partners and lawyers — private practice experienced increases in demand for IP, IT, OHS, human resources and workplace lawyers, while the in-house sector experienced an increase in demand for mining, general commercial and IP lawyers, and a decrease in demand for property professionals.

At that stage, there was still a level of demand for lawyers, with growth mainly in the mining and resources sector.

As the year progressed, global brands, cross-border and international work, secondment prospects and strong remuneration continued to lure lawyers into new firms and organisations. 

Government job cuts and the resources slowdown drove a demand for employment and industrial relations lawyers, while redundancies and restructuring within large corporate environments meant these skills were very much in demand.

A two-speed recruitment market had emerged by the middle of the year, which continued to generate work for lawyers in the mining and resources industries, particularly in Perth and Queensland, while the slowdown of business activity on the eastern seaboard impacted on the demand for lawyers in Sydney and Melbourne. 

“Melbourne has been very flat, particularly property work,” says Naiman, “while in Sydney, over the last two or three months, we’ve seen a definite decline in activity.”

Johnson Winter & Slattery managing parnter Peter Slattery agrees. He says that the Sydney and Melbourne markets, particularly in the corporate space, have been “subdued” for most of the year. 

In saying that, certain areas were reasonably buoyant in Melbourne, including employment and workplace relations, litigation, personal injury and family law.

Although the demand for corporate and banking lawyers has been slower than most would want, strangely enough, commercial lawyers have been kept busy, according to Naiman. 

“There has been demand in the commercial space,” she says, adding that the second half of 2012 has seen far less litigation roles than usual.

“The reality is that the market has turned to such an extent that people can’t afford to protect their personal interests,” adds Naiman.

Despite a slowdown in M&A activity nationwide, and the continuing sluggishness of corporate and banking markets, firms still have specific recruitment requirements and seem intent on finding the right calibre of lawyer. 

“We’re still actively hiring,” says Slattery. “We still have specific requirements and if we find a candidate that fits the bill we’ll hire them.”

The in-house market has remained relatively steady in 2012, with the Perth and Brisbane markets experiencing growth as companies compete for specialist talent. Again, the Sydney and Melbourne in-house markets remained mostly flat, except in the energy & resources, infrastructure and IT sectors; in the latter case companies mostly recruited their first in-house lawyer or added to their team.

WHAT'S THE DEAL?

The Australian M&A market has had a terrible year, and there is no confidence things will turn around anytime soon.

Things are bad, but they have been worse.

That is the message from David Friedlander, the noted M&A and securities partner at King & Wood Mallesons, despite his description of the general level of business confidence at the moment as being “pretty rubbish”.

“In the early ’90s, it was definitely worse than now,” says Friedlander, as he recalls a period where privatisations and demutualisations came to the fore. “If you look across at all the investment banks and law firms, anyone that tells you that deal volumes are remotely good either happens to have one or two particular deals or they are telling porky pies.”

The stats support Friedlander’s analysis. 

According to Mergermarket, deal volume for the first three-quarters of 2012 in Australasia was down 43.9 per cent as compared to Q1 to Q3 last year.

This compares unfavourably to a global downturn of just less than 17.5 per cent.

While the number of transactions has slowed, deals teams in the large law firms have been busy shoring up client relationships so they are not forgotten when the purse strings are loosened once again.

“With transactions down, many clients have had a number of important issues to deal with this year,” says Friedlander. “Things like the two-strikes rule and the focus on executive remuneration generally have kept many M&A practitioners busy.”

Winners and losers

For the available work, the winners were not exclusively global law firms, contrary to popular opinion.

According to Mergermarket, Freehills topped the Australasian deals table by volume (the merger with Herbert Smith took effect on 1 October), with Gilbert + Tobin, King & Wood Mallesons, Allens and Clayton Utz rounding out the top five.

KWM were the big movers; moving up from 15th last year into the top three this year. 

Friedlander believes it is simplistic to attribute such a turnaround solely to the merger with King & Wood.

“You never know with snapshot comparisons of league tables, as we have been from first to 13th at different times and back again,” he says. “But I do think we will have more M&A work with this connection.”

What has also been apparent is that, for national law firms, the M&A groups in the resource-rich state capitals of Perth and Brisbane have been faring relatively better than their banking & finance brethren in Sydney and Melbourne.

“As a general statement across all firms I think that is correct,” says Perth-based Minter Ellison partner Adam Handley, who was a high-profile departure from Corrs Chambers Westgarth to Minters earlier this year. “We still have a two-speed economy where the resource states of Western Australia and Queensland are continuing to power ahead on the back of strong investor interest from north Asia and elsewhere.”

The Mergermarket analysis points to the energy & resources market as having an increased share of global M&A transactions, yet that sector has also suffered.

The global energy, mining and utilities sector suffered a 7.6 per cent drop in activity compared to January to September 2011. Chinese investment into Australia has also dipped. The Asialink Index published in October pointed to a 51 per cent drop in Chinese investment into Australia.

Is the resources boom over?

“The view we have within our China group is that, although there will still be some volatility in Chinese demand for base commodities, medium-to-long term demand is very strong,” says Handley, who is also the chairman of the energy & resources committee with the Australia China Business Council.

Things can only get better?

When gazing into their crystal balls, M&A lawyers should also grab a stiff drink.

While many transactions are being deferred or shelved, the Mergermarket analysis points to a 16.6 per cent increase in M&A activity in the Asia-Pacific region from July to September as compared to Q2 2012.

Friedlander says that growth is largely occurring in other practice areas.

“China is going strongly, and Hong Kong is also going well,” he says. “Areas for us like international arbitration, finance and property have been strong.

“It is just M&A that has been flat.”

With a flat M&A market, price competition also gets flatter. That means that deal teams from the big law firms will have to continue offering discounted rates in 2013 to get their slice of the pie.