In Adelaide, law firms exist in an environment where word of mouth is sacred, competition is fierce and the future holds the promise of renewed prosperity. Claire Chaffey reports

Australia’s second-smallest state capital is an intriguing place.

With a population of around one million, it is more akin to a country town than a major city, with an economy that has been reluctant to pick up the pace and retain the corporate giants.

For the 3,700-odd lawyers that practise there, it is remarkably different to its eastern seaboard counterparts.

Peppered with top-quality boutique firms and historically unkind to national law firms, Adelaide’s legal services market is one in which success is hard-fought and longevity boils down to one crucial factor: relationships.

Friends in high places
Fox Tucker managing partner Joe DeRuvo knows all too well the importance of relationships to the success of law firms in Adelaide.

Having split from DLA Philips Fox (now DLA Piper) in 2010, DeRuvo has gone from being the head of a state branch of a national firm to being the head of a well-respected boutique firm in a market flooded with like entities.

“The Adelaide market has always been a pretty tough market. It is fairly parochial and is very much relationship driven,” he says. “It’s very hard for new players to break into the market by just coming and setting up.” 

John Kain, the managing partner of corporate and commercial boutique Kain C+C, agrees that sinking or swimming depends on how well you treat your client.\

“It is very much about relationships, and that is a feature of a pretty thin institutional presence here,” he says. “Absent that which would otherwise drive more of a panel-type arrangement, it is very much about your individual relationships.”

According to DeRuvo, the nature of Adelaide’s legal services market changed about 20 years ago, when many of the big corporate clients turned their backs on what they saw as slow economic growth and headed for the greener pastures of the eastern
seaboard. 

This tightening of the market meant firms had to ramp up their efforts to snare those
corporate clients who did stay behind and, in some cases, look further afield.

“It has caused the Adelaide firms to be far more aggressive in approaching work,” he says. “For example, probably half of my work would come from clients who are interstate.

Firms are more aggressive in the way they go about marketing, who their targets are and
who their clients are, and are not shy about stepping into other markets and trying to get work in
other markets.”

For Kelly & Co chief executive officer Stuart Price, competition is something on which the firm is thriving, and an aggressive approach to landing clients has resulted in record growth over the last
few years.

“It is competitive. We have a combination of local, national and international firms here. Like every
legal market, the legal spend has decreased, which is reflective of the economic challenges that are occurring at present,” he says.

“We are going out to our clients and asking what we can do better and what other people are doing better than us. We are not resting on our laurels. We are hungry, and we are hungry for success.”

Branching out
Relative to other state capitals, the success of national firms in Adelaide has been limited. 

Minter Ellison is one firm which has managed to maintain an Adelaide office, as has Blake Dawson, which, on 1 March morphed into a global firm via its merger with UK firm Ashurst.

The absence of other top-tier firms in the state is perhaps testament to many things: a slow growth economy, an over-lawyered market and a perceived lack of serious commercial viability.

Q&A with Ralph Bonig, president of the South Australian Law Society

Q: How many lawyers are practising in South Australia?
A: 3,780. This does not include in-house and government lawyers.

Q: What are the primary challenges facing SA lawyers at the moment?
A:  Those firms that have continued to have offices in our regional areas do have a problem attracting graduates who will stay long term.

That raises with it the issue of succession planning. If they can’t keep the graduates in their rural areas, the viability of the offices becomes an issue.

There is a lot of work being done to educate graduates and show them the opportunities of country practice. There is also some work being done to try and get mid-level to senior practitioners to think about relocating to rural or remote areas to fill the void.

It is an issue that the LCA has sought to address, but different states are different. If you have a look at rural and remote communities in Victoria, NSW or even Queensland, they have very significant regional areas that are close together. Our regional areas are a long way apart.

It is a massive area, so we
don’t have a concentration of regional centres and it becomes a greater problem. We are probably a bit similar to Western Australia, but there is an attraction in WA that we don’t have: their mining and resources sector is far more advanced than ours, and there are significant practices outside of Perth.

Although it is a national problem, solutions do need to be tailored at a local level.

Q&A with Erin Power, senior consultant, Wilson Rice

Q: Are there many opportunities in the Adelaide market at the moment?
A: I see the greatest movement at the 3 - 5 year PAE level in corporate and commercial. There is also a lots of movement criminal, family and personal injury areas at the same level, typically within smaller practices.

It is a challenge for firms to find gun lawyers at this level, and senior specialists are always difficult to attract and retain. Firms are always open to candidates who have their own client base.

Q: South Australia seems to have quite an insulated market. Would you agree? Why do you think that is?
A: I would agree that Adelaide is insular. After recruiting across the nation, I have noticed that each state has a unique employment market. Adelaide has a smaller scope which is highly driven by relationships and networks.

Doing business in Adelaide is very challenging due to high levels of competition focused on few key growing industries.

However, South Australia is about to undergo significant growth in the mining & resources sectors in
respect to the Olympic Dam expansion which will have a domino effect on many industries which will fuel growth and open Adelaide to the world.

Q: Do you get much interest from interstate candidates looking to move to SA?
A: Our growing economy, cheaper real-estate market, low traffic and vibrant lifestyle have caught the eye of an increasing level of candidates wanting to build a lifestyle here in Adelaide. SA still has a fair way to travel to be one of the leading attractions for talented practitioners, but I believe as we continue to win global contracts and provide local and national firms work on high-profile matters, we will develop into a more widely recognised employment market.

While national firms have been reluctant to dip their toe into Adelaide’s waters, or have tried and failed, Adelaide firms aren’t afraid to take their wares interstate and abroad – and they’re finding they can provide an attractive proposition. 

“We have found that with the cost of living and the relativity of charge-out rates, we have the skills and capabilities with a competitive advantage at the pricing level over our peers interstate,” says Price.

“Equally, we have had the benefit of a number of people returning to Adelaide, which often happens when people start a family.

They return to Adelaide with the experience of the top-tier law firms in places like London, Sydney and Melbourne.” DeRuvo, too, believes Adelaide firms have a distinct advantage in the broader legal market.

“When we are dealing with interstate or overseas clients, they are pleasantly surprised at the rates they are charged for partners and senior associates,” he says. “It is considerably cheaper than what is being charged in the eastern states.

In some situations, there are Adelaide firms that are about 40 per cent cheaper in relation to partner rates in Sydney or Melbourne.”

Small town blues
Despite a willingness to venture out of their home state to find work, when it comes to the impact global firms are having on the Adelaide legal services market – and whether there is room for global firms in the state capital – local firms are reluctant to see a future in which they are prevalent. 

Kain, for one, cannot see how global firms could thrive in an environment in which national firms have struggled. 

“Interestingly, Adelaide has been a bit of a black hole for national firms. If they can’t make it work here, with their cost structures and infrastructure and whatever else might be the impediment, I find it difficult to see how, at least in the short term, any global firms would have a direct impact here,” he says.

DeRuvo agrees. “In the past, there have been instances of national firms coming into the market, but it is very difficult for them to come and set up here. I just haven’t seen it work, ever, and I think the same would apply to a global firm,” he says. 

“I can’t see a global firm deciding they want to set up in Australia and pick Adelaide as its base. If there was going to be any entry, it would be off the back of moving into Sydney and Melbourne and deciding there were enough opportunities in the South Australian mining sector and the associate
sectors to decide it’s worth their while to have an office here.” 

Price believes the arrival of global firms is more of an inevitability than anything else, and will likely be triggered by an influx of international corporate clients seeking out what Australia is known for: energy and resources.

“Australia has a very clear economic path, and it’s underpinned by the mining and resources sector,” he says.

“Undoubtedly, there is room for global firms here. With the increase in mining and resources and the number of large-scale projects that will be undertaken in the next few years, I would expect to see new national and international clients emerge.

“Given the alignment of international firms with those international clients, I think it’s natural for those clients to expect representation. I don’t think the fly-in\fly-out model sits well with clients. They do look for a commitment to the state and a commitment to that client.” 

Hole in the ground If it is indeed mining and resources that will determine the course of Adelaide’s legal services markets, it would appear that global firms may just be starting to take notice.

In October last year, the Federal Government approved the expansion of the Olympic Dam project, which will make it the world’s largest open-cut mine from which thousands of tons of copper, uranium oxide, gold and silver are pulled each year. 

BHP Billiton, which owns the mine, hastouted the project as one which will improve living standards via an increase in employment and higher levels of household income and consumption.

Former state treasurer Kevin Foley said the state would enjoy direct expenditure by BHP Billiton of up to $3 billion each year for the next 15 years, as well as $350 million a year in royalties paid to the state treasury.

By all accounts, it’s a massive project, so is South Australia shaping up to be the next Western Australia or Queensland, with all the consequences that would hold for law firms and the legalservices market? 

Price advises caution in making such statements. “I would be the first to say that we don’t want to get ahead of ourselves and say that we are going to be like WA or Queensland,” he says. “I think we have to take small steps.

It is a long process. But the advantage that South Australia has is that other states have gone through the boom, and we, as a state, should be looking at where funds can be invested and where the needs of that industry sector are.”

Kain, though, is far more optimistic and is preparing for what he sees as an inevitable boost to the state economy through significant expansion in miningrelated projects. 

“Energy and resources is not a boom area now, but I think it will be,” he says. “It is underestimated, I think, because it has been simplified too much to the Olympic Dam project.

That is a very significant project in any state economy, but it is … only a part of the whole mining and infrastructure story. For every dollar spent on the Olympic Dam there is another dollar in the pipeline for infrastructure-related work. So it is significant, but it’s not the whole story.

“I think that in the next 12 months we will start to see meaningful impacts on the economy, and within five years it will have significant impacts which will flow on into the legal industry.” 

And for Kain, this means developing strategies to deal with what, in the future, may be a very different legal services market in Adelaide. 

“We have done a lot of strategic work around where the state economy is, where it’s going, what
that means broadly for businesses in the state, and how that impacts on us,” he says.

“There are some economic pressures in the market and, as we did a couple of years ago when the same situation occurred, we would be looking at key strategic lateral hires …

We will be closely looking at that over the next 12 months to see if any opportunities present themselves. We are going to build for what we feel will be a pretty exciting next decade.”