The lull in legal services at the top end of town has highlighted the emerging force of boutique firms, and the talent war is on for the boutiques to secure some top talent.

SPREADING THEIR WINGS: Boutique firms are making significant in-roads into areas previously dominated by large law

Boutique firms have firmly cemented their place in the Australian law firm market. Having grown in both number and diversity of practice areas, boutique firms are snaring healthy amounts of work which have traditionally been the preserve of larger law firms.

A recent Australian Corporate Lawyers Association survey of 125 in-house lawyers across Australia and New Zealand who spend in excess of $1 billion in legal fees found that 40 per cent expected to give more work to specialists and boutique firms by 2010.

The representatives from the four boutique law firms Lawyers Weekly spoke to indicated that the global financial crisis has potentially accelerated this trend. As legal spend has been cut and clients have been forced to do more with less, boutique firms are a potentially more cost-effective option compared to their mid-tier and top-tier peers.

Business and the GFC

Swaab Attorneys, a boutique firm based in the Sydney CBD which specialises in corporate structuring and commercial transactions, intellectual property, franchise law and employment, has bucked the trend that most large law firms were on the pointy end of over the past 12 months.

"While the larger firms were forced to offer their staff redundancies, at Swaab the number of fee earners has increased over the last year," says Paula Gilmour, business development consultant for Swaab Attorneys.

The biggest impact of the GFC on the legal sector has been that clients are shopping around, Gilmour observes, saying even large corporations have become a lot more flexible and open-minded about the firms they could or would use for legal services.

"Naturally, we are realistic about our capacity, but it has to be said that outside the really huge deals, there is a lot of legal work which is flowing on to law firms our size," she explains.

“We can’t pay the big bucks of the large firms, but we don’t believe in giving our staff a budgetary target” Brian Williamson, managing director, Workplace Law

Workplace Law, a boutique firm which specialises in employment, industrial and workplace relations law with offices in Sydney, Brisbane and the Gold Coast, has also fared well despite the GFC. "The market for us has been quite buoyant and we're flat out at the moment," says Brian Williamson, the firm's managing director. "We've had no clients go broke, and our 60-day and 90-day debtors are within our benchmarks, so the firm has fared fairly well."

Similarly, Robyn Ferguson, a partner at Perth-based boutique firm Q Legal, which specialises in corporate and commercial work, says the firm has done reasonably well through the downturn. While November 2008 through February/March 2009 was quieter, Ferguson says that litigation and dispute resolution started to pick up as the adverse effects of the GFC became more apparent within clients' businesses.

"We hired a new senior solicitor in litigation in April 2009 and our commercial solicitors were kept busy with a steady number of sales and acquisitions and also contractual dispute queries and advice," she says.

Russell Keddie, founding partner of Keddies Lawyers, which has specialised in compensation law since 1979 and now employs more than 120 staff in six offices up and down the east coast of Australia, says that the GFC didn't impact on Keddies as dramatically as some other firms.

“While the larger firms were forced to offer their staff redundancies, at Swaab the number of fee earners has increased over the last year” Paula Gilmour, business development consultant for Swaab Attorneys

He says the personal injury area that the firm specialises in is quite different to most other sections of the legal profession, because the sad fact is that people do still have accidents and suffer injury regardless of the state of the economy. "For that reason the market has remained reasonably strong," he asserts.

"Having said that though, Keddies has been impacted by the global downturn because we've seen many of the other law firms who would normally refer their personal injury clients to us, instead deciding to hold on to a lot of that work for themselves because their own speciality areas of, say, conveyancing or commercial law have slowed so dramatically."

Staffing the boutique practice

While boutique law firms can't offer the big salaries that other firms in the mid-to-top-tier can, lawyers in boutique firms benefit in a number of other ways. Mahlab's 2009 private practice salary survey identified a trend towards the "maverick" boutique firm, "set up by a group of individuals seeking greater autonomy, lower overheads and an escape from the politics and fee expectations of the majors".

“We are confident that we can attract the right candidate as we have noticed an increased sentiment by both young and more senior lawyers to join boutique firms” Robyn Ferguson, partner at Q Legal

The survey found that a number of such firms have proved quite successful and are very attractive options for partners with good transportable practices.

Williamson, who left Gadens' partnership ranks almost seven years ago to start up Workplace Law, believes there are a number of benefits to working in a boutique firm.

"We can't pay the big bucks of the large firms, but we don't believe in giving our staff a budgetary target. It's up to my business partner and I to keep everyone busy and allocate the work," he says.

"This means there is less stress on staff in terms of meeting budgets, and we have quite a flexible working arrangement for our staff. When times are not so busy, they can go early. If times are busy we expect them to stay, but we don't want people to work after 7.30pm."

Williamson says there has been an increase in applications to join the firm over past months, and the firm is currently looking to hire a junior/senior associate to assist with the firm's growing workload.

Q Legal's Ferguson says the firm's staffing levels have remained broadly consistent through the GFC, with a new senior solicitor joining in April 2009 to assist with increased litigation work.

"At this stage we plan to remain at these same levels in the near term. However, if the need to hire arises we are confident that we can attract the right candidate as we have noticed an increased sentiment by both young and more senior lawyers to join boutique firms," she explains.

“Law firms who would normally refer their personal injury clients to us, [are] instead deciding to hold on to a lot of that work for themselves because their own speciality areas of have slowed so dramatically” Russell Keddie, founding partner, Keddies Lawyers

Boutique firms can offer young lawyers the opportunity to work on high level and challenging legal matters with guidance and mentoring from experienced senior lawyers, she says, while also providing an increased level of autonomy, responsibility and client access that young lawyers in large firms may not be provided with.

Keddie says his firm has always had a steady stream of applications from young lawyers keen to join, but confesses "it is hard to understand exactly what is driving that". The current economic climate hasn't dramatically changed the number of approaches the firm has been receiving, and Keddie believes one of the things that appeals to lawyers joining the firm is the opportunity to work more autonomously in addition to knowing that their hard work and expertise will be noticed and rewarded, whereas those achievements may simply be lost in larger organisations where there are hundreds of aspiring young lawyers, he explains.

Swaab is currently employing partners and younger lawyers in a number of practice areas, and Gilmour says this process will continue next year. "The freeze on new hires in the larger firms has definitely left the market more open," she observes.

"As they come back on line, no doubt the recruitment market will tighten up, but we are confident that we will continue to attract talented lawyers because of our 'great place to work' awards, our commitment to work/life balance and the great culture we have created."

Gilmour notes that it's an unfortunate fact that within a number of professions - not just the law - that if you're a rainmaker who brings in the clients and the fees, you can get away with being egotistical or abrasive. "We make it a priority to deal with the few instances where we encounter behaviour which isn't up to scratch. This has gone a long way towards creating the great atmosphere we have at Swaab," she says.

- Craig Donaldson

Related article >> The outlook for boutique firms in 2010