In the Olympic year, the Australian economy is thriving and corporate activity is at an all time high. As a consequence, Australian lawyers are in great demand. However, not all Australian firms are riding this wave. Whereas in the past a large number of firms shared the legal work, a small number of firms have now emerged as the dominant players in the Australian legal market (the equivalent of London's magic circle) and the gap between these firms and the second-tier firms is widening.
Australia now boasts six of the 40 largest firms in the world. The top tier of firms currently comprises Allens Arthur Robinson, Blake Dawson Waldron, Clayton Utz, Freehill Hollingdale & Page, Mallesons Stephen Jaques and Minter Ellison.
The increasing domination of the Australian legal market by these first-tier firms can be attributed to a range of factors.
For example, each of these firms has offices across Australia which enables them to service major clients in all parts of the very large country. These firms also have international offices and affiliations and therefore a broad referral base. In addition, they have the critical mass to resource large and lengthy mergers and acquisitions and other major corporate transactions.
An increasing number of major Australian companies (recent examples include AMP, Westpac Bank and National Australia Bank) have significantly reduced the size of their legal panels at the expense of the second-tier firms.
But the Australian legal market is fluid and extremely competitive and the composition of this group of firms could well change within the next few years. After a slow and difficult start, the multidisciplinary partnerships (MDPs) are starting to enjoy increasing success in Australia.
Although not yet threatening the top-tier firms for premium work, the country's MDPs have the benefit of possessing an international referral network and the financial backing to acquire a high calibre talent base. It is possible that one or two of them will emerge as a top-tier firm within the next five years.
Although the Australian economy is thriving, the domestic market is not large enough to support additional top-tier firms.
As a result, the emergence of the MDPs is likely to be at the expense of one or more existing top-tier firms.
Part of a solution to this problem may be for top-tier firms to look outside Australia for work. Globalisation has caused the number of multinational transactions with an Australian aspect to increase and those Australian firms which have positioned themselves to be close to the sources of global transactions are benefiting.
This was made evident recently when Minter Ellison, which has the largest London office of the Australian firms, was ranked thirteenth in the world for European M&A work in the Thomson Financial Services Survey.
Australian firms are also increasingly being asked to project manage the Asia-Pacific elements of multi-jurisdictional transactions for European and US clients which view Australian lawyers as equally capable but less expensive than the leading London and New York firms.
Despite the success of the top Australian firms both domestically and abroad, the brain drain of young Australian lawyers to Europe and the US is continuing and is likely to increase with the current transatlantic wage war.
Although Australian lawyers are not as highly remunerated as their northern hemisphere counterparts, the lure of high quality work with a more balanced lifestyle has resulted in the one-way flow being somewhat redressed, with an increasing number of UK lawyers seeking work in Australia.
As regulations have been relaxed to make it much easier for UK lawyers to re-qualify in Australia, this trend could well continue.
Robert Hanley is Minter Ellison's resident London partner.