Australia's top six put clear space between rivals in profitability race
7 October 2002
Australia's top six firms are pulling away from their competitors, according to the latest findings by Australian business magazine BRW.
The research, released last week, reveals law firm performance for the top 20 firms in the last financial year, including their estimated average profitability.
The top 20 Australian firms together turn over A$3.171bn (£1.1bn), and for the first time an Australian law firm has broken the A$400m (£138.8m) barrier. Mallesons Stephen Jaques, which heads the BRW table for the fourth year in a row, recorded an 11 per cent turnover increase. Mallesons was the first firm to pass the A$300m (£104.1m) mark back in 1999-2000, and according to BRW, it ranks the highest in revenue per equity partner among the top six, at A$2.3m (£798,000).
Minter Ellison also had a solid year, coming second in the revenue table, although it posted a lower rate of growth (6.9 per cent) than its main rivals. Estimated profitability is lower than its other rivals in the big four (Mallesons, Freehills and Allens Arthur Robinson (AAR)), with average profits per equity partner thought to be between A$500,000 (£173,500) and A$572,000 (£198,500). This is partly explained by its high number of equity partners which at 262 is by far the highest number in the top group.
However, Minter Ellison also labours under higher costs than many of its competitors. It has offices in Adelaide, Perth and New Zealand, although each is a separate partnership. Stripping those entities out of the figures would give the Sydney and Melbourne offices an estimated average profits per equity partner of A$700,000 (£243,000).
For the other two firms in the big four - Mallesons and AAR - much of the year was dominated by overseas expansion.
In June, Mallesons relocated four partners to Hong Kong to add to its seven-partner team, making it easily the largest Austr-alian firm in Hong Kong. It was a clear bid for Asian work to rival US and UK firms in the region. It is an ambitious growth strategy - Mallesons aims to have 20 partners based in Hong Kong within a few years.
AAR, meanwhile, became Slaughter and May's Aus-tralian best friend a year ago (The Lawyer, 17 September 2001). It now has 40 lawyers in Asia, including eight partners, although the overseas revenue remains low, at around 10 per cent.
Of the chasing pack, Deacons has sustained a strong performance in recent times, with revenue almost doubling over the last three years, putting it comfortably within the top 10. That said, average profits per equity partner, estimated at between A$415,000 (£144,000) and A$490,000 (£170,000), is the lowest in the top 10. But Deacons has ambitious plans, according to BRW: turnover is projected to go up by 23 per cent, from A$134m (£46.5m) to A$165m (£57.3m).
Baker & McKenzie also posted sound figures. Revenue was A$107.5m (£37.3m), which meant that it just squeaked into the top 10, but revenue per equity partner was the highest in the top 20 at A$2.5m (£867,500).
Smaller firms turned in a strong performance, particularly in the revenue per equity partner tables. The highest revenue per equity partner of A$3.6m (£1.2m) was scored by Sparke Helmore, followed by Gilbert + Tobin at A$3m (£1m), while Arnold Bloch Leibler posted an average revenue per equity partner figure of A$2m (£694,000).
BRW estimated the two firms' average profits per equity partner as the highest in Australia. Sparke Helmore's equity partners are thought to average up to A$1.3m (£451,000) each, with Gilbert + Tobin's average figure thought to be A$1.2m (£416,000). However, an examination of both firms' partner numbers provides a clue: both have kept a tight grip on the equity. Gilbert + Tobin has 26 equity partners, while Sparke Helmore has 15, which is the lowest number of equity partners in the top 20.
The BRW top 20 bears witness to some turmoil within the Australian legal market last year. Out goes Andersen Legal, which was nineteenth in revenue last time round and which disbanded in the course of the year; and in comes Dibbs Barker Gosling - born of the 2001 merger of Barker Gosling and Dibbs Crowther & Osbourne - with revenues of A$43m (£19.9m).
Middleton Moore & Bevins, which was thirteenth by revenue last year, with a turnover of A$66.5m (£23.1m), has since split into two firms: Middletons in Melbourne and Acuiti Legal in Sydney. Acuiti, which is pursuing an industry-focus model, was the smaller of the two, and does not make it into the table. Middletons, which is following a more traditional full-service model, retained a place in the top 20, but now lies at eighteenth, with a turnover of A$40m (£13.9m).
Just outside the top 20 - but potentially new inclusions for next year - are two other firms: Tress Cocks & Maddox grossed A$32.5m (£11.3m), while Melbourne-based Maddocks, which has made a push into Sydney, turned over A$28m (£9.7m).