American industry trends to be felt in Australia

Peter Godfrey
by |
The industry trends detailed in an expansive American survey ranking the financial performance of firms will be mirrored in the Australian legal marketplace, an industry analyst and former firm COO has told Australasian Lawyer.

David Goener, consultant at Beaton Capital, believes that intensifying competition for a shrinking pool of work and shrinking firm size were particular trends in America that are likely to follow in Australia, if they weren't being felt here already in firms with American connections.  
 
“Australia certainly tends to follow these trends because things these days are always happening globally,” Goener said. 

“A number of local firms have reduced partner numbers already as they try their best to retain profitability.”

The AM Law 100 report which studied the top 100 American firms ranked according to their revenue, showed that firm growth at the pinnacle of the market remained strong whilst remaining flat elsewhere.

The nation's 100 top-grossing law firms managed to maintain 5% gross revenue growth to $US 77.4 billion in 2013 through cost-cutting measures.

Goener said that trends from the American market would already be present in Australia coming via the local outposts of American firms, and that fully domestic firms would feel the same market conditions later on.   

The report showed the following from 100 of America’s highest revenue earning firms:
  • 25 saw revenue per lawyer (RPL) fall
  • 46 shed lawyers
  • 32 had reduced profit-per-partner (PPP) levels
  • 50 firms reduced equity partner levels
Goener said that falling RPL, reducing lawyer numbers and declining partner profits all explained why firms were shedding their owners in an effort to maintain PPP levels – and thus retain their top-performing partners. 

Goener said this pattern was already familiar in some law firms in Australia. 

“There has been a reduction in demand for legal services globally.  Firms are trying to manage their costs at a time when revenue is flat and all firms are struggling hard to maintain the levels of revenue they had before,” Goener said. 

“When you put a ceiling on revenue you need to work out how to reduce costs.” 
  
 
The 5 largest American firms for gross revenue in 2013 were:

1.            DLA Piper - $US 4.481 billion
2.            Baker & McKenzie - $US 2.419 billion
3.            Latham & Watkins - $US 2.285 billion
4.            Skadden - $US 2.235 billion
5.            Kirkland & Ellis - $US 2.016 billion
 

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