Expansion through foreign mergers is becoming increasingly common - but there's more than one path to prosperity. As the managing partner of Australia's newest breakaway law firm, Joe DeRuvo tells Claire Chaffey why bigger isn't always better.

Driving the strategic decision was Adelaide managing partner Joe DeRuvo, and to many his decision might have seemed foolish, given the changing nature of Australia's legal market which has seen global firms begin to assert themselves on Aussie turf.

Given this apparent trend, you'd have to be mad to distance yourself from a strategy which is obviously a significant (and potentially hugely profitable) part of the future of a more globalised legal profession, right?

Not if you're Joe DeRuvo.

An amicable break-up

A South Australian boy through and through, DeRuvo started out as a lawyer at Adelaide firm Ross McCarthy & Nosworthy in 1983.

After setting aside dreams of becoming an engineer to try his hand at law, DeRuvo worked hard and spent many long hours in the office with his sights set firmly on partnership.

At the age of just 28, the toil paid off and he was appointed as the firm's youngest ever partner.

DeRuvo excelled in the commercial litigation and dispute resolution space, and when his firm, which was by now known as Ross McCarthy, merged with DLA Phillips Fox in 1992, DeRuvo was at the top of his game.

He was soon appointed managing partner of the Adelaide office and there he stayed, always looking out, he says, for the best interests of the Adelaide-based side of the business.

It is this responsibility which, around three years ago, led DeRuvo to conclude that the Adelaide office was simply not getting value for money in terms of how it was benefitting from so-called "national overheads".

"I was always of the view that [the Adelaide office] actually didn't get a real benefit out of [being part of a national firm]," says DeRuvo. "We got some of the national resources, but we weren't using them to the extent that I thought we [would]."

As such, a mutual decision was made that the Adelaide office would separate financially from the rest of the firm, and this occurred on 1 September 2009.

"[The financial separation] arose because of a difference in strategic direction between where the firm was heading and where I thought the Adelaide office needed to go," he says.

"Obviously, DLA Phillips Fox was looking at a much closer link with DLA Piper and they were looking at putting most of their resources in the Asia-Pacific area. While that is all very good, it meant that we didn't have the resources to put into the various areas all around Australia. It meant that Adelaide wasn't getting the sort of resources I thought it needed in order to develop the practice."

According to DeRuvo, the financial divorce was a step in the right direction and meant that the Adelaide office was finally able to achieve the goals it had set for itself, which included advancing internal staff and strengthening the practice through external hires - something which the national financial alliance had made difficult.

"We had difficulty in recruiting partners externally because of the KPIs they needed to meet in a national organisation and the fact that we were paying a fair bit of money for ... national overheads," he says.

"Once we separated financially, we had quite a large pool of money to play with. That gave us the ability to really change our KPIs for partners and ... look at investing in our juniors. We had a lot of good senior associates that were knocking on the door and should have been made partner, but we were having some difficulty getting them across the line because of the national KPIs."

And it wasn't long before this newfound financial freedom afforded DeRuvo the opportunity to strengthen the office's tax and M&A capabilities.

"We started talking to Rankine Tucker and they were specialists in tax and commercial ... We spent some time talking to them about the strategic direction we wanted to take the firm and they were very excited about that."

On 1 September 2010, after having separated fully from DLA Phillips Fox, the two firms joined together to form what is now Fox Tucker, and the new firm found itself in a favourable position.

"[The merger] resulted in us achieving our strategic plan, which we thought was a three to five year plan, in eight months," says DeRuvo.

A happy second marriage

In its short life, Fox Tucker has managed to make impressive headway, including being named Australia's best firm in the Roll On Friday Australian Law Firm of the Year survey.

DeRuvo is proud of the tag, which he says is testament to the fact that Fox Tucker stands apart as a law firm.

"Given that we are only six months old, bringing two groups together and having a new firm, it is really feedback from the staff and other firms as to what they think we have created," he says.

"It's good to get that positive feedback because you feel like you are doing the right thing."

The key to achieving such great feedback, says DeRuvo, is to ensure that when change is on the horizon, all affected stakeholders are involved in the process.

"It was very important to us to make sure that the staff came on a journey with us. If you are going to engage in any real change, as we did, you can fall into the trap of driving it from the top and just having the partners and the managing group drive the whole process," he says.

"I spent a lot of time with various members of staff just talking through the changes. At the end of the day, one of the main reasons we [took this path] was because we thought it would benefit the staff as a whole ... Bringing them on the journey with us was the secret to it all, and when it got to the point where it all actually happened, it was seamless."

Happily ever after

DeRuvo's passion for the firm is obvious, as is his view that being small is certainly no inhibitor to being the best. This is particularly clear when he expresses his views about the effect, or lack thereof, the arrival of global firms will have on the Australian legal market.

"I don't think international firms [are] going to make a lot of difference," he says.

"At the end of the day, they are not actually bringing in new talent. What they are doing is moving the chairs. You are getting partners who were previously at [one firm] moving to [another]. Really, what does that do? They are just operating under a different name, working for the same clients."

DeRuvo does concede, however, that things are changing.

"I think there is going to be a continuing shift to either larger firms or boutique firms, and there [will] have to be more focus on profitability from the point of view of managing overheads," he says.

"A lot of the problems ... the larger firms have ... is that the management of overheads is always ahead of the curve. There are departments and systems being set-up for what is anticipated, and production is never there to meet what is put in place. Legal firms are going to have to get a whole lot smarter about how they manage themselves."

Being a smart manager is something DeRuvo prides himself on, though he says that being a great leader and a great lawyer is about much more than technical brilliance.

"A lawyer is, to me, someone who has a very good ability to connect with other people. You can be the brightest spark and the best technical lawyer in the world, but if you don't have any people skills you really won't get very far," he says.