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Law firms to face new threat from mega firm

Law firms to face new threat from mega firm

One mega firm to rule them all, and one major mid tier firm that will really be able to compete with the top tier, are very real threats to other firms in the Australian legal services industry.

ONE mega firm to rule them all, and one major mid tier firm that will really be able to compete with the top tier, are very real threats to other firms in the Australian legal services industry. 


"Crystal ball gazing" about the future of the Australian legal market, widely-respected law firm consultant George Beaton of Beaton Consulting, has told The New Lawyer that we are approaching a period of massive restructure. 


'In the top 8, 9 or 10 firms we will see two things," Beaton said. "First, the globalisation trend, and we saw that with DLA Phillips Fox and Norton Rose and Deacons. We will see two or three more alliances in two or three years, of other firms."


Beaton also predicts that weaker firms in that top 10 are at risk and are likely to be merged into the stronger firms. The fallout will see the rise of one mega firm, much larger than any law firm seen previously in Australia. 


"Currently the largest firms in this country are $500 million in round dollars. One of those firms will merge a smaller firm, of $300 or $400 million, into it. 


"There will be some fallout from that. There will be client conflict, there will be partners who say they don't want to go. But the new mega firm will be around $800 million. So now you'll have a true giant, like what we have seen in the accounting industry in this country," Beaton said. 


Pressed as to whether the mega firm will be akin to a six-cylinder engine driving in a four-cylinder market, Beaton said "no firm has a single stage in its strategy".


He said: "There is a double digit growth market to the north and anybody who wants to take on that market needs huge resources, superb leadership and deep pockets."


Beaton made similar predictions about the rise of a mega firm at the Law Council of Australia's Australian Legal Convention, held last week. 


But in an interview with The New Lawyer, Beaton also warned of a rise of a massive mid-tier firm.  


Despite some law firms' marketing claims to the contrary, while there has been some mid tier prospering in an environment of changed corporate client buying behaviours,  "we don't yet have a true challenger to the top tier coming out of the middle tier", said Beaton.


But, he says, there will be a challenger to the top tier. "We will see one, two or even three in the next couple of years. We will get an east coast, very strong and truly integrated, superior quality middle tier firm. There are a number of contenders for that. Middletons is one, Maddocks is another. They have the potential, and there are others, but there is nobody close to this goal yet." Corrs Chambers Westgarth, he said, is in the top 7, 8 or 9 already.




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