MALLESONS Stephen Jaques and Freehills are too big, and their sights are set too firmly on Asia, to consider a merger with another major Australian firm, says the legal market expert who last week predicted the rise of a mega firm.
Having predicted that the Australian legal profession is about to see the rise of one major law firm via a merger of two other big firms, George Beaton of Beaton Consulting has offered some insight into which firms are likely to take such a massive step.
Beaton said in the top 8, 9 or 10 law firms, Australia is likely to see two key trends in the next few years. The first is the globalisation trend, "and we saw that with DLA Phillips Fox, and Norton Rose and Deacons".
"Secondly, the weaker firms in that top 10 are at risk and are likely to be merged into the stronger firms. Currently the largest firms in this country are $500 million in round dollars. One of those firms will merge with a smaller firm, or $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 by The New Lawyer as to which top firms would make such a step, Beaton said Freehills and Mallesons have very distinct strategies, making it to challenging to merge.
"Mallesons has long recognised the spaces in Australia and so has been focusing on Asia, particularly China, and very successfully. It's now the eighth biggest firm in Hong Kong which in a short space of time is a really good achievement," he said.
"Freehills [and Mallesons] are independent stars and the way they are addressing their opportunities in Asia suggests they are more focused on that as a growth market because Asia is still growing at more than 10 per cent."
Beaton denied suggestions the Australian market is not big enough to hold one mega firm unlike anything seen in the local legal market before. Far from being a six cylinder firm working in a four cylinder market, said Beaton, "no firm has a single stage in its strategy and the top-tier mega firm might well be part of the globalisation play".
"So you have to think of the second and third horizon. When you play chess you don't just make your next move, you're thinking about the move after that and the move after that. 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."
A Mallesons spokesperson confirmed the firm "has no plans" to undertake a merger with another Australian firm. Mallesons last year came close to a merger with UK firm Clifford Chance, but "the financials" for an Australian merger "don't stack up", she said.
"There would be too many client conflict issues to resolve," the Mallesons spokesperson said.