ONLY BY cutting down on support staff, expensive atriums and large libraries is it possible for UK-based dispute resolution law firm Kennedys to set up its new Sydney office in July this year.
While some argue that the Australian legal services market is too tight to attract new players, Kennedys’ plans to launch an office here appear to challenge this view. But according to Ric Martin, Kennedys’ chief executive, the move is only possible due to considerable infrastructure cuts.
Arguing that it is reasonable to perceive the market is too tight to attract new international players, Martin told Lawyers Weekly that it will be interesting to see how large firms like DLA Piper — which The Australian Financial Review reported last week has confirmed it is in formal alliance talks with Phillips Fox — maintain their profitability.
The “DLA march is taking over the whole world”, Martin joked. He questioned, however, whether there was scope for many more international firms to set up within the Australian market. “I think it is just coincidence that it is happening at once. I am not sure there is some magic light shining in London and everyone has said, ‘Oh, what we have to do is go to Australia’.
“For us, it is an expansion from needing to be near our clients. And we are going to all the places where we have significant clients. In Dubai, it’s insurance and construction and in Madrid it is insurance,” he said.
Insurance clients do not expect the same sort of infrastructure as other commercial clients may, he said, and as a result the setting up of the Sydney office will be more easily achievable.
“The clients don’t expect the huge atriums. Some clients will walk into the atriums [of large firms] and say, ‘This is the sort of the firm that I want to be with — they are big and serious, like me’. It is a little bit like, as used to be the case, you buy IBM because no one will criticise you for buying IBM.
“But our insurance clients walk into an atrium like that and think, ‘How much is this costing me?’” Martin said. “This is a different market entirely and I’m not saying anything critical of the law firms that have that. You have to cut your cloth according to what your clients want. Those big commercial practices have large teams of support lawyers and large libraries and huge marketing departments. We don’t need that,” he said.
Some firms are analysing whether they can run insurance as well as their commercial practice, because the rates that insurance work attracts are not as high, he said. This phenomenon is visible in the UK, he adds. Kennedys manages by having lower costs, and by charging lower rates than some larger firms.
The firm relies instead on its international network, which is important to it because its clients, “the big global players in the insurance market”, are international. “We feel it is very important to be where our clients are, and our clients very kindly say that they want us where they are.”
“Plus, the fact that we are in these places gives us credibility with these big global insurers,” he said.
Kennedys anticipates it will obtain new clients in the Australian market, thanks to the “interesting mix” of insurance lawyers that it has poached from Minter Ellison. Adrian Howie, Mark Doepel, Patrick George and Tony O’Reilly will join the new Kennedys office when it opens on 1 July.
The firm expects to have between 16 and 20 lawyers when it opens. Martin said he had met with a number of people from firms — including Minter Ellison. “When we have premises and a date, we can start making offers to other people,” he said. Martin anticipates that by its third year, the Sydney office should have about 35 or 40 lawyers, depending on the work that comes in.
Kennedys has six UK offices, including three in London. As well, it has offices and associates in Abu Dhabi, Auckland, Delhi, Dublin, Hong Kong, Karachi, Mumbai, Paris and Warsaw. It recently opened a Madrid office and is about to open an office in Dubai.
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