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Mid tier finds the sweet spot
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Mid tier finds the sweet spot

WHILE TOP-TIER firms seem to have reached some sort of stalemate, with Minter Ellison calling a mature market in Australia and Mallesons Stephen Jaques expanding and merging internationally,…

WHILE TOP-TIER firms seem to have reached some sort of stalemate, with Minter Ellison calling a mature market in Australia and Mallesons Stephen Jaques expanding and merging internationally, mid-tier firms are making the most of the increasing market becoming available to them, a survey has revealed.

The greatest movement over the past year has been to mid-tier partnerships, according to Mahlab Recruitment’s Survey 2004. The spread of work available in the last 12 months means these firms have been busy and have been harnessing the opportunities offered by a busier market, said Mahlab NSW managing director Lisa Gazis in an interview with Lawyers Weekly.

Mid-tier firms have pushed forward in appointing new partners, acquiring practices, merging with other firms and opening interstate offices, the survey reveals.

This sits in stark contrast to the condition of top-tier firms generally, the survey suggests. There have been fewer appointments in the top tier, which has resulted in an increase in senior associates from such firms taking up opportunities in well performing mid-tier firms, where there is a likelihood of them being offered partnership.

For senior associates in top-tier firms, particularly those with a portable practice, there are opportunities associated with a move to another tier, the survey suggests.

Mid-tier firms do not necessarily need the same practice value threshold that the larger firms do. It is the ‘opportunity factor’ associated with the particular partner, or the introduction of a particular skill set or the compatibility of a client base with that of the firm that will be the impetus for a partner acquisition, the survey reveals.

When partners move from one law firm to another, remuneration is generally not the reason, according to Survey 2004. As the larger firms are increasingly being corporatised, and as partners become increasingly dissatisfied with the emerging culture of their firms, they want to reclaim control of their practices.

Transporting their practices to mid-tier firms is a way these partners can achieve their goals, as well as a work/life balance, the survey suggests.

“The key thing for partners is having control of their practices - this is a reason for many moves. They want to feel more a part of the firm,” Gazis said. “In smaller firms the pressures are not as great, as well,” she said.

Partnership income varies from firm to firm, the survey reveals. Some larger practices recorded a decline in partnership drawings over the past year, which reflects economic conditions as well as the transition of laterally hired partners into firms, which takes some time. Slower growth rates within firms and a decline in activity in particular practice areas also may have contributed to a decrease in drawings.

Melbourne and Adelaide firms that are opening up Sydney offices have made a number of partner acquisitions, including the large scale movement of teams, whole sections and occasionally entire firms. This is a result of larger national practices rationalising partners who are non-performing or who are restructuring their practice groups. Also, the decline of the three multidisciplinary practices has fuelled this change.

According to Gazis, Adelaide and Melbourne firms have set up in Sydney and “are ready and wanting to make investments and want partners who can develop a practice. These firms recognise that Sydney is the commercial centre and are ready to expand there”.

“Mid-tier firms are still seeing an opportunity for growth, and it’s easier for them to grab this opportunity,” Gazis said. “Because of their structure and lower overheads … they have a broader range of work so can develop their practices. They’ve got the opportunity to go up,” she said.

While top-tier firms are finding the market mature, with little room for growth, smaller firms are coming into the market. “They’re optimistic, they’ve done their research, they’re investing and buying growth,” Gazis said.

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