Industry analysis carried out by IBISWorld and released last month found that Freehills had 2.7 per cent of the market share in 2005—06 based on revenue from Australian operations, ahead of Mallesons on 2.6 per cent — despite Mallesons having generated the most fee income among all Australian law firms for the same period.
Mallesons topped all firms in the revenue stakes, with $475 million in revenue for the period 2005—06, up 6.7 per cent on the previous year. Freehills followed, generating total revenue of $465 million in 2005—06, up 11.3 per cent on 2004—05.
The report indicated that revenue growth at Mallesons was strong as the number of lawyers and partners decreased during the year. As a consequence, the report estimates that average revenue per fee earner increased by 21.3 per cent during the year.
The report also found that the total number of Freehills fee earners during 2005—06 increased approximately 15 per cent, faster than revenue growth, and consequently the average revenue per fee earner fell. However, despite the average revenue per fee earner falling, the average profit margin was up 1.8 per cent to 42 per cent, which was the second-highest return among the largest law firms.
The report also notes that Freehills’ fee earners have the highest billable hour target of the top six firms, with 7.5 hours per day expected.
While Mallesons topped the tables when it came to revenue, it questioned the accuracy of the report generally. A spokesperson for Mallesons said: “The IBIS report references 18-month-old data and contains a number of inaccuracies. The AFR annual profit survey issued in September is a more accurate guide to the recent performance of Australian firms — it showed that Mallesons had the highest revenue of any Australian firm in fiscal 2007. None of our competitors disputes this.”
Clayton Utz was the firm with the third-largest market share, with 2.3 per cent of the market. The IBISWorld report found Clayton Utz was the most profitable top-tier firm, achieving the highest profit as a share of total firm revenue. In 2005—06, the firm generated revenue growth of 7.9 per cent totalling $391 million.
Revenue growth was driven by a 6.3 per cent increase in the total fee earners and total revenue per fee earner was up 1.7 per cent. It was also the fourth-largest law firm in terms of total fees generated.
Minter Ellison achieved 2.3 per cent market share and revenue growth of 1.2 per cent, to $410 million. The report said the firm underperformed relative to the industry, which is attributed to excess capacity being cut in the form of a 2 per cent reduction in fee earners. The firm generated a profit of $151.7 million, or growth of 4.6 per cent. The drop in fee earners reduced the operating expenses, but Minter Ellison still has the highest number of partners and lawyers of any Australian firm.
Allens Arthur Robinson had 2.1 per cent market share and achieved revenue growth of 5.7 per cent to $370 million, driven by an increase of 5.5 per cent in total fee earners.
Blake Dawson (formerly Blake Dawson Waldron) was the only top-tier firm to exhibit a fall in revenue, which was down 5.3 per cent in 2005—06 to $305 million. This can be attributed in part to the 3.5 per cent decrease in fee earners. IBISWorld also estimates that revenue per fee earner fell by 1.9 per cent to $405,046.
Collectively these six firms accounted for just over 13 per cent of the Australian legal services industry’s market share.
The report did not take into account the law firms’ overseas operations.