Biz Lunch (#12 December 2017)

Competitive Environment

Australia is often called the remote continent even though its market is mature and highly integrated with the Asia-Pacific region. Inbound investment is leading to the arrival of global players, and technological developments within the country also boost its highly competitive environment. Right after the IBA Annual conference in Sydney, we visited the office of Australian law firm Henry Davis York and asked its managing partner, Michael Greene, to tell us about the current state of play in this market. The conversation is very timely and relevant as the firm recently merged with Norton Rose Fulbright.

 

Australia is remote from the other world and we don’t really know much about its legal market. How would you describe the current Australian legal landscape?

Michael Greene: The landscape is very competitive in terms of the number of law firms and the number of lawyers, but the market itself has lots of opportunities.

So there are some areas of law in Australia and in particular in Sydney and New South Wales that are very busy and there’s a high demand for legal services.

This includes anything to do with projects, infrastructure and real estate. At the moment there is a lot of development taking place in Australia in relation to infrastructure of all types, transport infrastructure and port facilities, hospitals and schools. Social infrastructure is a very busy and growing area. That is a positive trend in terms of the law firm environment. We have seen, as is reported often in Australia, a lot of different types of law firms starting new types of offerings…. It’s quite a crowded market that makes it more competitive and so it’s very important for law firms to differentiate themselves.

In terms of trends, there is a pressure on pricing in relation to law firms and clients expectations have certainly increased in relation to what they expect their lawyers to provide both in terms of price but also quality of service and experience.

In relation to areas of growth, there is a lot of foreign investment coming to Australia, a lot of investment in agriculture, in Australian businesses. So that’s an area of focus.

 

Some sources have reported that there is a decline in demand at present for the services of law firms in Australia. Do you feel this in your firm?

M. G.: There has been a slight decline in client demand for some legal services but I don’t think there has been a decline across the whole sector. You wouldn’t say it has been rapidly growing as a whole but there are certain areas that have been growing quite a lot, like infrastructure, projects and construction. Another growth area is providing services to the Government. So our sectoral focuses are Infrastructure, Government and Financial Services.

All three of those areas are growing and show high demand for legal services. So looking at infrastructure in relation to providing services to government, that continue to increase both at a local, state and a federal level.

And in relation to financial services, the nature of some of the legal services has changed to banks and to financiers. Of course, there is some tradition lending and recovery work. But increasingly those clients also need legal advice on risks, regulation and compliance. These are growth areas as well which we are focusing on.

The regulation and compliance basically across all sectors, but particularly the financial services sector. There are a lot of external scrutiny by government and by agencies and regulators on that sector.

Thankfully, from Henry Davis York’s perspective, we have competitive offerings in all of those areas. So at the moment we are experiencing the benefits of increasing work in those areas.

 

Is it true that the market is currently overcrowded with lawyers?

M. G.: No, I don’t think it is overcrowded but it is certainly crowded. There are more law firms now than before. And there are more lawyers now than before. From a clients perspective that’s a good thing.

Successful lawyers are constantly analyzing the clients’ needs. Because if you don’t you wouldn’t be competitive, you wouldn’t be able to win the work. And certainly it’s getting harder to differentiate yourself from other firms. That’s the constant focus of the law firms now — to be successful — is how you differentiate yourself from your competitors.

 

How would you comment on the situation between local and foreign law firms. Do you feel increasing competition from foreign law firms in Australia? How do you meet this challenge?

M. G.:  Yes, there is certainly increased competition and part of that has been an inflow of foreign law firms. So there is more competition on the market. Some of those foreign law firms have quite specific offerings, looking on one particular practice area or another.

How do you compete with them? It’s ensuring that you provide the same or better level of service or offering something different. And it’s obviously maintaining the current client relationships that you have.

In our case, as you know, our response has been to enter a combination with a successful full service global law firm. We looked at a range of opportunities for our law firm and decided that a combination with Norton Rose Fulbright was in our interest and in the interests of our clients and our people.

As I’ve said before, it’s about being competitive and to be able to continue to offer our clients a high level of service and expertise and a good price. But also, to be able to draw upon knowledge and experience and the expertise of a truly global firm. To be bigger in Australia and bigger globally, which means that we can offer our clients a breadth and depth of expertise across the key areas. We think it makes us more competitive.

For example, we will now be better positioned to respond to a tender for a very large infrastructure project, perhaps in the energy or transport sectors.

Through the combination with Norton Rose Fulbright we will have access to both world-wide expertise and experience, and expertise of the Norton Rose Fulbright Australian partnership. 

And we will take that expertise and capability to our clients and say this is how we can service you in energy, aviation, transport, health. We will have a greater breadth and depth of expertise that we think will make us more competitive.

And that is a good thing from our clients perspective because they get the benefit of that high level of service, real depth of the expertise and resources that we need to work effectively. And it’s great for our people because they will be working on the largest and the most significant projects and matters. So that’s why we are doing it.

 

What transformation do you expect with regard to this recent merger because usually it’s big stress for law firms?

M. G.: It’s a big job that obviously takes many months. We have very complementary practice areas. The areas of our focus — financial services, government and infrastructure — are also areas of focus for Norton Rose Fulbright. We have a very complementary client base. We have a quite a few clients in common and those clients are particularly excited about us coming together and providing legal services in the one firm.

In terms of operations of the firm and all of our various policies, we obviously need to align those, there are a number of different work streams working to bring those together and it is all coming together.

It’s our intention to commence the newly emerged firm at the beginning of December.

 

Do you feel competition from the alternative legal services providers like legal practices of the ‘Big Four’ audit companies and from in-house counsels, internal legal departments?

M. G.: Absolutely, when we talk about the competitive market that is all of those factors. They are building out their internal legal capability to offer their clients presumably a full suite of service.

Did they increase competition on the market for us? Absolutely, yes.

It means we need to be on our game to offer our clients something that is competitive and, hopefully, better.

I think where lawyers do have an advantage is particularly helping our clients to navigate risks and regulation. That is what lawyers do. So I think we need to make sure that we can offer our clients insights and bespoke solutions that make us competitive with the accountancy firms.

Large Government departments, and our banks and large corporations now have very large and effective and very experienced in-house legal teams. So the opportunity for law firms is to make sure you really partner with those in-house teams to help them to perform their role. So it’s not competitive. It’s actually us assisting them to assist their business or their agency with its operations or its strategy.

And the other part of the market are “the new law offerings”, which is boutique and niche firms, sometimes very technology based legal services delivery platforms, and small specialists firms. So offering a different kind of focus or service, but again we have some competition with them as well.

Our main competitors are the large national law firms or global law firms in Australia but I think increasingly we will see more competition from the accountancy firms.

 

You have touched upon the question of technology. How do you implement technologies in the everyday work of your lawyers?

M. G.: Yes, that’s a big focus of ours and that’s a focus of most businesses.

It really is looking at ways to enable our people to have access to all the tools and information they need to be able to perform their tasks as lawyers.

Online subscription services for legal research but also to communicate with their clients, but mostly also to be more mobile, to be able to work in clients premises, be able to work from home, be able to work flexibly, which is a very important thing in a modern workforce.

So, we have invested in technology, we provided each of our employees including, administrative staff, with a Surface Pro. It gives them great mobility, and access to technology wherever they might be, traveling, working from home, working with them in the office.

That has been a very positive thing for us, but really it’s about making sure that you’re aware of what developments are taking place with technology and keeping up to date with those, which we are doing.

But also one of the big advantages of being part of the Norton Rose Fulbright network will be that we take advantage of their every substantial investment in technology. And they have been making significant investment in technology to help them be a more efficient business but also to be able to serve their clients in a more efficient way. So it was very impressive to see what they’ve done. So we will get the benefit of that as well.

 

Who is responsible for business development right now in your company: partners, business development managers?

M. G.: It is a combination. It’s my view and the view of my partners, that business development has to be principally led and driven by partners and by the lawyers, but with the assistance of some very good business development professionals. So this is definitely a role for both working well together. We have a business development and marketing team that provide the resources and skill sets that we need. But business development primarily is the responsibility of partners, assisted by those professionals.

 

What do you expect in the near future on the legal market globally, and in Australia?

M. G.: I think that Australia will, as it has in the past, follow and be part of those trends. It won’t be immune to those trends, and it won’t do anything necessarily different.

I think that there will continue to be consolidation of the market in Australia and also globally. I think that there will be further consolidation where there are a handful of large, truly global law firms. I also think the global accountancy firms will continue to increase their investment in legal teams as they have done today.

I think there will continue to be an increase in “new law”, smaller boutique firms will continue to increase as well. So, there will be consolidation and the market will move in those two directions, into the smaller niche type legal service offering or larger consolidated offerings. That is where I think the market is going.

 

And the last question. Have you ever had projects with Ukraine?

M. G.: I’m not aware of any Australian legal project involving Ukraine. I am certain that Norton Rose Fulbright will have had an active presence in your jurisdiction (probably in its oil and gas practice) but I am not aware of any Australian project in Ukraine that HDY has been involved in.

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