Thynne & Macartney to merge with Biggs & Biggs in Brisbane. Cridlands and Morgan Buckley in Northern Territory merger. Nicol Robinson Halletts joins Herbert Geer in Brisbane. These are some of the headlines that have graced ALB’s pages in recent editions and the general consensus is that there are more to come. So what is driving the process?

 

 

There is a common theme emerging from the recent mergers of firms: that a firm must be of a certain size in order to attract clients and staff of a desirable calibre. John Moore, Thynne & Macartney’s chairman of partners, refers to this as the “critical mass” theory. “We believe that Brisbane firms with general practices will require a certain critical mass in order to attract and retain quality clients and staff. That critical mass will also be necessary to ensure that star performers, whether they be partners, professional staff or support staff, are generously rewarded,” Moore says.

 

Similarly, Tony Morgan, partner at Morgan Buckley, also says that client demands and expectations as to optimum firm size were the key drivers of its merger. “Our clients are ever increasingly expecting a legal service provider who has the depth, experience and size that only a merged entity could provide,” says Morgan. “In addition, the merger improves on existing economies of scale and provides further scope for competitive advantage in all areas of our practice.”

 

But where is the point that determines critical mass? What is the minimum size a firm should ideally be? This is the kind of mathematical question no lawyer particularly wants to be quoted on, but John Moore did venture to make some suggestions about the Brisbane market. “We think that if you are in the 100-plus people category – with at least 50% of those people being fee earners – then, provided the firm is well run, you’re probably going to be reasonably successful,” says Moore. “However, if you’re a general practice with 40 or so people – with a less than a 50:50 fee earner to support staff ratio, there will be challenges ahead.”

 

 

The point of critical mass, says William Fazio of Herbert Geer, is where there exists a broad enough base of expertise for the firm to make a wide service offering. “Four to six partners is okay for a boutique firm, but our experience has been that 10 partners is the point where you start to get that internal energy and synergy.”

 

Herbert Geer has had cause to ponder the question of optimum firm size of late. The firm’s Sydney office recently expanded from six to 12 partners and in Brisbane, where Herbert Geer had a modest insurance practice, the firm merged with Nicol Robinson Halletts to transform into a full-service entity. “We had a vision for becoming a full-service firm in Queensland sooner rather than later, and in our view lateral recruitment was too slow a strategy. The merger was a way of really getting serious about our vision,” says Fazio.

 

 

The point of critical mass is a variable one, and nowhere is this more apparent than in the Northern Territory. “The Northern Territory market is significantly different from the wider national market. A major capital city mid-tier firm would be large in the NT marketplace,” says Tony Morgan. Nonetheless, the aim of meeting client expectations as to depth of experience remains the same – hence the merger of Cridlands and Morgan Buckley.

 

“In recent years, significant numbers of larger corporations have set up operations in the Territory, which has led to an increasing need for a larger, more specialised firm to provide the level of service that many of these larger corporations require and expect,” says Morgan. He adds that a number of key industries including resources, government, pastoral and tourism are experiencing strong growth in the Northern Territory,

 

with development in the services and property areas supporting those industries. Cridlands MB will be able to leverage its expanded capacity to pick up work which might have otherwise bypassed a smaller firm.

 

 

A merger is an opportunity to re-evaluate the business model and Moore says that there is plenty of food for thought. “The traditional legal model often involves concepts such as lock-step equity, goodwill and seniority. We have serious reservations about the value and saleability of those concepts in today’s legal market,” Moore explains.

 

Thynne & Macartney has introduced a system of measuring net profitability at firm, workgroup and individual levels to gauge performance. The firm has also introduced a new equity partner remuneration model which rewards equity partners in real time, having regard to their current financial and non-financial performance. Moore says the system is designed to give equity partners freedom of choice. “For example, it enables an equity partner with a young family to spend more time at home without criticism from fellow equity partners. Conversely, it allows high performers of any age to earn returns that rival those received by equity partners at national firms,” he says.

 

Where does this all end? Can mid-tier firms continue expanding until they begin to reach the proportions of the top tier? Perhaps, says William Fazio, the question is more whether firms are keen to go down that path.

 

“We want to keep the human scale of our firm,” he says. “In our firm, every partner has a voice and we respect individuality. Now the bigger you get, the more compromised those attributes are going to become.”

But Herbert Geer is not giving up the expansion game just yet. “We think we’ve got room to expand without compromising our culture,” says Fazio. “There’s an upper limit somewhere. I’m not sure where it is, but we’re not there yet.”  ALB

Thomson Playford and Cutler Hughes to merge   One of the most popular stories on the ALB website is the news of yet another merger. ALB Australasian Law Awards 2008 Adelaide Firm of the Year Thomson Playford is to bed down with Sydney-based firm Cutler Hughes & Harris. The new entity, to be known as Thomson Playford Cutlers, will have a total of 160 staff in its Sydney office and 130 in Adelaide.   Thomson Playford chief executive Brett Goodridge noted that the decision to merge was guided by the explosive demand for legal services in Sydney and Adelaide. “We have been exploring options to facilitate our ongoing growth for some time. We have been down the merger path before, and found it to be an effective and successful growth strategy,” said Goodridge. In 1993 Thomsons merged with the Adelaide office of Corrs Chambers Westgarth (then known as Mollison Litchfield) and shortly after with Playfords, and then again with Cowley Herne in 2006.   The move will also lay the foundations for future expansion through acquisition. Melbourne appears to be shaping up as the next stop for the newly merged firm, with Thomson Playford maintaining its ‘fly-in fly-out’ office and keen to expand in the city on the Yarra.

Merged	Location	Merger date
Nicol Robinson and Herbert Geer	Queensland and Victoria	July 2008
Cridlands and Morgan Buckley	Northern Territory	August 2008
Thynne & Macartney and Biggs & Biggs	Brisbane	August 2008