Despite a fragile Australasian economy, law firm revenues have bounced back in FY2011. Renu Prasad reviews the headcount and revenue trends at Australasia’s largest 30 law firms.

Largest firms by lawyer headcount – Australia and NZ only

Partisan commentators from within the “big six” firms always like to claim that the “six” is
comprised of three high quality firms and three chasing firms. We’ll leave it to the clients to assess the merits of each firm – but as this year’s ALB30 reveals, the “big six” is a story of two halves in quite a different sense. 
Three of these firms – Clayton Utz, Freehills and Minter Ellison – have retained their traditional size, hovering at the 1000 lawyer mark. The three Blake Dawson are looking decidedly slimmer by comparison, in the low 700 lawyer range. The next group of firms (Corrs, Gadens and Norton Rose) are not far behind.
Caution should be applied in the interpretation of these figures - see the discussion of the survey parameters below - but it is clear that the “six” are employing distinct strategies to the local market and that perceptions about where the “six” are collectively heading need to be challenged. Last month, ALB reviewed partnership figures between 2008 and 2011 and concluded that while the market perception that top tier partnerships were shrinking was generally correct, Minter Ellison and Blake Dawson were moving in the opposite direction. Firms have also denied any conscious strategy in this respect – AAR’s Michael Rose has pointed out that some of the fluctuation is due to generational change in the partnership and a Freehills spokesperson told ALB that there was no major fluctuation in Freehills partner numbers when the recent figures are viewed in the longer term historical context.
Revenue growth
Despite upbeat talk from the mining sector, the Australian and New Zealand economies continue to be jittery. Talk of the “two speed” economy continues and downgrades in the growth forecast for the US economy and talk of default of US treasuries have added to a skittish economic environment.
It is therefore somewhat surprising to find that nearly every major law firm surveyed by ALB managed to increase revenues in FY2011. Last year, ALB noted that the Australian market was a story of two halves: a flourishing midtier and a top tier which was suffering the clear effects of a paucity of premium work. One would have expected that trend to have  continued in FY2011, but Minter Ellison, Freehills and Blakes have managed to defy  pessimism with some respectable growth. Clayton Utz also recorded some growth, while Allens – which continues its policy of secrecy in relation to revenues – is also understood to have had a satisfactory year. The notable exception to this pattern of growth was Mallesons, which contracted by 1%.
Blake Dawson is leading the top tier results with 8% growth, a figure which managing partner John Carrington says is likely to be exceeded next year. “The strong level of activity in the final quarter of last financial year has continued into the current quarter – and this growth has been seen across the firm,” says Carrington. “Brisbane and Perth have been particularly busy, not just in the pure resources work but other areas such as M&A and employment. Banking & finance, litigation and IP have also been strong across the board.” Blake Dawson has also enjoyed a significant role in the NBN negotiations.
Like many of its rivals, Blakes is looking to Asia as a source of growth. It opened Singapore and Tokyo offices during the depths of the GFC and is now investigating Beijing and South Korea as possible new locations, if the requisite approvals can be obtained.
“The driver will be following regional capital flows,” says Carrington. “These have principally coming out of Japan and China, but increasingly they are coming out of Korea. Those capital flows have resulted in increasing opportunities for us.”
How to interpret the ALB30 tables
Regular readers may have noticed that the figures published in the annual ALB30 survey occasionally vary from those published elsewhere. Why? The results of each survey are dependent on the way the information is collected. ALB collects information about firm size by lawyer headcount, but it is also possible for this information to be expressed as a full time employee (FTE) count. Similarly, other surveys may include paralegals or graduates in their calculations, whereas ALB only counts qualified lawyers.
Most importantly, the ALB30 survey relates to the Australian/NZ market only and firms are specifically asked to exclude any headcount based offshore. This is done to avoid the distortions likely to result from international firms including their Asia-based lawyers in their calculations: while it may be interesting and perhaps portentous for a list of Australasia’s  largest firms to be topped by the likes of Baker & McKenzie or Allen & Overy, this would not give an accurate picture of their true scale in Australia. For this reason, the survey is confined to Australia and NZ. We would refer those interested in the Asia market to the ALB50, the corresponding survey conducted by ALB’s sister publication Asia Legal Business across the Asian jurisdictions. For ease of reporting, the revenue figures listed in this feature are for each firm overall and not confined to Australian operations.
Eligibility
The ALB 30 has traditionally included multiple partnership firms, provided that these firms all operate under common branding. This is consistent with the conventional market perception of such firms: names such as Gadens and Minter Ellison are commonly accepted as single firms, whatever the disadvantages (or advantages) of their partnership structure.
The “common branding” rule has been somewhat more generously applied this year. Hunt & Hunt and Macpherson + Kelley are two newcomers to the ALB30 and both firms include state-based entities which continue to trade under their own local brands. Both of these firms are well established names and while their inclusion in the ALB 30 is to an extent an anomaly, this is a more satisfactory outcome than excluding them altogether. These  inclusions have resulted in Piper Alderman and Herbert Geer dropping out of the ALB30 for this year, although they only missed a spot by a narrow margin. ALB