This year’s Fast 10 reflects an industry in transition – mergers, listed firms and the GFC have all made their impact on the composition of the 2009 list. This also promises to be one of the most controversial Fast 10 features ever published. What constitutes “growth”? What constitutes a “law firm”? As will become clear, industry change is posing new questions and there is no consensus yet on the correct answers.
Organic growth or merger growth?
This year’s Fast 10 reflects an increasing number of firms which have achieved their growth through mergers. This is not a completely new phenomenon – last year’s winner, Thynne & Macartney, achieved some of its growth courtesy of a merger with fellow Queensland firm Biggs & Biggs.
However, as the mid-tier consolidates, mergers are having an increased impact on the Fast 10. This presents a dilemma. On the one hand, it is important to acknowledge the efforts of firms which have achieved growth as a result of shrewd leadership and superior client service. Organic growth is undoubtedly a key benchmark of a high-performing firm.
| The Fast 10 list is based on a survey sent to over 100 firms in Australia and New Zealand. Only firms which completed the survey were considered for inclusion in the Fast 10. The primary criterion for inclusion was percentage revenue growth for the 2009 financial year and to a lesser degree growth in fee earners. Figures were supplied by the firms themselves and only firms with at least ten lawyers were eligible for consideration. All growth figures and percentages have been rounded to the nearest whole number. |
On the other hand, the purpose of the Fast 10 is to simply provide a guide to the fastest-growing firms and to leave the market to draw its own conclusions as to the merits of the particular growth strategies employed. Given the pattern of mid-tier consolidation over the past two years, it is also arguable that excluding merged firms would provide an incomplete market picture.
Another complication is demonstrated by Thomson Playford Cutlers, who lost their insurance arm in 2008 with the secession of breakaway firm Gilchrist Connell, yet gained Cutler Hughes Harris in Sydney and Dibbs Abbott Stillman in Melbourne. So how would one calculate organic growth in such a scenario?
This year the format of the Fast 10 remains unchanged, with law firms being assessed on overall revenue growth. However, we make particular acknowledgment of the firms which have grown organically – and in particular, we congratulate Wotton + Kearney on its achievement of 37%organic growth.
Henry Davis York, Hall & Wilcox and Mills Oakley are other examples of firms that have eschewed mergers and still made the Fast 10.
Listed and aggregate firms
The issue of whether acquisitions should be counted in revenue growth was accentuated by a strong showing from listed firms Slater & Gordon and Integrated Legal Holdings, both of which have employed an aggressive acquisition strategy. However, Slater & Gordon’s Andrew Grech points out that half of the firm’s revenue growth can be attributed to organic growth.
“Most of our work is done on a fixed-fee basis – our rates have remained consistent and the (organic) growth has come from increased activity and market share,” Grech says. The Slater & Gordon model might not appeal to everyone, but he is proud of the profile the firm has built – not just in the legal profession but in the wider community. “Love us or hate us, everyone knows who we are,” he says.
The arrival of Integrated Legal Holdings in the Fast 10 complicates the picture further. Under the ILH model, firms acquired by ILH retain their existing branding. Partners are encouraged to continue with the day-to-day responsibility and accountability for business strategy and management, within the broad direction set by ILH.
“Our strategy is all about identifying very good medium-sized law firms to join the group through acquisition, and then supporting these member firms as part of a national network,” says the managing director Graeme Fowler, “particularly towards achieving above market growth and improved business performance.”
With revenue growth of 59%, there’s no doubt about the ‘fast’ side of the equation – but is ILH actually a law firm? The lack of unified brand would seem to suggest otherwise, but Fowler has no doubt. “Of course we’re a firm,” he says emphatically. “We’re an organisation carrying on a legal services business – but with a different structure.” Fowler’s view is supported by the existence of an integrated growth strategy for firms within the group, as well as the fact that ILH reports financially as a single entity.
Nonetheless, ALB acknowledges that the decision to include the group will be controversial – and disappointing to traditional firms such as Herbert Geer, which can justifiably take pride in the cohesive growth culture which they have built under a single brand.
Trends
The growth figures in this year’s Fast 10 revenues are not dramatically different from those of FY2008, due partially to the artificial inflation of revenue growth caused by mergers. For example, the fastest-growing firm recorded 53% revenue growth in 2008 and 59% in 2009, with both winners having had the benefit of M&A’s.
The fastest organic growth firm (Wotton + Kearney) still recorded 37% growth – which is on par with the fastest organic growth law firm in 2008. At the bottom end of the scale, the tenth-placed firm (Curwoods) recorded 9% revenue growth, which is again on par with the tenth-placed firm in last year’s Fast 10 list (Cooper Grace Ward, 9%).
This, of course, does not imply that firm revenues have remained steady throughout the GFC. The real story lies with the law firms which are not on this year’s Fast 10. Some firms that made last year’s list declined to participate in 2009, frankly conceding that their growth wouldn’t warrant a spot. Other Fast 10 stalwarts such as Moray & Agnew, Holding Redlich and Duncan Cotterill produced creditable results, but narrowly missed the cut. Mills Oakley and Hall & Wilcox, who are both appearing in the Fast 10 for a third consecutive year, both recorded growth below 2008 levels.
For obvious reasons, it is easier for smaller firms to record high revenue growth. In this context, special mention should be made of the stellar results produced by some of the bigger players: Piper Alderman (8% growth), Clayton Utz (5% growth) and Minter Ellison (5% growth). They didn’t make the list, but this surely must be food for thought for readers who are students of top-tier fortunes.
Number one
Integrated Legal Holdings is the shock winner of the 2009 Fast 10. ILH earned A$17m in revenue last year – and an important contributor to this growth was the acquisition of the firms Argyle Lawyers in November 2008 and mda lawyers in March 2009.
ILH plans to develop a national network of leading law firms in the capital cities and other key centres across Australia. “We are very selective and incremental in our acquisition strategy,” says managing director Fowler. “We are targeting 15-20 medium sized firms to join the group over the next 5-10 years.” Fowler says that he will be looking to recruit firms with an annual fee income of between A$4m-A$8m and with strong growth prospects. The firms will be expected to at least double fee income in three to five years.
He says there should be no shortage of potential candidates, as according to his estimates there are at least 150 law firms in ILH’s target medium-sized firm group, in what he describes as a “fragmented” industry. “We are after good people who know how to grow a successful business and want to leverage the benefits of the listed company environment to take their business to the next stages and well beyond,” says Fowler.
These benefits include access to capital for growth, the resources and tools to attract and retain the best lawyers and clients in target markets, and the leverage of a national network combined with the offerings of a small-firm mentality approach.
“We apply a performance-based remuneration structure to incentivise growth and improvement in the businesses, and all principals and most staff are shareholders, which incentivises working together,” he says.
Close call
In recent years, the Fast 10 has been decided largely on revenue results, with a small weighting added for fee-earner growth. This is done in order to acknowledge the firms that have continued to provide employment to the profession, or even added lawyers to their payroll during difficult times. The weighting is kept to 20% in order not to skew the nature of the Fast 10 as a predominantly revenue-based survey.
The fee-earner growth component needs to be taken into account when looking at the survey results. For example, Thomson Playford had 36% growth in fee-earners, which allowed it to leapfrog other firms with higher revenue growth. This occurred only by the smallest margin – Thomson Playford, Henry Davis York and Mills Oakley all attained the same weighted score, with the final ranking coming down to decimal places.
10. Curwoods Lawyers
Managing partner: Scott Kennedy
Revenue growth: 9%
Partners: 11 (22% growth)
Other fee-earners: 31 (35% growth)
Summary:
This Sydney-based firm is a newcomer to the Fast 10 but not to solid growth. Curwoods has achieved double-digit growth in each of the past four years, slipping just slightly to 9% in 2009. Curwoods’ highly targeted areas of specialisation include insurance, dispute resolution and construction, with managing partner Scott Kennedy saying that all practice areas are performing equally well. He describes the firm’s growth strategy as one of “organic growth, while identifying individual lateral recruits whose practices are both a strategic and cultural fit.” The firm has had to expand its premises as a result of the growth and is looking to continue growing in 2010 with, inter alia, strategic lateral recruitment in the insurance area. Aged 37, Kennedy may well be the youngest-ever managing partner to grace the pages of the Fast 10.
9. Hall & Wilcox
Managing partner: Tony Macvean
Revenue growth: 14%
Partners: 28 (12% growth)
Other fee-earners: 71 (15% growth)
Summary:
Hall & Wilcox earned A$31m in 2009, which managing partner Tony Macvean says is vindication of a “multi-focus” strategy. The firm has invested in areas such as litigation, insolvency, Workcover and employment law, which have held up well during the economic downturn. Macvean says that the firm’s private client practice, covering areas such as family law and wealth management, has also been strong.
In contrast to rivals which have opened offices in Sydney and Brisbane, the Hall & Wilcox strategy is to focus on Melbourne and to nurture quality and firm culture in that core market. However, Macvean points out that the firm’s work is not necessarily Melbourne-centric.
8. Mills Oakley
CEO: John Nerurker
Revenue growth: 16%
Partners: 25 (25% growth)
Other fee-earners: 61 (8% growth)
Summary:
Mills Oakley recorded its fifth consecutive year of double-digit growth in 2009 and while it’s early days yet, CEO John Nerurker says that 2010 is on track to deliver more of the same. The firm is buoyed by prestigious panel appointments including Telstra, GPT, Perpetual and Suncorp-Metway. The firm’s strategy of diversifying its offerings, particularly in counter-cyclical practice areas, and reinforcing its market position and geographic presence has served it well throughout the downturn.
The firm earned A$31m last year but represents the dilemma of growth. While spectacular growth is possible with mergers, Mills Oakley has not gone down this path. Nerurker is proud of the fact that the firm is consistently able to make the Fast 10 on the back of organic growth. He says that Mills Oakley- won’t compromise the quality of its partnership or brand for the sake of short-term growth.
7. Henry Davis York
Managing partner: Sharon Cook
Revenue growth: 16%
Partners: 48 (-4% growth)
Other fee-earners: 159 (10% growth)
Summary:
Henry Davis York earned A$85m in revenue, which managing partner Cook attributes to strong performance in key practice areas. Revenue in the public sector practice was up by 39%; in the insolvency and restructuring practice revenue was up by 26%.
Henry Davis York is committed to “sustainable and organic growth” and rarely recruits partners from outside the firm, preferring a “grow your own” culture. This is a sharp distinction from the approach adopted by most other Fast 10 firms. Cook predicts that the firm will have a strong 2010 as a result of increased activity in both the litigation and public sector practices.
6. Thomson Playford Cutlers
Chief executive partner: Adrian Tembel
Revenue growth: 10%
Partners: 47 (27% growth)
Other fee-earners: 141 (36% growth)
Summary:
Strong fee-earner growth saw Thomson Playford advance up this year’s Fast 10. It is difficult to assess how much of the firm’s growth is organic – Thomson’s has had an eventful year in which the insurance practice broke away, with mutual agreement, to form the boutique firm Gilchrist Connell. Thomsons then linked up with Cutler Hughes Harris in Sydney and Dibbs Abbott Stillman in Melbourne, giving the firm a solid East Coast presence. Growth is spread evenly across the offices, with the litigation practice being a particular highlight, recording 12% growth.
While CEP Adrian Tembel says the firm will be in consolidation mode over the next few months, he expects that it will revisit the issue of geographic coverage and possible further expansion in mid 2010. Thomson Playford also won the prize for Adelaide firm of the year at this year’s ALB Awards.
5. M+K Lawyers
Managing director: Damian Paul
Revenue growth: 21%
Partners: 29 (24% growth)
Other fee-earners: 48 (-12% growth)
Summary:
M+K Lawyers earned A$24m in revenue last financial year. While the firm has been in expansion mode, acquisition activity has been limited to sole partner practices, which have been built up with lateral hires. MD Paul attributes a large part of the firm’s growth to the quality of the partnership (or principals, to use M+K’s terminology) and the confidence with which work can be referred between partners and the referral of work via client word of mouth. M+K is expecting to acquire its first multi-partner firm in 2010. Paul attributes much of the 2009 growth to the firm’s Sydney offices, but predicts that the Victorian offices will see as much as 25% growth this year. And don’t be surprised if M+K makes a foray into a new market in 2010 either.
4. Slater & Gordon
Managing director: Andrew Grech
Revenue growth: 29%
Other fee-earners: 197 (13% growth)
Summary:
Slater & Gordon earned A$103m in revenue last year. The firm had an aggressive growth strategy which saw the acquisition of six firms, however managing director Andrew Grech points out that half of the firm’s revenue growth can be attributed to organic growth.
In addition to its signature personal injury and litigation practices, Slater & Gordon is working to broaden its service offering and diversify away from its Melbourne base. Forty five per cent of the firm’s total revenue was derived from outside Victoria last year.
3. Wotton + Kearney
Managing partner: David Kearney
Revenue growth: 37%
Partners: 10 (11% growth)
Other fee-earners: 36 (29% growth)
Summary:
Some readers believe the Fast 10 should be determined by reference to organic growth only. Those readers can stop reading at the end of this page – your fastest organic growth firm is Wotton + Kearney with 37% growth and no mergers. This is a nice way to cap off a year which also saw the firm pick up the ‘Insurance Specialist Firm of the Year’ prize at the ALB Awards.
Wotton + Kearney earned A$15m last year with a strategic revamp which saw it offer broader services, including regulatory work, insurance policy drafting and reinsurance work. The Melbourne office, previously confined to particular areas such as D&O insurance, is now providing a more complete service. The economic downturn has inevitably contributed to a rise in claims work, although David Kearney estimates that this accounts for only about half of revenue growth. The firm has also introduced a 9.5 day fortnight for lawyers, where lawyers can take a paid half day to pursue professional development or simply have a break.
2. Herbert Geer
Managing partner: William Fazio
Revenue growth: 52%
Partners: 50 (14% growth)
Other fee-earners: 90 (18% growth)
Summary:
As far as the purists are concerned, Herbert Geer may be the “true” winner of this year’s Fast 10. It’s certainly the fastest-growing law firm under a unified brand and conventional structure. Managing partner Fazio and his team deserve credit for their implementation of an ambitious vision, to build a strong East Coast presence for Herbert Geer.
The firm earned A$54m in revenue in 2009, which is a remarkable 52% increase on 2008. FY2009 was the first full year where the 2008 mergers with Brisbane firm Nicol Robinson Halletts and Sydney firm Rivlin Deschamps Kelly could be taken into account. However, Fazio says that the entire firm is benefiting from a new sense of self-belief. A “growth mentality” has seen recruitment occur across a broad range of practice areas in the existing business, including insurance, superannuation and IT.
Fazio said that the firm was “comfortable” with the profitability side of the equation and that growth in Sydney and Brisbane would continue to be a particular priority over the coming year. Herbert Geer is also keeping an open mind on the possibility of further acquisitions.
1. Integrated Legal Holdings
Managing director: Graeme Fowler
Revenue growth: 59%
Partners: 16 (82% growth)
Other fee-earners: 47 (76% growth)
Summary:
Revenue growth of 59% is fast growth, but is it a “law firm”? ILH earned A$17m in revenue last year with an acquisition-based growth strategy, yet the acquired firms will continue to operate under their existing branding. Managing director Graeme Fowler says that he intends to develop a national network of leading law firms in the capital cities and key centres across Australia and predicts that as many as 20 firms will join the group over the next ten years.
ILH suffered a significant decline in profitability last year and was criticised for what has been described as an “ad hoc” growth strategy to date. Indeed, the very structure of ILH makes the company an easy target for such observations. However, the ILH concept is relatively new and it is natural that such a fundamentally different legal practice model will attract scrutiny and criticism – which may or may not prove to be warranted. Time will tell whether Fowler’s vision will be vindicated. These are uncharted waters for all concerned – and that includes ALB.