International Law Firm Mergers and Economic Growth

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The "law rush" by international law firms seeking global alliances and Australian law firm partners has seen Australia's leading firms charging ahead of their international partners in terms of revenue growth, according to new research.  Some participants like Herbert Smith Freehills chief executive Gavin Bell (Pictured) says the disparity is largely due to exchange rate variations.

The Australian reports that firms like Freehills, Allens and Blake Dawson grew up to seven times faster in 2010-11 than at their global alliance partners of Herbert Smith, Linklaters and Ashurst, in revenue terms.

The biggest performance gap was at Allens where revenue grew by 27.8 per cent compared to 3.8 per cent at the firm's alliance partner Linklaters.

Beaton Research and Consulting, which conducted the research for its Beaton 450 guide, says it helps explain how the recently announced Freehills merger with Herbert Smith became "a merger of equals".

One alliance that does not fit the pattern is the deal between Mallesons Stephen Jaques and China's King & Wood, which is based in one of the world's fastest-growing markets.

Beaton's Tristan Forrester said the deal that created King & Wood Mallesons should be viewed as a unique arrangement.

He said it was crucial to note the research focused on revenue, not profitability, and some international firms, such as DLA Piper and Clyde & Co, had increased revenue through mergers.

Gavin Bell, who is to be joint chief executive of Herbert Smith Freehills, said he believed much of the performance gap in revenue growth between the global and Australian firms was because of exchange rate variations.

"I think for most firms except Freehills that is the explanation for it," Mr Bell said.

The Beaton research is based on US dollar results, but in Australian dollar terms Freehills' revenue grew by 7 per cent in 2010-11 and by 11 per cent in 2011-12, Mr Bell said.

He said the conversion to US dollars tended to inflate the firm's revenue growth, but even in Australian dollar terms it still had substantial growth and had done better in those two years than most international firms.

Source: The Australian