NZ Lawyer ed. 6.2 July 2014
(download the pdf here
There are no major surprises to unveil in this year’s NZ20 survey. The survey, which measures the size of firms based on their number of partners and non-partnered lawyers, shows everything a New Zealand lawyer practicing in the country’s commercial space would come to think: the country’s six biggest firms three years ago are still its biggest firms today.
Perhaps the only surprises are when considering who is at the very top of the rankings. Lawyer and partner numbers are just one of the many ways to rank a firm’s size and they reveal nothing about the firm’s quality of services or its relationships with strategic clients, but they do give an idea of the resources available to each firm.
There’s no denying that greater size can be an attractive feature for many large-sized companies, and it is thus interesting to note that Simpson Grierson currently sits atop the rankings in terms of total legal staff.
Change the ranking system to take into account partnership size only and Chapman Tripp remains the country’s biggest firm, a little way in front of Simpson Grierson, but it is clear that the latter has made a lot of ground and has been growing its partnership faster in recent years.
This aside, 2013 and early 2014 has remained a tough period for most New Zealand firms and the NZ20 survey tells a story of reduced headcount and subdued growth in many firms, which have reported to NZ Lawyer, confidentially, that they have seen little in the way of increasing revenues.
There are exceptions to this rule, of course, as there always are in every market, and it is fascinating to point out that some of the firms that expanded last year are the country’s mid-tier players. This follows a trend that has been continuing for some years now in which key mid-tier firms have been outperforming their top tier rivals in terms of growth in revenue and growth in lawyer numbers.
Lawyers will hardly be surprised that the idea of a ‘Big 3’, formed by Chapman Tripp, Bell Gully and Russell McVeagh, has fallen somewhat into history. This is widely known within the industry, but the extent to which the gap between the resources of these firms and rivals such as Minter Ellison Rudd Watts, Buddle Findlay and other firms appears to have narrowed further.
In the one instance, Simpson Grierson’s place among the biggest firms in the country is fairly clear, but Buddle Findlay can also stake a claim to being a major force within the industry. Ranked by partner numbers, its 42 partners edge out Russell McVeagh’s 37, although Russell McVeagh still has more lawyers in total.
It shows that the narrative of a ‘Big 3” no longer has practical significance, much as has been the case for the last few years, since the top tier end of the legal services market is no longer as clear cut as it was historically.
Perhaps the most pervasive trend among New Zealand law firms this year, and over the years preceding that in fact, is that law firms appear not to be taking on much in the way of new staff. The proportion of firms that are growing appears to comprise a minute selection of firms that are the exception to a highly rigid rule.
Bell Gully is a good case in point. The number of non-partner lawyers at the firm has slipped from 157 in 2012, to 145 in 2014. This is just as partner numbers have stayed fairly stable, going from 45 in 2012 to 46 in 2014. These numbers hardly speak of a firm that is in major decline, but they hint at wider trend of reduced hiring.
Kensington Swan has also seen legal staff numbers hit a modest decline. In 2012, the firm had 32 partners, but this number has slipped to 28 this year. Non-partner lawyers have also decreased, going from 96 two years ago, to 87 in May 2014. Again, the decrease is far from noteworthy. It does little in the way of suggesting that there has been a mass exodus of talent from the firm, but rather that those lawyers who have left the firm have not been rapidly replaced.
Another interesting trend is that in spite of falling lawyer numbers at firms, leverage levels appear not to be affected in any meaningful way. Indeed, NZ Lawyer reported in April that most firms were seeing little signs of major shift.
Chapman Tripp managing partner Andrew Poole said that his firm’s leverage figures have consistently sat around the mark of 3 and 3.5 since he joined. “There has been no material change. We’re not thinking about any material downsizing of the firm in NZ,” he said.
Russell McVeagh’s Gary McDiarmid remained proud that his firm still has a high leverage figure. “Our leverage [figure]… can get over five. There is not a top law firm in the world that doesn’t have a good level of leverage. It is great value to have stuff that frankly doesn’t need to be done at the senior level done at a level further down.”
But perhaps some perspective is needed. As Simpson Grierson chairman Kevin Jaffe points out, leverage numbers – and lawyer and partner numbers for that matter – only describe a small part of what characterises a firm’s offering.
(download the pdf here