It is no secret the Big 4 is muscling into the legal market. Legal teams are expanding at an unprecedented rate, from the graduate level up. Management, emboldened by being able to offer a full suite of professional and legal services, can implement technological efficiencies quickly across all advisory areas. This has the potential to further bring down costs for a client and secure long-term loyalty. Add to this the entry of non-traditional legal service providers, empowered to provide simple legal advice through technology and AI, and the legal marketplace is becoming distinctly crowded.
Specialist super-mergers
Law firms are responding by merging firms in similar fields to dominate a specific area of practice. In many ways, this makes sense. It is an opportunity to consolidate deep expertise in a practice area, creating a firm which can represent itself as the leading – and perhaps only – subject matter expert.
Rather than attempting to compete with a ‘one size fits all’ offering from a major multi-national firm or member of the Big 4, a firm with deep expertise can simply be the best for the specific legal problem facing a client.
The proposed merger of Xenith and Qantm reflects this thinking. The merger, which is set to take place in April 2019, is intended to create a single IP services group. The new entity would offer a broad range of complementary patent, trademark, legal and strategic innovation advisory services.
The best of size, scale and deep expertise
Both Xenith and Qantm are ASX-listed IP groups. Together, they would include five specialist IP firms from Australia – Davies Collison Cave, FPA Patent Attorneys, Griffith Hack, Shelston IP and Watermark.
In addition, the new entity would include innovation and advisory service provider Glasshouse Advisory and Malaysian IP firm Advanz Fidelis.
Significant operational efficiencies are expected. The new entity is likely to benefit from the increased size and scale to invest in common, market-leading technology and streamline its back office and management.
“While each business will continue to operate independently in supporting their clients, the increased scale will enable the merged group to achieve strategic objectives more quickly and more effectively,” Qantm chair Richard England told Small Caps .
Following the merger, the new entity would have a market capitalisation of A$285.2 million. It would be second in size only to IPH Limited, which has a market capitalisation of A$1.1 billion as of 30 November 2018.
While these mergers offer clients the benefit of resources and expertise, questions arise around how the decline in competition might negatively impact choice for consumers of IP services.
M&A to thrive in changing times
The past year saw major M&A activity among law firms. Prominent mergers included Thomson Geer’s acquisition of Kemp Strang, with Russell Kennedy and Aitken Lawyers also joining forces. Among the boutique firms, DW Fox Tucker merged with Bradbrook Lawyers.
It is a trend Tony Britten-Jones, Managing Partner of Piper Alderman, expects to slow.
“Firms have been desperately trying to position themselves in spaces from which they can thrive,” Tony told Lawyers Weekly. “I feel that following the spate of mergers over the past 18 months there will be a period during which firms focus on consolidating their offering.”
Indeed, Piper Alderman has been consolidating its operations following its 2017 merger with Norton Gledhill.
“Disruption from technology and new competition will not slow,” Tony said to Lawyers Weekly. “I believe there will be significant lateral movement between firms as lawyers seek out platforms which are more compatible with their practice, personal career development plans and values.”
General practice dominated by small law firms and technology
According to the 2018 Mahlab Report , firms will need to continue to consolidate their offering to remain competitive and gain greater market share. This is certainly true of lawyers and firms who offer sophisticated legal expertise for complex matters.
However, it is likely clients will still need generalist advice for simple legal matters. This is where non-traditional legal service providers could help under-serviced clients who cannot afford legal advice. It is also where small law firms thrive, providing legal advice on every day matters ranging from property settlement to family law, wills and estates.
Amidst the flurry of law firm merger activity, a new legal landscape is starting to emerge. It appears to be one in which the Big 4 and large firms provide advice alongside highly specialised conglomerates of law firms and related service providers, with general practice law remaining the domain of smaller law firms and emerging technologies.
