18 October 2018

Legal teams in-house growth a driver in law firm consolidation

Consolidation of law firms in part driven by the growth in in-house legal teams, says Australian white paper.

The growth of in-house legal teams is a significant factor contributing to the continued consolidation of law firms, regardless of size.

In-house growth

The 2018 State of the Legal Market, an Australian white paper created by the Melbourne Law School and Thomson Reuters, has identified the dominant trends impacting the Australian legal market in 2018, as well as key issues influencing 2019 and beyond. According to the report, recent and future market consolidation has been and will be heavily influenced by a range of factors. One of these, the white paper says, includes the continued growth of in-house legal teams. The report explains, ‘FY18 was characterised by the continued consolidation of large commercial law firms. The 2018 State of the Legal Market – Australia white paper also discussed the role of legal tech in the in-house market and how general counsel and their teams are seeing the benefits from its adoption.

Ahead of the curve

During 2018, law firm tie-ups peaked significantly at 19 deals, involving 123 partners. We saw well established 100-year old firms like Henry Davis York, DibbsBarker and TressCox merging with larger firms.’ The reports adds, ‘some of the factors underpinning these structural changes include increased competition for clients, continued growth of in-house legal teams, higher fixed costs, the expansion of NewLaw alternatives, growth of LegalTech and the continued focus of the big four in the legal sphere.’ The report highlighted that firms that ‘strategically accounted for these pressures in the preceding 3–5 years remained ahead of the curve, while others have had to quickly pivot their strategic direction, in some cases successfully, and in others less so.’