Latest news – Big profits, big grins for firms; more women joining partner ranks; Litigation finance on the rise
Firms naturally upbeat as profitability increases
Australian law firms are happy about business conditions on the back of recent large profits, according to the latest CommBank Legal Market Pulse series. The survey found that the confidence of the country’s top and mid-tier firms in both industry and broader economic conditions rose from 20 per cent in 2017 to 85 per cent for the recent survey.
CommBank says heightened demand for legal services lifted the top and mid-tier law firms’ profits by an average of 8.2 per cent in the past financial year, with many firms directing a portion of those profits toward investing in their ability to adapt to longer-term structural change.
As firms expand their teams to meet client demand amid heightened activity across disputes, regulatory changes and strong corporate deal flow, the war for talent has intensified. It is now the top business challenge, particularly among top-tier firms. At the same time, those underlying fundamentals appear to be providing some relief from last year’s biggest challenges – negotiating prices with clients and winning new business. The most common strategies to ensure firms can future-proof and grow the bottom line are:
- Flexible work arrangements, suggesting that talent retention is a priority (100 per cent of firms)
- Developing alternative fee arrangements in response to client pressure (95 per cent)
- Adopting new technologies to adapt to changing client expectations and better compete with more flexible and efficient rivals (93 per cent)
- Lateral hiring to grow revenues (88 per cent).
Higher percentage of women becoming partners
The Australian Financial Review‘s Law Partnership survey reveals that the number of women being admitted as partners at leading law firms has jumped by almost 10 percentage points in the past year. While that is good news for women seeking to break through the glass ceiling, the fact is that male partners still outnumber them by almost four to one.
The survey shows that women made up an average of 42 per cent of new partners in 2018, up from 33 per cent the previous year. Overall, women now make up 27.4 per cent of partners at the 54 firms in the January edition of the survey, up from 27.1 per cent in July. However, women are still far more likely to be promoted to partner if they are at a firm with fewer than 100 partners.
Litigation finance to drive growth and innovation
The annual Litigation Finance Survey by American consultancy Burford, a provider of finance to the legal market, shows that an overwhelming majority (76 per cent of online respondents) see legal finance as a new business tool for law firms.
Almost 500 lawyers in Australia, Britain and the United States were involved in the survey. The report surmises that firms will further embrace outside financing as a way to gain a competitive edge in 2019. It suggests that legal finance enables law firms to take more cases on risk and to offer creative fee-structure arrangements to clients.
More than 80 per cent of Australian respondents expected litigation funding to be increasingly important in the business of law, compared with 73 per cent in the US and 78 per cent in Britain. Among those lawyers whose organisations have not used litigation funding, 72 per cent of Australians were likely or very likely to make use of it in the next two years. Litigation finance is already widely used to fund class actions in Australia, while Burford predicts it is likely that there will be more and more diversity in the kinds of matters which are funding, including an increased uptake in commercial litigation finance on a single-case and portfolio basis.