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Commonwealth Bank Legal Market Pulse Report.Conducted by Beaton Research + Consulting September Quarter 2014
1
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Contents
Confidence continues to improve as economic outlook brightens 2
Australian economic outlook 3
September quarter 2014 results summary 5
Overall business conditionsPerception of business conditions for Australian law firms from now to 2 years time 7
Perceived performance of Australian economy 7
Perception of business conditions in specific areas 8
FY14 financial performanceTotal revenue change from FY13 to FY14 9
Difference between FY14 budgeted and actual results revenue 9
Difference between FY14 budgeted and actual results expenses 10
FY15 business prioritiesMarket entry and exit 11
Revenue predictionsChanges in revenue over the next 6 months by location 12
Changes in revenue over the next 6 months by practice area 12
Changes in revenue over next 6 months by practice area cont. 13
Realised rates and fee structuresExpected changes in realised rates over the next 6 and 12 months 14
Percentage of revenue generated using alternative price structures 14
Expense and profitability predictionsChanges in expenses over the next 6 months 15
Changes in staffing over the next 6 months 15
Change in operating margins over the next 6 months 16
Business process efficienciesAre clients’ putting more pressure for law firms to use LPO? 17
Effect of growth in LPOs on operating margin over the next 12 months 17
Provision of non-legal servicesProvision of non-legal services 18
Non-legal services – percentage of revenue 18
Potential revenue from non-legal services 19
Competition from non-traditional (alternative business model) law firmsCompetition from non-traditional (alternative business model) law firms (segmented by tier) 20
Frequency of competition from non-traditional (alternative business model) law firms 20
Attitudes and behaviour toward philanthropyFirms practising in the not-for-profit sector (segmented by tier) 21
Firms practising in the not-for-profit sector by Practice area 21
Firms practising in the not-for-profit sector by Practice area cont. 22
Change in practise in not-for-profit sector in the next 12 months 22
Reasons for practising in not-for-profit sector 23
Effect of global financial crisis on the attractiveness of serving the not-for-profit sector 23
2
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Marc Totaro National Manager, Professional Services Commonwealth Bank
Welcome to the first quarter edition of the Commonwealth Bank Legal Market Pulse report for the 2014/15 financial year, conducted in partnership with Beaton Research + Consulting.
It is encouraging to report that during the quarter we witnessed a continuation of an upward trend in confidence amongst law firms in Australia, Asia and the United Kingdom. This positive sentiment was echoed by the fact that law firms are increasingly positive about Australia’s economy in the next 12 months.
While sentiment has been steadily improving over the last year, a negative net confidence reading was still recorded. Despite this, the longer term outlook amongst law firms continues to remain positive.
Notwithstanding an increasingly positive outlook, firms continue to deal with ongoing challenges in key areas such as winning new business and client price negotiations.
“Our top priority is managing costs of production against fixed fees, quotes or estimates”. CEO/Managing Partner mid-tier firm.
One area that remains firmly in positive territory amongst firms is their ability to access capital and there were also encouraging improvements across key financial metrics, including collecting invoices and controlling expenses. In addition, seven in 10 firms reported that their 2013/14 financial year expenditure was below budget, driven by tighter control of costs, improving their bottom line.
“We’re focusing on maximising the benefits of our integration with the global network”. CEO/Managing Partner top-tier firm.
The survey revealed mixed results for revenue expectations amongst domestic and international locations in the next six months. UK based international law firms were the most positive, with 100% expecting revenue increases, as are firms in Brisbane, Melbourne and Perth. Conversely, firms based in Sydney, Canberra and Asia are expecting revenue declines.
In terms of staffing expectations, firms flagged an increase in partner and senior associate numbers in the next six months, albeit at a slower rate. We also saw increases expected across all junior and administrative roles.
The insolvency and restructuring practice area witnessed a significant decline in confidence this quarter, which is not surprising given the general positivity around the economic outlook. Revenue expectations among the banking & finance, trade practices and competition and consumer law practice areas recorded the most substantial gains.
Diversification continued to gain in prominence amongst firms, with 38 per cent of firms indicating revenue from non-legal services will grow over the next 12 months, with an even sharper increase expected in the longer term (62 per cent over the two years).
In this quarter’s edition, we conducted a spotlight on philanthropic activities amongst law firms, with an overwhelming majority of firms indicating that they provide pro bono services to the not-for-profit sector. While most firms indicated the primary driver was to give back to the community, the growing not-for-profit sector remains of commercial significance with one in two firms deriving revenue from the sector.
I trust you will find this edition of the Commonwealth Bank Legal Market Pulse Report informative and useful for your firm’s planning and benchmarking. We look forward to continuing to monitor the legal industry’s sentiment and performance, and sharing these insights with you.
Marc Totaro Email: marc.totaro@cba.com.au Phone: +61 2 9303 1940
Confidence continues to improve as economic outlook brightens
3
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Diana Mousina Associate Director Economics Commonwealth Bank
The Australian economy expanded by 2.9% in 2013/14 as a whole. This outcome is a touch above that recorded in 2012/13 and is close to trend. This should be seen as a decent outcome for an economy in transition. The economic package remains very attractive. Australian public finances and the financial system remain in good shape, the AAA credit rating looks secure and policy makers still have some firepower if needed.
The main uncertainty that is clouding the economic outlook is ensuring that the transition from mining to non-mining led growth is successful. Solid growth in residential construction and resource exports is on track. But non-mining business capex growth needs to be stronger.
The downturn in mining capex will be significant. The non-mining economy will need to make a more significant contribution to growth if trend-like growth outcomes are to be expected.
0
2
4
6
0
2
4
6
1861 1881 1901 1921 1941 1961 1981 2001
%
Source: RBA/CBA
Mining Investment
(% of GDP) %
Previousbooms
The uncertainty of this growth transition has impacted business and consumer confidence. Consumer confidence remains quite fragile but business confidence is lifting. The latest report from the Commonwealth Bank Legal Market Pulse Report (conducted by Beaton Research + Consulting) indicated an overall 3.9% increase in business confidence from the last quarter of research. More positivity towards the longer-term outlook continues to be a key theme in the survey. Law firms are managing weakness in revenue through slowing expense growth.
Australian economic outlook
4
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Sentiment remains fragile given the uncertainty of the growth transition. Business confidence is tracking higher but consumer sentiment is low.
-40
0
40
80
-40
0
40
80
Jul-01 Jul-04 Jul-07 Jul-10 Jul-13
Sentiment
(annual % change)% %
Source: WBC Melbourne Institute , NAB
Consumersentiment
Businessconfidence
Labour market indicators give a good overall read on the health of the economy. We believe the unemployment rate is around its peak at 6.4%. Jobs vacancy data (a leading indicator of labour market conditions) is consistent with a downtrend in the unemployment rate. And business surveys are pointing to jobs growth running at a pace that is sufficient to turn the unemployment rate around. We expect the unemployment rate to hover around 6.0% towards the end of the year. Jobs growth will be focussed in residential-construction associated areas, health and education.
The law firms surveyed in the Commonwealth Bank Legal Market Pulse report seem to be more cautious in estimates around expected staff numbers. The majority of law firms suggested that partner and senior associate numbers were likely to grow at a slower rate over the next six months.
-60
-25
10
45
80- 2
- 1
0
1
2
Jul 00 Jul 03 Jul 06 Jul 09 Jul 12
Unemployment rate
(annual change, lhs)
Job vacancies*(inverse, rhs)
% %pa
* Source: ANZ
Unemployment & Vacancies
Turn in vacancies typically marks turn in unemployment rate
The Reserve Bank of Australia (RBA) has had a neutral policy stance since February. The desired growth transition is underway, inflation measures are moving towards the top end of the RBA’s target band and the Australian dollar has now depreciated to below USD0.90. A lower currency will provide stimulus to growth and increase imported inflation.
The Central Bank is also becoming increasingly concerned about the elevated growth in dwelling prices, particularly given the investor interest in the market. Commonwealth Bank’s forecast for growth and inflation to come out above the RBA’s forecast forms our view that the RBA will need to start raising interest rates sooner than financial markets are currently expecting. We expect a 25bpt interest rate hike in February, taking the cash rate to a 2.75%.
5
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Summary of Q1 FY2015 findingsSeptember quarter 2014 results summary
%
On balance the market expects the Australian economic outlook to improve over the next 12 months
This represents a +3.9% increase in confidence from the last quarter of research.
23.3%
Although the short-term outlook remains negative, confidence among law firms has steadily improved over the past 12 months
-43%
Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15
-28%-23%
-17%
Firms are forecasting an increase in usage of alternative price structures
Law firms are forecasting a 5% increase in the usage of alternative price structures, rising from 28% to 33% over the course of the next 12 months.
1 in 2 law firms (52%) failed to achieve their FY14 revenue targets Firms have attempted to offset shortfalls in their bottom-line through tighter control of their expense lines with 7 in 10 firms (69%) reporting FY14 expenditure below budget.
Revenue Expenses
FY14 Budget vs. Actual
17% Over budget
31% On budget
69% Under budget52% Under budget
28% On budget
3% Over budget
Perception of business conditions
Net
% (p
osi
tive
- n
egat
ive)
-23-17
10
45
63
23
Q4FY14
Q1FY15
Q4FY14
Q1FY15
Q4FY14
Q1FY15
At the moment Likely to be in12 months time
Likely to be in2 years time
2 in 5 law firms (40%) express growing pressure from their clients to use legal process outsourcing
The impact of this trend is more evident among top-tier firms.
23
37
63
36
3240
38 32
Disagree / Strongly Disagree Neutral Agree / Strongly agree
Total Top-tier Mid-tier
Majority of firms (87%) provide philanthropic services to the not-for-profit sector
However, a significant proportion of firms also use their not-for-profit relationships to derive a commercial return.
Provide pro bono advice
Provide advice at reduced fees
Provide advice on a normal
fee-paying basis
87% 67% 50%
Three main practice areas in which law firms provide advice to not-for-profit organisations
September quarter 2014 results summary
Revenue from non-legal services is expected to grow over the next 12 months, and to represent an even greater proportion of firm revenues in two years time 62%
38%
38%
62%
Proportion of revenue from non-legal services
In 12 months time In 2 years time
70% Employment, workplace and Occupational Health & Safety
67% Litigation and dispute resolution
67% Other general work
CIB0501_Infographic_DPS.indd 1 9/10/14 5:31 PM
6
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
September Quarter 2014 results summary cont.
%
2 in 5 law firms (40%) express growing pressure from their clients to use legal process outsourcing
The impact of this trend is more evident among top-tier firms.
23
37
63
36
3240
38 32
Disagree / Strongly Disagree Neutral Agree / Strongly agree
Total Top-tier Mid-tier
Majority of firms (87%) provide philanthropic services to the not-for-profit sector
However, a significant proportion of firms also use their not-for-profit relationships to derive a commercial return.
Provide pro bono advice
Provide advice at reduced fees
Provide advice on a normal
fee-paying basis
87% 67% 50%
Three main practice areas in which law firms provide advice to not-for-profit organisations
62%
38%
38%
62%
In 12 months time In 2 years time
70% Employment, workplace and Occupational Health & Safety
67% Litigation and dispute resolution
67% Other general work
CIB0501_Infographic_DPS.indd 2 9/10/14 5:31 PM
2 in 5 firms expect revenue from non-legal services to increase in 12 months time, and 3 in 5 believe it will increase in the next 2 years.
7
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Overall business conditions
Perception of business conditions for Australian law firms from now to 2 years time
Although the short-term outlook remains negative, perceptions of business conditions continue on an upward trajectory over the past 12 months (-43% in Q2 FY14, -28% in Q3 FY14).
-23 -17
1023
4563
80
60
40
20
0
20
40
60
80
100
Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15At the moment Likely to be in 12 months time Likely to be in 2 years time
Net
% (
posi
tive
–-
nega
tive
)
Perceived performance of Australian economy
In balance, there is an expectation that the Australian economy will improve over the next 12 months. This is consistent across top-tier and mid-tier firms.
50
50
50
13 13 14
37 38 3623.3 25.0 22.7
100
80
60
40
20
20
40
60
80
100
100
80
60
40
20
0
20
40
60
80
100
Total Top tier Mid tier
%
Positive Very positive Negative Very negative Neutral
36
25
11
32
32
18
21
21
39
7
18
18
11
4 4 4
24
29
39
At the moment Likely to be in 12 months' time Likely to be in 2 years' time0
10
20
30
40
Mean %
More than 75%
Between 60% and74%
Between 45% and59%
Between 30% and44%
Between 15% and29%
Between 1% and14%
0%
Average percentNet % (positive – negative)
Perc
enta
ge
8
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Perception of business conditions in specific areas
Competition between law firms has perceived to have softened marginally. However, business conditions remained challenging across most business areas.
35 40
3
-13-23 -17 -19 -17
-32 -27
-65-57 -61 -60
-68 -70 -74 -73
100
80
60
40
20
0
20
40
60
Q4FY14
Q1FY15
Q4FY14
Q1FY15
Q4FY14
Q1FY15
Q4FY14
Q1FY15
Q4FY14
Q1FY15
Q4FY14
Q1FY15
Q4FY14
Q1FY15
Q4FY14
Q1FY15
Q4FY14
Q1FY15
Accessing capital
Keeping qualitystaff
Keepingexpenses under
control
Finding qualitystaff
Collectinginvoices
Competing withother firms
Keeping stafffully utilised
Winning newbusiness
Negotiating pricewith clients
Net %
(po
sitiv
e -n
egat
ive)
9
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
FY14 financial performance
Total revenue change from FY13 to FY14
It has been a challenging year for law firms, especially among top-tier firms. Half of the mid-tier firms (48%) reported revenue growth in excess of 5% for FY14 compared to 1 in 8 (13%) for top-tier firms.
2413
29
28 50 19
3 5
725
2813
33
3 57 10
3.0
0.1
4.1
20
10
10
20
100
80
60
40
20
0
20
40
60
80
100
Total Top tier Mid tier
Ave
rag
e %
Increased 2% - 5%
Stayed about the same
Increased 11% - 15%
Increased >16%
Increased 6% - 10%
25
11
32
18
21
39
18
18
11
29
39
At the moment Likely to be in 12 months' time Likely to be in 2 years' time0
10
20
30
40
Mean %
More than 75%
Between 60% and74%
Between 45% and59%
Between 30% and44%
Between 15% and29%
Between 1% and14%
0%
Average percentAverage % Decreased
2% - 5% Decreased 6% - 10%
Perc
enta
ge
10
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Difference between FY14 budgeted and actual results revenue
Half the law firms (52%) failed to meet their revenue budgets for FY14.
31 25 33
2113
24
28
25
29313
17 25 14
2.8 3.2 2.6
20
10
10
20
100
80
60
40
20
0
20
40
60
80
100
Total Top tier Mid tier
Aver
age
%
On budget
Under budget by 2%-5%Under budget by 6%-10%Under budget by 11%-15%
Over budget by 2%-5% Mean
Perc
enta
ge
Difference between FY14 budgeted and actual results expenses
The majority of law firms have been able to (at least partially) offset underperforming revenue growth through expense reductions.
28 25 29
48 50 48
1725
143 5
3 5
3.4 3.8 3.3
20
10
10
20
100
80
60
40
20
0
20
40
60
80
100
Total Top tier Mid tier
Aver
age
%
On budget
Under budget by 2%-5%Under budget by 6%-10%Under budget by 11%-15%
Over budget by 2%-5% Mean
Perc
enta
ge
11
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Market entry and exit
The two main practice areas in which law firms are looking to increase their investments are M&A and corporate advisory and insurance. Employment, workplace and OHS and insurance are the two areas most likely to see a reduction in investment.
30 3027 27 27
2320
17 17 1713
10 10
307 7 3
10
0
10
20
30
40Planning to enter/significantly grow investment
Planning to exit/significantly reduce investment
Perc
enta
ge
FY15 business priorities
12
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Revenue predictions
Changes in revenue over the next 6 months by location
Revenue expectations have improved this wave across UK/Europe, Brisbane, Melbourne and Perth. Sydney and Canberra are expected to experience a revenue decline.
75
100
71 70
35
57
76
54
38
52
29
4738
22
-13 -1320
0
20
40
60
80
100
Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15
UK / Europe Asia Brisbane Sydney Melbourne Perth Canberra Adelaide
Net
% (i
ncre
asin
g -d
ecre
asin
g)
Changes in revenue over the next 6 months by practice area
Revenue expectations have shown the strongest gains for banking and finance, competition, consumer law and trade practices and other general commercial work.
6367 67
56 52 56
43 41
25
40
2836
4133
23
33
0
20
40
60
80
100
Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15
Construction,engineering and
major infrastructure
Employment,workplace and
OH&S
M&A and corporateadvisory
Insurance Banking andfinance
Other generalcommercial work
IT, telecoms andmedia
Competition,consumer law and
trade practices
Net
% (i
ncre
asin
g -d
ecre
asin
g)
13
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Changes in revenue over the next 6 months by practice area cont.
Revenue expectations in insolvency and restructuring have decreased significantly this wave, likely due to the improved perceptions of business conditions. Revenue expectations in Government and litigation and dispute resolution have also decreased this wave.
33 32 31 3143
2819 22
39
2013 9
41
-420
0
20
40
60
80
100
Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15
Intellectual property Property, environmentand planning
Government Taxation Litigation and disputeresolution
Energy and resources Insolvency andrestructuring
Net
% (i
ncre
asin
g -d
ecre
asin
g)
14
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Realised rates and fee structures
Expected changes in realised rates over the next 6 and 12 months
Firms are expecting realised rates to increase by 0.8% in the next 6 months, and to increase to 1.1% in 12 months time.
0.7 0.81.4 1.1
Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15
In the next 6 months (as compared to the last 6 months) In the next 12 months (as compared to the last 6 months)
Mea
n %
5
0
Percentage of revenue generated using alternative price structures
On average 28% of firm revenues come from alternative price structures, a figure which is expected to increase to 33% over the next 12 months.
321 10
3428
28
31
1728
28.132.6
0.0
10.0
20.0
30.0
40.0
50.0
0
20
40
60
80
100
At the moment Likely to be in 12 months' time
Mea
n %
Between 45% and 59%
Between 30% and 44%
Between 15% and 29%
Between 1% and 14%
0%
Average percent
Perc
enta
ge
15
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Expense and profitability predictions
Changes in expenses over the next 6 months
Staff training and development joins marketing and business development and IT hardware and software as the three primary areas of expected expense growth over the next 6 months. Firms also expect telecommunications and professional indemnity insurance expenses to decrease the most over the next 6 months.
35 37 3933
10
27
10
7 6-
--13
-26-20
-3
-20
40
20
0
20
40
60
Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15
Marketing andbusiness development
IT hardware andsoftware
Staff training anddevelopment
Occupancy Library and knowledgemanagement
Telecommunications Professional indemnityinsurance
Net
% (i
ncre
asin
g -d
ecre
asin
g)
Changes in staffing over the next 6 months
The majority of law firms indicate that partner and senior associate numbers are likely to grow at a slower rate over the next 6 months.
23
7
50
13
39
13
3950
-10 -7
-32-23
10 7
40
20
0
20
40
60
Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15 Q4 FY14 Q1 FY15
Equity partnernumbers
Fixed share / salarypartner numbers
Senior Associates /senior lawyers (4th
year+)
Junior lawyer numbers (Graduates – 3rd year)
Shared service staffnumbers
Secretarial and adminstaff numbers
Paralegals
Net
% (i
ncre
asin
g -d
ecre
asin
g)
16
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Change in operating margins over the next 6 months
The proportion of firms who expect operating margins to increase for the next 6 months is lower compared to previous wave.
3327
0
20
40
Q4 FY14 Q1 FY15
Your firm's forecast for operating margins for the next 6 months
Net
% (i
ncre
asin
g -d
ecre
asin
g)
17
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Business process efficiencies
Are clients’ putting more pressure for law firms to use LPO?
2 in 5 law firms believe that there is growing pressure from their clients to use LPOs. This is more evident among top-tier firms.
4063
32
37
38
36
23 32
0
20
40
60
80
100
Total Top tier Mid tier
Perc
enta
ge
Disagree/StronglyDisagree
Neutral
Agree/Strongly Agree
Effect of growth in LPOs on operating margin over the next 12 months
Majority of firms do not believe the growth in LPOs will affect their operating margins over the next 12 months.
18 14 19
82 86 81
0
20
40
60
80
100
Total Top tier Mid tier
None
Decrease
Perc
enta
ge
18
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Provision of non-legal services
Provision of non-legal services
Approximately 1 in 2 law firms have diversified their offering to provide non-legal services, a trend that is more prevalent among top-tier firms.
5325
64
4775
36
0
20
40
60
80
100
120
Total Top tier Mid tier
Yes
No
Perc
enta
ge
Non-legal services - percentage of revenue
Non-legal services still only accounts for 1-2% of overall firm revenue.
1725
13
8 13
25
50
13
17
25
2525
25
8 13
2.0
1.3
2.4
0.0
1.0
2.0
3.0
4.0
5.0
0
20
40
60
80
100
Total Top tier Mid tier
Mea
n %
10% or more
7.5%-less than 10%
5%-less than 7.5%
2.5%-less than 5%
1%-less than 2.5%
0.5%-less than 1%
0.25%-less than 0.5%
Less than 0.25%
Mean
Perc
enta
ge
19
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Potential revenue from non-legal services
2 in 5 firms expect revenue from non-legal services to increase in 12 months time, and 3 in 5 firms believe it will increase in the next 2 years.
6238
3854
8
38.5
61.5
100
80
60
40
20
20
40
60
80
100
80
60
40
20
0
20
40
60
80Likely to be in 12 months time Likely to be in 2 years time
Increase Increase significantly Decrease Decrease significantly Remain the same
36
25
11
32
32
18
21
21
39
7
18
18
11
4 4 4
24
29
39
At the moment Likely to be in 12 months' time Likely to be in 2 years' time0
10
20
30
40
50
Mean %
More than 75%
Between 60% and74%
Between 45% and59%
Between 30% and44%
Between 15% and29%
Between 1% and14%
0%
Average percent
Net % (increase – decrease)
Perc
enta
ge
Perc
enta
ge
20
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Competition from non-traditional (alternative business model) law firms
Competition from non-traditional (alternative business model) law firms (segmented by tier)
The proportion of firms who have competed for work against non-traditional law firms are similar across top-tier and mid-tier firms.
77 79 77
23 20 24
0
20
40
60
80
100
Total Top tier Mid tier
Yes
NoPerc
enta
ge
Frequency of competition from non-traditional (alternative business model) law firms
Advent Balance and Bespoke Law are the two firms which compete most frequently with traditional law firms.
40
80 7550
40
2550
20 20
0
20
40
60
80
100
AdventBalance Bespoke Law Plexus Other
Somewhat frequently
Rarely
Never / Almost never
Perc
enta
ge
21
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Attitudes and behaviour toward philanthropy
Firms practising in the not-for-profit sector (segmented by tier)
Mid-tier firms are more likely to operate on a normal fee-paying basis in the not-for-profit sector.
87
67
50
7 3
100
62.5
37.5
0 0
81.8
68.2
54.6
9.14.6
0
10
20
30
40
50
60
70
80
90
100
Yes, pro bono Yes, at reduced fees Yes, on a normal fee-payingbasis
No, but the firm providesmonetary donations and other
non-legal related support
No
Total Top-tier Mid-tier
Perc
enta
ge
Firms practising in the not-for-profit sector by practice area
The main practice areas in which law firms provide advice to not-for-profit organisations are employment, workplace and OH&S, litigation and dispute resolution and other general commercial work.
.
70 67 67 63 5948 41 37
0
10
20
30
40
50
60
70
80
Employment,workplace and
OH&S
Litigation anddispute resolution
Other generalcommercial work
Property,environment and
planning
Regulation andcompliance
Intellectualproperty
M&A andcorporate advisory
IT, telecoms andmedia
Perc
enta
ge
22
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Firms practising in the not-for-profit sector by practice area cont.
The practice areas in which law firms are least likely to provide advice to not-for-profit organisations are Insolvency and restructuring and energy and resources.
3333 30 26 22 15 7 7
0
10
20
30
40
50
60
70
80
Banking andfinance
Taxation Competition,consumer law and
trade practices
Government Construction,engineering and
majorinfrastructure
Insurance Energy andresources
Insolvency andrestructuring
Perc
enta
ge
Change in practise in not-for-profit sector in the next 12 months
2 in 5 law firms expect to increase the amount of work they conduct for the not-for-profit sector in the next 12 months.
59
88
47
1926
2213
26
0
20
40
60
80
100
Total Top tier Mid tier
Increase by 5%-15%
Increase by 1%-4%
Stay the same
Perc
enta
ge
23
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Reasons for practising in not-for-profit sector
Whilst philanthropy and staff motivation are the primary drivers for participation in the not-for-profit sector, half the law firms in the study expect their involvement to derive a commercial benefit.
9381
5241
150
10
20
30
40
50
60
70
80
90
100
To give back to the community To engage and motivate ourstaff
To build networks andrelationships that may
potentially lead to commercialreturns
To differentiate our firm'sbrand to prospective clients
To directly increase ourrevenue
Perc
enta
ge
Effect of global financial crisis on the attractiveness of serving the not-for-profit sector
The attractiveness of serving the not-for-profit sector has not been affected by the global financial crisis (87% of law firms were not affected).
7 9
87 100 82
7 9
0
20
40
60
80
100
Total Top tier Mid tier
Yes, the sector hasbecome more attractive
About the same
Yes, the sector hasbecome less attractive
Perc
enta
ge
24
COMMONWEALTH BANK LEGAL MARKET PULSE – SEPTEMBER QUARTER 2014
Further information
For further insights or information, please contact:
Marc Totaro, National Manager Professional Services
Mobile: 0477 739 315 Phone: +61 2 9303 1940 Email: marc.totaro@cba.com.au Web: commbank.com.au/legalmarketpulse
For media inquiries, please contact:
Liz Lovett, Public Relations Advisor Phone: +61 2 9303 1403 Email: Elizabeth.Lovett@cba.com.au
Things to know before you Can: This report is published solely for information purposes. As this report has been prepared without considering your objectives, financial situation or needs, you should before acting on the information in this report, consider its appropriateness to your circumstances and if necessary seek the appropriate professional advice. The information in this report is based on the views of large and mid-sized law firms across Australia and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its compilation, but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made in this report. Commonwealth Bank of Australia ABN 48 123 123 124
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