Law firms put adaptability on display

Amid a sharp rebound in business conditions, Australian law firms have defied earlier projections and recorded a significant increase in profits over the 2021 financial year, according to the new CommBank Legal Market Pulse.

Despite the pandemic-induced disruption, the research found 85 per cent of law firms currently have a positive view of business conditions, matching the previous record confidence reading from mid-2018. Further, the vast majority of firms expect conditions to remain favourable over the next 12 to 24 months.

Firms hiring intentions have strengthened at all levels, for both legal and non-legal professionals, as the companies seek to keep pace with an increasing workload. The most in-demand roles are senior associates and junior lawyers.

Julienne Price, Executive Manager of Professional Services at CBA, said: “The legal services firms’ rebound and profit growth is a testament to adaptability and resilience during such a disruptive period.

“Firms are preparing for the return of many expenses curtailed by the pandemic and for the current rate of profit growth to settle which is prompting many to rethink their investment focus.

“Firms remain focused on keeping up with current demand and attracting and retaining talent. Most are increasing workplace flexibility, focusing on staff wellbeing, and luring in their competitor’s top performers,” Ms Price said.

To maintain current momentum and service client demand, most firms are prioritising investment in marketing and business development (65 per cent), lateral hires from competing firms (58 per cent), and adopting new technologies (56 per cent).

The CommBank research shows almost one in two firms (46 per cent) anticipate higher levels of mergers and acquisitions (M&A) in the next 12 months, increasing to 61 per cent of firms holding the same view over a two-year horizon. 

About the CommBank Legal Market Pulse

The CommBank Legal Market Pulse is an analysis of Australia’s legal sector. The report is based on a quantitative study of 55 leaders of law firms, conducted in July 2021 by Beaton Research + Consulting. Participants included 8 top-tier firms, 29 mid-tier firms and 18 ‘other’ firms that are smaller in turnover than the preceding categories. When a ‘don’t know’ response is given, it is excluded from the associated chart. The research segments firms by leading firms and followers based on five criteria used in the report. Leading firms are defined as those with positive or stable financial, workforce and business operations performance. References to leading firms relate to the 30 firms that met all five criteria, and followers to the 25 firms that did not. The five criteria are stable or growing year-on-year profit, maintaining cash flow, managing staff utilisation, adapting to remote work and digital delivery of services, and firms’ ability to compete with other firms.