Legal Services Industry
Source of data: IBISWorld (M6391 : February 2019)
Actual Revenue (2019):
Projected Revenue (2018)
AUD $20.8 billion
AUD $19.8 billion
Historical Annual Real
Growth (2014 – 2019):
1.6%
Projected Annual Real
Growth (2019 – 2024):
2.0%
Industry Profit: AUD $6.2 billion(29.8% of industry
revenue in 2019)
Industry Wages: AUD $6.5 billion (31.3% of industry
revenue in 2019)
Number of Business: 21,322
Australian Legal Services Industry Key Statistics
AUD $20.8 billion for 2019 split as follows
Australian Legal Services Industry Revenue
Source of data: IBISWorld (M6391 : February 2019)
Commercial law services, 32.2%
Source of data: IBISWorld (M6391 : February 2019)
Australian Legal Services Industry Revenue
AUD $20.8 billion for 2019 split as follows
Commercial law services, 32.2%
Source of data: IBISWorld (M6391 : February 2019)
Australian Legal Services Industry Revenue
AUD $20.8 billion for 2019 split as follows
Operators in this segment provide legal advice
to businesses, mostly relating to major
corporate transactions such as mergers and
acquisitions and IPOs, and financing methods
and taxation solutions.
The business cycle, investment levels and
overall corporate activity heavily affect demand
for these services.
Due to the complexity of commercial
transactions, legal firms that specialise in this
area of law often command high premiums.
The top-tier law firms primarily provide services
in this segment.
Some commercial law services, such as those
associated with bankruptcy and restructuring
initiatives, are countercyclical.
Over the past five years, this segment has
increased as a share of industry revenue due to
positive business confidence and growing
demand from financial services firms.
Personal legal & industrial
relations, 21.7%
Source of data: IBISWorld (M6391 : February 2019)
AUD $20.8 billion for 2019 split as follows
Australian Legal Services Industry Revenue
.
Personal legal & industrial
relations, 21.7%
Source of data: IBISWorld (M6391 : February 2019)
AUD $20.8 billion for 2019 split as follows
Australian Legal Services Industry Revenue
.
This service segment includes legal work related to
wills and estates, personal injury, workers’
compensation and family Law.
Sole proprietors and small firms primarily are the
primary providers of personal legal services, as
services in this segment are less profitable than
services in other segments.
Since the Fair Work Act 2009 was implemented,
employers have grappled with good-faith
bargaining, industrial action and permitted
agreements.
Legal firms provide services to both employers and
employees. Legal services related to industrial
relations usually involve unions and large
corporations.
This segment has increased as a share
of industry revenue over the past five
years, despite a decline in the
workplace accident rate.
Growth in this segment is largely due to
law firms increasingly offering a no-win
no-fee incentive to consumers for
personal injury and workplace claims.
Administrative, constitutional & other, 16.3%
Australian Legal Services Industry Revenue
Source of data: IBISWorld (M6391 : February 2019)
AUD $20.8 billion for 2019 split as follows
Administrative, constitutional & other, 16.3%
Australian Legal Services Industry Revenue
Source of data: IBISWorld (M6391 : February 2019)
AUD $20.8 billion for 2019 split as follows
This segment includes work related to
government administration, the constitution,
tribunals and other fields of law, such as
environmental law.
The main market for these services is
corporate clients dealing with government
departments and agencies. Some larger
industry firms also provide advisory
services to government departments,
agencies and statutory authorities
regarding forming and implementing
government regulations.
This segment has slightly declined as a
share of industry revenue over the past five
years, as government departments have
increasingly been using in-house legal
teams.
Property law services, 15.5%
AUD $20.8 billion for 2019 split as follows
Australian Legal Services Industry Revenue
Source of data: IBISWorld (M6391 : February 2019)
Property law services, 15.5%
AUD $20.8 billion for 2019 split as follows
Australian Legal Services Industry Revenue
Source of data: IBISWorld (M6391 : February 2019)
Property law services refer to property
conveyancing and other property-related
legal work. Small local law firms primarily
provide these services to households and
businesses engaging in property
transactions. As a result, interest rates and
the strength of the domestic economy
significantly affect demand for property law
services.
Additionally, while property owners and
investors account for a large portion of
clients for this segment, property law
specialists also advise property developers
on issues such as structuring finance for
property sales. Although the number of
housing transfers has declined over the
past five years, a rise in the number of new
dwelling commencements has boosted
demand from property developers over the
same period. However, operators in this
segment face strong competition from real
estate agents and mortgage brokers that
also provide these services. Over the past
five years, this segment has declined as a
share of industry revenue.
Intellectual property, 5.0%
AUD $20.8 billion for 2019 split as follows
Australian Legal Services Industry Revenue
Source of data: IBISWorld (M6391 : February 2019)
Intellectual property, 5.0%
AUD $20.8 billion for 2019 split as follows
Australian Legal Services Industry Revenue
Source of data: IBISWorld (M6391 : February 2019)
Intellectual property refers to legal protection,
such as patents, copyrights and trademarks,
of valuable intangibles including ideas,
inventions, words, trade secrets, discoveries
and designs.
This segment comprises a range of clients
across different industries. These include
pharmaceutical and information technology
companies, fashion houses, and food and
beverage manufacturers.
This segment has grown as a share of
industry revenue over the past five years, as
biotechnology and fintech firms have spent
more on research and development.
Criminal law services, 4.8%
Barristers account for a higher proportion of
the criminal law services segment than for
other legal professionals, as clients that
require these services often need in-court
representation.
An increase in illicit drugs, weapons and
explosives offences has supported demand
for criminal law services over the past five
years. These cases are generally more
complex than other crimes, such as traffic
violations, allowing lawyers to charge
higher fees. However, demand for criminal
law services has slowed over the past five
years, due to weak growth in criminal
activity. As a result, this segment has
AUD $20.8 billion for 2019 split as follows
Australian Legal Services Industry Revenue
Source of data: IBISWorld (M6391 : February 2019)
Community legal services, 4.5%
This segment includes legal aid authorities
and community legal centres. Eight legal aid
authorities operate in Australia, one in each
state and territory.
Legal aid provides funds that allow access
to legal representation, while community
legal centres often provide free legal advice
and services. Almost 200 community legal
centres operate throughout Australia,
providing free legal services to the public
with a focus on helping disadvantaged
individuals.
.
State and federal
governments provide most
of the funding for these
services, with a small
proportion derived from
other sources such as
philanthropic organisations.
This segment has declined
as a share of industry
revenue over the past five
years, due to Federal
Government funding cuts
AUD $20.8 billion for 2019 split as follows
Australian Legal Services Industry Revenue
Source of data: IBISWorld (M6391 : February 2019)
Criminal law services, 4.8%Intellectual property law
services, 5.0%
Personal legal & industrial
relations, 21.7%
Administrative, constitutional & other, 16.3%Community legal
services, 4.5%
Property law services, 15.5%
Commercial law services, 32.2%
AUD $20.8 billion for 2019 split as follows
Australian Legal Services Industry Revenue
Source of data: IBISWorld (M6391 : February 2019)
Australian Legal Services Industry Key External
Revenue Drivers
Australian Legal Services IndustryKey External Revenue Drivers
Projected for 2019
according to IBISWorld
Property transactions
Source of data: IBISWorld (M6391 : February 2019)
Australian Legal Services IndustryKey External Revenue Drivers
Projected for 2019
according to IBISWorld
Property transactions
Demand from financial services industry
Source of data: IBISWorld (M6391 : February 2019)
Australian Legal Services IndustryKey External Revenue Drivers
Projected for 2019
according to IBISWorld
Property transactions
Demand from financial services industry
Business confidence
Source of data: IBISWorld (M6391 : February 2019)
Australian Legal Services IndustryKey External Revenue Drivers
Projected for 2019
according to IBISWorld
Property transactions
Demand from financial services industry
Business confidence
Level of criminal activity
Source of data: IBISWorld (M6391 : February 2019)
Projected for 2019
according to IBISWorld
Property transactions
Demand from financial services industry
Business confidence
Level of criminal activity
Divorces
Australian Legal Services IndustryKey External Revenue Drivers
Source of data: IBISWorld (M6391 : February 2019)
How to quantify business value
How to quantify business value
Future maintainable earnings
(somewhat objective as profit can be quantified)
How to quantify business value
Future maintainable earnings
(somewhat objective as profit can be quantified)
X
How to quantify business value
Future maintainable earnings
(somewhat objective as profit can be quantified)
X
Multiple i.e. a number usually to one decimal place
(subjective because it relies on qualitative factors)
How to quantify business value
Future maintainable earnings
(somewhat objective as profit can be quantified)
X
Multiple i.e. a number usually to one decimal place
(subjective because it relies on qualitative factors)
=Value of legal practice
What makes one law firm more valuable than another (assuming similiar profit)?
1. Service lines & geography
More service lines, across different geographical areas, the greater the spread
of risk, ergo HIGHER MULTIPLE
2. Fee generating ‘equity’ partners per service line
Less reliance on one key partner to preserve service line income, ergo
HIGHER MULTIPLE
3. Spread and depth of repeat annual customers
Quality, spread and depth of repeat clients is KING, ergo HIGHER MULTIPLE
4. Staff turnover and working capital management
Rigid focus on billable hours and other KPI can lead to burnout – balance is
needed as people drive revenue & profits. Low staff turnover, with strong
working capital KPI leads to HIGHER MULTIPLE
1. Top Tier Firms have expanded into international markets with global clients increasing revenue (independent of domestic conditions) and also opening opportunities for domestic boutique firms which have increased in number.
2. International based firms opening up offices in Australia, e.g. Pinsent Masons, Kennedys, Clifford Chance.
3. Recent amendments to the Singapore-Australia Free Trade Agreement (SAFTA) have made it easier for Australian legal firms to practice in Singapore. Similarly, the China-Australia Free Trade Agreement (ChAFTA) allows Australian law firms to establish commercial associations with Chinese law firms in the Shanghai Free Trade Zone.
4. Big 4 accounting firms recruiting law firm partners will increase competition and reduce demand from some large corporate clients. Government departments and private companies also growing in-house legal teams.
5. Clayton Utz introduced Forensic & Technology Services which will compete with accounting & insolvency firms. Expect other legal firms to expand service offerings beyond traditional legal services.
Australian Legal Services Industry 9 Observations and Trends
5. Some law firms ‘merging’ to generate accretive revenue but stagnant recent
acquisition activity by consolidators as law firms prefer opportunistic growth via
recruiting rainmakers as lateral hires who can attracting other lawyers to follow.
6. Some movement towards fixed fees driven by increased competition and cost
conscious clients.
7. More online legal services and savvy use of digital marketing to promote brand.
Blockchain technology and smart contracts will impact delivery of legal services.
8. Wages as a percentage of firm revenue expected to increase as legal work
requires more highly trained and more specialised experience to compete via
promotion of niche areas.
9. Firms seeking to improve operating efficiencies and employ practice managers
to drive improvements in profitability.
Australian Legal Services Industry 9 Observations and Trends
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