Providing a one-stop shop of consulting services alongside legal advice has helped Australia’s top law firms grow their consulting divisions amid the pandemic, even as the big four consulting powerhouses cut pay and jobs.
The 100-strong consulting team at MinterEllison, which was the first major legal outfit to push into practice area, forms the fastest-growing part of the firm’s revenue base, while the growth of rival big six firm Ashurst’s nascent consulting team is more than six months ahead of schedule.
Ashurst’s global managing partner Paul Jenkins said the foray into consulting in Australia has been such a success that the firm is now considering doing the same in other offices around the world.
This growth – off an admittedly small base – has come as the big four consulting groups are coming out of six months of widespread job cuts and redundancies as COVID-19 saw demand for their advisory services plummet.
MinterEllison chief executive Annette Kimmitt pinned some of the firm’s consulting success on clients increasingly wanting a “one-stop shop” for both legal and consulting services.
The big four relied on a similar theory when pushing into the legal sector in the past decade, largely focusing on technology and tax advice that could sit alongside other project work for the firm.
“I think our growth is reflective of what we’re focusing on with our consultants. They’re offering services that are definitely adjacent to our legal services,” Ms Kimmitt said.
It’s being able to say to clients, ‘rather than using two professional services firms, we can provide a similar service but with just one firm’.
— Annette Kimmitt, MinterEllison CEO
Mr Jenkins added: “Our clients have in the past looked to the large consultancy firms, but I think they are now looking for more of a bespoke service. They want a smaller team which is very focused on the particular issue of concern.
“We call it an adjacent service – we’re focusing on where we are strong in a legal context and then adding consultancy services alongside that, such as risk or board advisory services.
“It’s being able to say to clients, ‘rather than using two professional services firms, we can provide a similar service but with just one firm’.
“And if you can provide a one-stop shop and continue to provide high-quality service with people who are leaders in the area, then clients tell us that is an attractive proposition.”
Ashurst has hired the entire leadership group for its new consulting division from either commerce or big four backgrounds. It also has further leadership group hires in priority market segments kicking off in October and January.
Ms Kimmitt said the business models of law firms were better suited to performing strongly during a downturn than those of the big four.
“When you looking at the [big four], where they are making cuts is predominately in their consulting businesses,” she said.
“Comparatively, our consulting services are going quite well. As a whole they are continuing very strong growth and our tech consulting team in particular is going to return high growth this year and next.”
Ms Kimmitt said the big four partnership model was particularly sensitive to a downturn in revenue.
“If you think about the professional services business model, it’s a model that serves its businesses really well in times of economic growth but is really challenged in times of serious economic downturn,” she said.
“The model is highly, highly sensitive to the slightest downturn in revenue. And then when you think about their partnership structure, 100 per cent of the profits have to be distributed every year, which [limits] cash reserves.”
Big four slow law push
At the same time, the big four consulting firms have largely slowed their previously aggressive push into the legal sector, according to the latest round of The Australian Financial Review Law Partnership Survey.
The July 2020 survey revealed that Deloitte, KPMG and PwC did not make any appointments to the partner ranks in their legal practices, while EY made just three.
Once departures were taken into account, PwC’s legal partner numbers shrunk by six from July 2019 to hit 34 in 2020, KPMG’s by four to 21, and Deloitte’s by one to 14. EY was again the exception, with overall growth of 11 to hit 28.
KPMG head of legal Kate Marshall said COVID-19 had made the firm “revisit its growth ambitions” for its legal practice.
Prior to the pandemic, it had made brought on significant numbers of lateral partners and their teams. While the firm still plans to continue that expansion, she said it was now taking stock of the best way to do so.
It comes as PwC loses two of its law, partners Danny Simmons and Bryan Pointon, to leading mid-tier law firms Mills Oakley and Norton Rose Fulbright respectively from October 1.
The move is a return to the traditional law firm model for both men, who joined PwC as senior members of its mergers and acquisitions legal team after spending the bulk of their careers at leading Australian legal practices.
Mills Oakley also recruited director (Lynda Reid), senior associate (Jana Kiriazidis) and associate (Shannon Sau) from PwC’s legal division at the same time.