IBISWorld Market Research
Price pressures have mounted over the past five years, as competition has remained high
Melbourne, Australia (PRWEB) January 31, 2015
The past five years have challenged the Legal Services industry, with the aftermath of the global financial crisis taking its toll. While profit margins have remained high, revenue growth has slowed due to declining demand for services, as businesses have implemented cost-cutting measures. According to IBISWorld industry analyst Sebastian Chia, “price pressures have mounted over the past five years, as competition has remained high.” Consumers and businesses alike have increasingly demanded value-for-money legal services. Consequently, industry revenue is projected to grow by an annualised 2.1% over the five years through 2014-15, hampered by declines in 2009-10 and 2012-13. The industry's fortunes are expected to improve in 2014-15, with revenue forecast to increase by 2.7% to reach $22.7 billion.
Lacklustre demand in Australia has caused many major firms to look overseas for growth opportunities. Herbert Smith Freehills, Allens and Ashurst all merged or formed alliances with UK-based law firms in 2012 and 2013. Meanwhile, King & Wood Mallesons merged with a Chinese firm. IBISWorld projects solid growth for all four firms in 2014-15. Minter Ellison and Clayton Utz are the only two remaining major firms yet to merge or align with an overseas partner. However, both have indicated a willingness to do so in the future. Industry revenue is forecast to grow over the five years through 2019-20. “Merger and acquisition work is expected to increase as businesses become more comfortable with challenging conditions and begin to invest more strongly,” says Chia. Initial public offering work is also expected to rise on the back of strong activity in 2014. Furthermore, small firms will have opportunities for growth in niche markets over the next five years.
The Legal Services industry is predominantly comprised of small firms. Over half of all firms are sole practitioners or partnerships not employing any additional non-partner staff. This indicates a low level of market share concentration. The key to a significant share in a saturated market environment is niche practice and marketing. Many clients prefer to engage with a locally based practitioner, but given such high competition levels within regions, specialisation is still key to strong business performance. This allows firms to build on their reputation in a specific practise area, a key success factor for firms in the industry. Many top-tier firms often focus too much on higher value business, like international mergers, and lose business from the everyday client as a result.
For more information, visit IBISWorld’s Legal Services industry in Australia report page.
Companies in the industry provide a broad range of legal services. This includes solicitors, barristers and legal aid offices. Conveyancing services provided by lawyers and patent offices are also included in the industry. The industry does not include services provided by in-house legal teams.
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