'There's no doubt this has improved our bottom line': Why Kiwi firms should look to Australia

by Mackenzie McCarty12 Feb 2014
On Monday, NZ Lawyer reported on an article penned by DLA Piper global co-chief, Sir Nigel Knowles, who argued that firms have three choices when it comes to future success: go global, go niche, or go bust.
Lovegrove, Smith & Cotton – an Australian construction and planning law firm with a satellite office in Auckland – partner, conjoint professor Kim Lovegrove, FAIB, has responded to that article, saying Knowles is largely ‘on the money’, save for one important distinction when it comes to the local market. 
“Maybe ‘global’ is the wrong word; ‘regional’ is more appropriate.  New Zealand firms can develop a strong regional presence particularly in the Antipodes - this is achievable, but not on a global scale. The logistics of moving into the Australian market…are much more achievable on account of proximity, there being no language barriers and close to dollar parity.  The exchange parity may afford New Zealand law firms a rare window to invest in Australia, because historical trends suggest that the Australian Dollar will recover against the Kiwi currency.”
But if it’s so easy for New Zealand firms to expand across the Tasman, then why aren’t more of them doing it? (And judging by Hall & Wilcox’s recent acquisition of Duncan Cotterill’s Sydney office, firms may have legitimate reason to tread carefully). Lovegrove argues many maintain an overinflated fear of losing referrals.
“Some large firms have been reluctant to set up shop abroad for fear of losing referrals from Australian counterparts. My personal view is that this is not a compelling argument and is used as an excuse rather than a reason. Yes, the Australian market is highly competitive, yes it is tough, but it is also much larger, so potentially the most adept will do better on account of market size.”
Ambitious law firms, he says, derive revenue from growth of client base by way of practice acquisition and strong client retention. Referrals, while important, he admits, are rarely the lifeblood of the larger and more established organisations. 
“The law firms that have shown the most profound growth in Australia in the last decade have done so by way of practice merger, practice procurement or the procurement of partners with transportable billings.”
Nor is cost a significant barrier, according to Lovegrove, who claims it’s no more expensive for an Auckland practice to set up in Melbourne than for a Perth or Brisbane practice setting up in the same location. 
“…although there is some provincialism that can be overcome by practice merger or the purchasing of boutique practices or big name lawyers.  That, after all, is how the London and American firms have moved into Australia.  Until recently, the weakness of the New Zealand Dollar was a cost barrier; this is not an impediment at this time on account of proximate parity, so the time is nigh.”
Finally, Lovegrove believes Australia is in fact a better expansion bet than Asia when it comes to New Zealand firms, for reasons both geographical and cultural.
“I find it amazing that New Zealand firms have not pushed more assertively into Australia. Yes it is very competitive, but so is the tiny New Zealand market…New Zealand law firms need to recalibrate their thinking and think in terms of an Antipodean region or market where one is intent upon being cross-jurisdictional. After all, that’s what our practice has done as a niche practice…We operate in the Victorian, NSW, ACT, Queensland and more recently New Zealand [markets]. Different jurisdictions, but all part of the Australasian market - and there is no doubt that this has improved our bottom line.”

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