Clients’ search for value is driving fresh disruption through the Australian legal sector: The man leading a multidisciplinary firm’s foray into the legal market will speak on this at a major managing partner conference
O’Malley, the former managing partner of King & Wood Mallesons, will be one of the headline speakers at the Chilli IQ 8° Managing Partner conference being held in Queensland next February, where he is set to explore the resurgence of multidisciplinary professional services firms in Australia.
The public have grown very confident with the concept of multi-disciplinary practice over the past 10-15 years, O’Malley told Australasian Lawyer.
“The concept of being in an environment where you’ve got people with different functional expertise is something that people are very comfortable with, so extending that to legal is a natural move…The idea that a firm can provide a more integrated holistic solution appeals to them.”
The market is also fundamentally different compared to the early 1990s, which was the last time that the large professional services firms attempted to carve themselves a niche of the legal market.
O’Malley says clients are now seeking greater value, are less concerned about law firm branding and long standing relationships, and more focused on whether firms can deliver quality services in a commercial and business relevant fashion.
They are far more sophisticated and savvy, he says.
“Right down to almost what individuals can do for them as opposed to large firms. They’ve seen the legal sector fragment across Australia and New Zealand over the past 10 years. Many of the initial suppliers have merged or changed, and [clients are] not really sure what any of it means.”
Accounting firms are also operating very differently today, says O’Malley. In the early 1990s when they first tried to take a slice of the legal pie, they were substantially smaller than today and relied heavily on audit and assurance work.
Now, however, they are much larger multidisciplinary organisations with tax, consulting and deals practices standing alongside audit and assurance.
O’Malley is leading the charge into the legal market alongside Tim Blue, also a former KWM managing partner.
At present, PWC is home to an Australian legal partnership of six, with ambitions to increase to 20-25 partners over the coming three to five years, and $100 million of legal service revenues.
By carefully constructing legal groups with a good cultural and practice fit, O’Malley believes that multidisciplinary firms would be able to compete effectively with long established and even global law firms.
He sees a huge opportunity to provide legal services as part of an integrated and tailored commercial offering.
“For example, in an M&A transaction, we can provide the legal documentation and advice, transactional support - including the commercial and financial due diligence - and the tax structuring in one seamless service.
“We want to be a top 20 global law firm in the next five years. PWC already has around 200 lawyers and $500 million of legal service revenues. We want to more than double that in five years.”
However, O’Malley doesn’t necessarily believe that the entrance of the Big Four into the legal space in itself is a dangerous threat to the profitability of traditional law firms.
Instead, he thinks those firms will probably just see PWC and others as offering a different value proposition.
“These large corporate and commercial firms in Australia and New Zealand are excellent at what they do. The question is, as they deal with the same pressures of change, can they actually change their model quick enough to deal with it?
“What we’re doing is saying ‘where it’s logical for us to have a highly competent legal service, we will be a player in that space’.”
And as the former managing partner of a giant law firm, O’Malley says he’s certainly noticed the cultural difference at his new multidisciplinary firm.
His general observation is that the Big Four are looking over the horizon, rather than just in the rear-view mirror.
“I think what that means for us in the legal group is we have the opportunity to avoid the traditional model…We are constantly in that white space where our clients are, and we’re trying to find and understand opportunities,” he says.
“It’s early days. There is a lot of activity going on here, and we’re very busy recruiting. You get the sense that the whole business is excited about going back into the legal market, and playing the role of disrupter.”
The 8° Managing Partners Forum provides an opportunity for a frank exchange of views among senior leaders of the nation’s leading law firms. It will be held on February 27-28, 2015.