The Australian legal sector suffe- red in 2016 as the country’s economy continued to struggle. For the second year in a row, none of Australia’s three largest independent firms—Clayton Utz, Minter Ellison and Allens—made the Global 100 revenue ranking.
The economic slowdown that began in Australia in 2015 with the collapse of commodity prices and the decline of Chinese economic growth intensified last year, with the worst third quarter since the 2008 financial crisis. Meanwhile, the Australian dollar continued to depreciate, trading at A$1.34 per dollar, down 17 percent from 2014.
International firms weren’t shielded from the downturn. Last year Skadden, Arps, Slate, Meagher & Flom closed its five-lawyer Sydney office after 27 years, and DLA Piper pulled out of national capital Canberra in April 2017, six years after gaining the six-lawyer office through the merger with local firm Phillips Fox.
But not everyone is heading out. In September 2016, White & Case announced the launch of Sydney and Melbourne offices with eight partners recruited from Herbert Smith Freehills. Eric Berg, head of Asia Pacific for the firm, says that despite the slower growth in the overall economy, the projects and infrastructure sector in Australia has been active.
In particular, he cites the Australian government’s asset recycling initiatives: Under the program, the federal government provides subsidies to states as incentives to privatize infrastructure assets such as toll roads, tunnels and ports, with the proceeds then going to build new projects. The Australian government said a total of $56 billion will be allocated in the next 10 years for infrastructure projects.
“Our projects and project finance practice is now uniquely positioned with all pieces—the Americas, Europe, Africa and the Middle East, Asia and Australia—in place,” Berg says.
In December, Dentons formally entered Australia as it completed a year-long process of combining with local firm Gadens. Although Gadens’ offices in Brisbane, Melbourne and Adelaide chose not to join the combination, Dentons ended up with the firm’s offices in Sydney and Perth in Australia and in Port Moresby in Papua New Guinea. In 2017, Norton Rose Fulbright, which first entered Australia in 2010 by acquiring the then 700-lawyer Deacons Australia, merged with 180-lawyer Henry Davis York. The firm now has nearly 800 lawyers in Australia.
Elsewhere the country’s economic woes show a silver lining. Following three quiet quarters, mergers and acquisitions in Australia picked up in the last three months in 2016, according to Thomson Reuters data. Most of the deals were inbound deals, taking advantage of assets made cheap by low interest rates and the depreciated currency.
But dealmaking faces challenges in 2017 and beyond. In January, U.S. President Donald Trump signed an executive order for the United States to withdraw from the Trans-Pacific Partnership, a comprehensive trade deal designed to create closer business ties among the 12 signing countries, including Australia. The TPP’s collapse shattered Australian law firms’ hope to cash in on more cross-border trade, transactions and disputes. And in August 2016, Australian Treasurer Scott Morrison banned power company State Grid Corp. of China’s $7.7 billion preferred joint bid for half of Ausgrid citing national security concerns. The decision, a second in the year after barring a Chinese consortium from taking over an Australian cattle company, prompted warning of protectionism from China, Australia’s top trading partner.