Focus: Blake Dawson Emerges as Major International Merger Target

We continue to hear noise that Blake Dawson is on the phone to firms abroad. As we’ve already reported, rumours abound that Blake Dawson has been talking to London firm Herbert Smith about the prospect of a major international merger. We understand that these talks continue, but we’re also hearing that several US firms have recently expressed interest in merging with Blake Dawson. This makes sense to us – the devaluation of the USD and the thoroughly bearish outlook for the US economy make revenue and revenue-streams denominated in AUD more enticing, while the geographical exposure to the booming Asian economy makes long-term business sense.

Reading between the lines, it looks like Mr Carrington already has the binoculars out too:

“In the next three to five to 10 years most Australian, certainly the larger law firms, and I would include in that category now the global firms, will be looking beyond our immediate boundaries to source work… I suspect we will see the arrival of more global firms, whether they be US or UK based, or both. We’ll see some major firms change their branding”

(John Carrington, AFR 2011 Legal Conference, March 31 2011).

Well, there can be little doubt that Blake Dawson is a major firm that would benefit from a change in branding, but is the firm an appropriate and realistic vehicle for the arrival of another global firm? Let’s have a look.

Blake Dawson Historical Revenue Performance

FY2005/2006: $305million

FY 2006/2007: $337million

FY: 2007/2008: $370million

FY: 2008/2009: $368million

FY: 2009/2010: $359million

Estimated Blake Dawson Historical Profit Performance

FY2005/2006: $110million (36%)

FY 2006/2007: $131million (39%)

FY: 2007/2008: $148million (40%)

FY: 2008/2009: $136million (37%)

FY: 2009/2010: $147million (41%)

In the last year, Blake Dawson has done an excellent job of quarantining profits from declining revenue. We know that high profitability is a major consideration for potential suitors, but the recent history of declining revenue is likely to be a source of concern for those wishing to merge with Blakes. The downbeat comments made by the firm’s CEP John Carrington to the AFR (29/4) aren’t likely to help matters either:

Blake Dawson managing partner John Carrington said there was no question larger firms had faced challenges retaining market share in recent years. “I think this will continue. There is also no doubt that the ability to generate revenue and profits through increased fee rates will be under continuing pressure as well,” he said.

But don’t international firms want less competitive pressure? One thing they’re certain to want is a firm with up-to-date technology and this is where the trouble apparently starts for Blakes. According to an anonymous Blakes secretary, an allegedly highly confidential memo apparently from partnership level contained the following comment:

5 years ago, Blake Dawson was highly regarded for its technology legal practice and internal computer systems. Both are now left wanting. My computer screen is still fuzzy, my secretary’s computer sometimes sounds like a hair dryer and our new printer is as slow as the old one.

A person purporting to be a Blakes IT insider later emailed us clarifying the situation:

The noisy computers are a faulty sensor in our crappy Lenovo desktops. It makes the fans spin fast. Doesnt happen as much anymore. The fuzzy monitor is actually Lenovo’s fault too. This is old news. They sold us a monitor that didn’t match well with our model of laptop. The resolution is terrible. You would think that a company like Lenovo would get that right.

Or that a law firm would sue the company. Or that the law firm would replace substandard technology. Or that Blake Dawson is  a homosexual porn star err… an insolent child singer/actor … a technotronic law firm.

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Focus: Blake Dawson Emerges as Major International Merger Target, 3.9 out of 5 based on 11 ratings