Legal Market Overview
The economy of New Zealand is underpinned by primary industries such as agriculture, dairy and forestry but tourism, construction and, increasingly, hi-tech are becoming key drivers of growth. GDP growth of 2.3% in 2018 shows the economy is still performing strongly, though surveys of business confidence show an increasingly diminishing sentiment after two years of the Labour-led coalition government of Prime Minister Jacinda Ardern.
The country is not immune to the effects of global politics and the on-going tensions between the US and China over sanctions is a contributing factor to the more muted outlook for growth, as New Zealand is dependent on the inflow of capital, of which China is a key source. The policies of the current government have led to more scrutiny by the Overseas Investment Office (OIO) of inbound investments. The OIO has placed restrictions on the ownership of residential properties by foreign entities and, while this does not directly impact business investment, it is seen as having a knock-on effect on areas such as commercial property.
The world’s media spotlight fell on New Zealand in 2019, following the Christchurch mosque shootings. Two consecutive terrorist shootings by an Australian man at mosques in Christchurch during Friday Prayer on 15 March, 2019, which were live-streamed on Facebook Live, resulted in 51 deaths. Ardern described the events as “one of New Zealand’s darkest days” and established a royal commission of inquiry into its domestic security agencies.
A separate royal commission in Australia, looking into culture and conduct in the banking industry, is having an impact in New Zealand, where the four big banks are Australian. The spotlight is falling on financial services and, by extension, all professional services, including the legal industry. This and the increased focused on capital adequacy among the major banks is seeing more alternative lenders coming into the market. Domestic and overseas private equity funds, for instance, are an increasingly important component of the market.
In the legal market, large vertical mergers have been a key source of work for the big firms. Among the key deals were the merger between Sky and Vodafone, though this was ultimately not approved by the Commerce Commission, and the acquisition of payments processing company Paymark by Ingenico. For insolvency practices, the liquidation of insurance giant CBL and its subsidiaries has been a key source of work, with almost every major practice involved.
New Zealand has a strong cadre of full-service law firms, including the traditional ‘Big 3’ of Bell Gully, Chapman Tripp and Russell McVeagh. In terms of size and breadth, these are now matched by Buddle Findlay, MinterEllisonRuddWatts and Simpson Grierson. Since 2015, DLA Piper New Zealand has been the only global law firm based in the country, but that changed towards the end of 2019 when Kensington Swan signed an agreement to become Dentons New Zealand.
At the other end of the scale, boutique firms play a central role in some practice areas. In corporate and commercial (Harmos Horton Lusk Limited and Flacks & Wong), dispute resolution (LeeSalmonLong and Gilbert Walker), insurance (Fee Langstone and Robertsons), employment (SBM Legal, Dundas Street and Kiely Thompson Caisley) and IP (AJ Park and Baldwins), they are often party to the largest transactions in the market.