The Big Interview: Morton Fraser chief Chris Harte

Amid all the talk of tie-ups, mergers and consolidation still swirling around Scotland's commercial legal sector, Chris Harte makes a salient point. 'You would be hard-pressed to find a Scottish firm that has no M&A activity in its make-up,' observes the Morton Fraser chief executive, who next year will celebrate his quarter century at the Edinburgh-based mid-tier practice.

Chris Harte draws an analogy between law firms and pubs in the ways both have been forced to adapt to change

Since becoming a partner with the firm in 1999, then rising to the top post at the start of 2013, Harte has been witness to momentous change within the profession. The financial crisis of 2007/08 accelerated that upheaval, culminating in a host of familiar names disappearing, be it through merger, acquisition or, in a handful of high-profile cases, failure.

Among what had been the historic “big four” players, McGrigors merged with Pinsent Masons in 2012, Dundas & Wilson was swallowed by London-based CMS a little more than a year later, and Maclay Murray & Spens (MMS) unveiled its marriage with global legal giant Dentons only last year.

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A string of tie-ups and splits have taken place further down the pecking order and most observers see little let-up in the pace of change, though a handful of indigenous firms have risen to the fore – Brodies, Burness Paull, Shepherd and Wedderburn and Dickson Minto taking top billing in terms of fee income.

Morton Fraser has plenty of heritage, tracing its roots back to 1829, when it was founded by Charles Morton, who set up as Greig & Morton WS in partnership with James Greig. The firm opened a west coast operation in 2004 and picked up Edinburgh-based practice Skene Edwards in 2008 and Glasgow-based Macdonalds Solicitors in 2013 – Macdonalds’ timeline stretches back to the 17th century.

The tail end of 2016 saw talk of a possible marriage between Morton Fraser and MacRoberts. As both mid-tier firms have annual revenues in the region of £20 million, the move would have created a business with considerable scale. Those talks fizzled out after reportedly reaching an advanced stage.

Harte stresses that Morton Fraser, which has a headcount of just over 280, with roughly two-thirds of those based in the Scottish capital, is more than holding its own as a “really strong, pre-eminent, Scottish-focused firm”.

“Look, those kind of conversations about potential tie-ups happen all the time,” he says, “and only a very small number ever come to anything. We are open-minded about these things but we are keen not to chase revenue growth for its own sake.

“Even in past five-year window, there has been a huge amount of change in the sector. Taking a glass half full view, that is a positive thing as it shows that our market is interesting and stuff is happening. That has to be a vote of confidence of sorts, and certainly keeps us on our toes.

“Looking forward, do I think that is it? There is going to be no more change? Not at all. But for the moment we are not looking to tie up with someone from outwith Scotland. We are a member of a legal network and we also have some very good connections in London and work with firms on cross-border stuff.”

The firm is now just a month away from closing its current financial year and is confident of solid progress. Results released last summer showed that revenues had risen 2.5 per cent year-on-year, and by 46 per cent in the past four years, with almost £20m in annual billings for the year to April 2017. Profit growth over that same four-year period amounted to 78 per cent. The firm has undertaken major investment in IT and completed a number of key recruitment moves.

“It’s been a strong year so far,” says Harte, who joined the firm in 1994 to undertake his training. “We saw in the previous year that there was a bit of a lull post-Brexit. What seems to have happened now is that people have decided that we just need to get on with things. We have found that in the current financial year it really has been quite positive, particularly in transactional areas for us – commercial real estate, banking, corporate – all these areas are performing well.

“One of the measurements we are trying to get our heads around is to what extent are these markets doing well and to what extent are we winning share in those markets? At the moment, we are probably seeing a bit of both.”

He adds: “I think that before the financial crisis, many professional services firms blithely assumed that year-on-year you would increase revenues and profits and the only real debate was by how much. I think we have all been brought back to reality.”

Harte talks of the need to adapt to a rapidly changing marketplace, where clients’ expectations of what a lawyer, and professional advisers in general, should offer have risen and where technology is automating many labour-intensive practices of the past.

Last month, Morton Fraser unveiled a formal “agile working” policy as part of a wider focus on employee well-being and organisational flexibility. It says it has been breaking down traditional notions of legal practice in order to offer its staff greater choice about where and when they work. The firm has now formalised the approach with a policy that applies to all staff.

Last March, Morton Fraser announced that Linda Urquhart was officially retiring after 33 years with the firm. In 1999, Urquhart broke new ground by becoming the first female managing partner of a major law firm in Scotland and went on to become the first female chair of business organisation CBI Scotland in 2009. She took on the role of chair of Morton Fraser in 2011 and received an OBE for services to business in Scotland the following year.

The firm was also one of the first commercial occupants at the vast Quartermile development that has sprung up on the grounds of the former Edinburgh Royal Infirmary in the centre of the capital. “I always joke that they will eventually call our move here visionary,” says Harte, laughing, of the shift undertaken almost a decade ago from its traditional town house offices.

Having advised pub, hotel and restaurant operators in the past, Harte draws a parallel with the licensed trade sector and its shake-up in the face of mounting economic, structural and social pressures.

“There are fewer pubs now and the successful ones have had to reinvent themselves with more of a focus on casual dining and their food offering, and they are doing very well as a result,” he says.

“They have adapted to the market and, without straining the analogy, from the point of view of professional services firms, you cannot assume that you will be around for ever. I know this is fundamental, but you have to understand what clients want from you and then work hard to give them that.

“I have seen a lot of changes in our firm and within the sector. However, I still see a thread that runs through Morton Fraser from when I joined to the present day. I think it has always been a firm that wants to be a good place to work – wants to be a good employer – and is not going all out for financial returns ahead of absolutely everything else.

“The pace of the M&A in the sector is probably quickening and some of the drivers are changing but the idea of consolidation and firms coming together to better achieve what they are trying to do is not a new thing.”

Harte says he is keen to see the headcount rise, particularly at the firm’s west coast operation.

“We have being doing a lot in Glasgow in recent years and would like to find ways of continuing to grow there. But we are keen not to do so at all costs. Let’s make sure it is the right kind of growth and is sustainable rather than piling in and adding numbers and revenues for the sake of it. The trickier thing is to grow in a way that is strategic and sustainable.”

Harte concludes: “If you had suggested to people about 15 years ago that many of those names would disappear and that law firms would become insolvent then people would have said ‘really?’. It’s a salutary reminder that when all is said and done, we are a commercial enterprise and we will succeed or fail just like any other commercial enterprise.”