Since the financial crisis of 2007/08, the profession has seen a host of familiar names – many as similarly long established as S&W – disappear, be it through merger, acquisition or, in some cases, failure. The retrenchment of the nation’s two financial heavyweights – Royal Bank of Scotland and Bank of Scotland, latterly as part of HBOS and then Lloyds – saw deal activity and funding slow markedly and with it the need for lucrative legal advice.
Firms hitherto reliant on banking and corporate work to generate the big bucks were forced to cut their cloth and refocus efforts on more buoyant practice areas. Throw in the desire – in some cases necessity – to expand beyond these shores and the challenges posed by disruptive technologies and commoditisation in a sector whose biggest costs are its people, the change in the legal landscape has been nothing short of seismic.
In the past few years, consolidation has been the name of the game. Where Edinburgh-headquartered S&W was once one of the so-called “big four” in Scotland, as an independent entity it is the sole survivor of that grouping. 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.
Among indigenous players, Shepherd and Wedderburn is likely to be mentioned in the same breath as Brodies and Burness Paull these days. Revenue-wise, S&W and Burness Paull are pretty evenly pegged at somewhere between £50 million and £55m, with Brodies booking annual fee income north of £65m.
As it enters the final quarter of its financial year, S&W’s chief executive, Stephen Gibb, appears confident about the firm’s prospects, and its standing in the marketplace.
“We see a market for a few really independent Scottish-headquartered firms,” he asserts. “What has been happening is a positive development because we believe that we have something really strong and positive to offer and we believe that a lot of Scottish-based businesses in particular will be interested in our offering.
“We are now ten years on from the financial crisis and we have seen a lot of changes in the market. However, I think that we have weathered the storm pretty well. It was a difficult period for everyone post-financial crisis. Everybody had to tighten their belts and try and move forward.”
While the firm under its present naming came into being in the early 1920s when Joseph Wedderburn of Carment Wedderburn & Watson entered a partnership with Alfred Shepherd of Guild & Shepherd, the roots of the business can be traced back to Patrick Stewart, who set up practice in the Scottish capital in 1768.
More recently, S&W stepped in to rescue Tods Murray following its plunge into administration in October 2014. That deal saw scores of staff from Tods – itself one of Scotland’s oldest law firms, having been founded in 1856 – taken on by its larger peer.
Those additions plus a series of lateral hires have taken S&W to its present partner count of 80 with a staff headcount around the 500 mark, across offices in Edinburgh, Glasgow, Aberdeen and London. The London operation was launched in 2001, while a concerted push into the Granite City was undertaken in 2016 through the acquisition of independent business law firm The Commercial Law Practice (CLP). That deal was completed at the start of last year and saw CLP partners Mike Anderson and Keir Willox become partners at S&W.
Gibb, who joined the firm as a partner from Fyfe Ireland in 1999 and was made deputy CEO in 2009 before taking up the top job three years later, stresses that the Aberdeen move was “not purely an oil and gas play”, though a steady rebound in the oil price to around $70 a barrel will have provided encouragement.
“We deliberately went into Aberdeen on the basis of the North-East business community,” he says. “We wanted to demonstrate that we were doing this for the long term.”
“The firm has had a London presence since 2001 which we believe is very important to the business and has benefited us a lot,” Gibb adds. “Our Scottish-based clients are interested in that as a platform into the London market. International clients, meanwhile, will tend to come to the city of London before coming to Scotland and so having a base there is extremely helpful.”
In its last set of annual results, S&W saw a 5 per cent fall in revenue to £50.5m, which Gibb attributed to a year of investment in IT and client projects, as well as a leaner period for renewables and commercial litigation.
With “things having bounced back”, the partnership is now in a position where it is “performing very strongly”, with turnover likely to be comfortably north of £50m in the year to the end of April. “We are well ahead of where we were this time last year,” notes Gibb. “That’s across the board with a mixture of corporate and real estate, which is performing very strongly, litigation, regulation and markets.”
Alluding to the challenges posed by Brexit, both for the legal profession and its client base, the S&W chief remains sanguine, insisting that “everyone is basically getting on with it at the moment”.
“Challenges and opportunities almost come in the same breath,” he says. “The sterling devaluation has caused more inward investment in the UK as a whole and Scotland in particular, so we see a lot of money coming in and picking up assets that are looking attractive because of where sterling sits. That is likely to continue for the foreseeable future.
“We have also seen the stock market on something of a high and that has meant Scottish companies have been starting to access the market over the past year. Hopefully that will continue. You also have the oil price nudging $70.”
Gibb is enthused by Scotland’s emerging leadership in digital technologies and innovation, highlighting the firm’s involvement with Edinburgh-rooted fantasy sports game developer FanDuel and the sale of fellow capital success story Skyscanner, the travel search specialist, to Chinese giant Ctrip.
“We have the ability in Scotland to produce two unicorns [businesses with $1-billion-plus valuations] in a short space of time and offer a range of expertise in that digital market, not just from a legal perspective. You go to the seminars, you go to the incubators, you listen to people and you see the quality on offer. It’s really exciting.
“Technology and artificial intelligence is also important to our business. We are working with some of the bigger platforms that can review thousands of contracts. There are huge amounts of things going on around that area and it is so fundamentally important. However, it all comes back down to people at the end of the day,” he stresses. “We are a people business. If you want to be at the top of the profession in a particular area and you are in the service industry then you have to have the best people to service your clients.”
Like most of his peers, Gibb anticipates further consolidation within the profession, but says the firm has developed a clear focus in a “big year” for the business.
“Do I see further consolidation in the sector? Yes, I think that is likely,” he observes. “That is the way the market is going just now. Could we be a consolidator? Never say never.
“The story that we have to tell people is of an independent, Scottish-based, outward-looking legal business with a really strong, stable financial position. We are getting lots of CVs and are in discussions with various people at the moment. We see a real opportunity to pick some really good people up.”