Legal Review 2023: how sector consolidation means business continues

Claire Armstrong, managing partner at Dentons Scotland, believes the recent M&A activity in the sector can be attributed to a combination
of factors. Picture: Neil Hanna — Claire Armstrong, managing partner at Dentons Scotland, believes the recent M&A activity in the sector can be attributed to a combination of factors. Picture: Neil Hanna

The biggest legal merger in a decade was announced in early September when MacRoberts and Morton Fraser joined forces. The combined practices have seen revenue growth of almost 20 per cent since 2021, with total annual revenues of about £46 million.

Around the same time, a merger between Irwin Mitchell – which focuses on banking, finance and personal injury – and Wright, Johnston & Mackenzie, which has a concentration on corporate, private client, property and asset management, was unveiled.

Throughout the year there were announcements on the mergers of smaller firms, such as the coming together of Hamilton businesses Robert Ferguson & Sons, and John Jackson & Dick, and Hodge Solicitors of Blairgowrie joining forces with Watson & Lyall Bowie in Coupar Angus.

Commentators expect this upturn in M&As to continue, partly due to continuing economic and cost pressures and the need for law firms to scale up and diversify to remain competitive and profitable.

Peter Lawson, chairman of Burness Paull, says: “A more challenging economy does create the conditions and pressures that force firms to review their strategic options, so it wouldn’t be a surprise if there was further consolidation in the market.”

However, he says Burness Paull is committed to its independence as it means it has complete licence to shape the culture of the firm.

Allan Wernham, managing director (Scotland) at CMS, says: “I’m not surprised to see ongoing M&A activity within the Scottish legal sector as many clients are looking to firms with scale and depth to help them with increasingly complex requirements across a broad range of issues and jurisdictions.

“Further investment in technology is essential in delivering an efficient and competitive service, but all of this is difficult to address without scale. Fewer large firms with an enhanced capacity to invest would be a positive development which could deliver significant benefits for clients. It could also make a positive impact in terms of career opportunities that firms can offer their people.”

Claire Armstrong, managing partner at Dentons Scotland, pictured inset, believes the recent M&A activity in the sector can be attributed to a combination of factors: “Firstly, in the case of MacRoberts and Morton Fraser, it’s important to note that this merger had been discussed within the legal market for some time.

“The fact that it eventually materialised suggests that both firms saw strong synergies and a shared vision for their future together. These firms likely share similar cultures and ambitions, which are essential for a successful merger.”

According to Armstrong, one driving force behind these mergers may be economies of scale. She observes that combining forces allows law firms to enhance their capabilities, offer a broader range of services to clients, and potentially achieve cost efficiencies through shared resources and infrastructure.

She continues: “Additionally, the legal sector has witnessed several international mergers and expansions in recent years. This has led some to speculate that there is room for another large-scale Scottish firm, one that can challenge the incumbent giants in the Scottish legal landscape.

“As a result, these mergers may be seen as strategic moves to position themselves as significant players in the market, potentially even on an international scale.”