Legal Review: M&A dust begins to settle but firms must adapt and evolve to survive

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With most of the major mergers and acquisitions at the top level of the Scottish legal sector having already taken place over recent years, the amount of activity recorded in 2019 was relatively modest but frequent enough to remain an on-going trend.

This continued drive towards consolidation was illustrated by the launch at the start of the year of the Association of Law Firm Merger Advisers, as a direct response to “unprecedented change and challenges faced by the legal profession”. Law firms are experts at advising their clients, said the new body, but not so smart at looking after their own affairs.

Any suspicion that the arrival of the association was a little late in the day should have been dispelled when it became clear over the following months that a new

collaboration or takeover is announced on average once a month in Scotland.

Some of those who have already embraced such fundamental change have reported positive outcomes. Harper Macleod has made a number of strategic acquisitions in recent years, and continued that approach in 2019 with the takeover of Elgin firm Wink & Mackenzie.

The Glasgow-based firm has extended its reach to build a Scotland-wide network, and the strategy is producing impressive results. Record figures were reported for the financial year 2018-19, with an eight per cent rise in profit to £11 million from a 9.5 per cent rise in turnover to £29m – an eighth consecutive year of profit growth.

Chairman Professor Lorne Crerar welcomed the fruits of continued growth, and highlighted his firm’s independence as he warned of the dangers of being swallowed up by a global operation. He did not mention the disappearance of the names Dundas & Wilson and Maclay Murray & Spens, both lost in mergers with bigger partners, but his comments were made within the context of what has happened in recent years to some of the biggest firms in Scotland.

“I am proud of our position as a leading independent law firm in a Scottish legal profession which I believe is in danger of losing its identity,” says Crerar. “Our industry relies on having thriving, Scottish-headquartered firms leading the way to ensure that the future of Scots law and the profession here is secure.”

But five years on from Dundas & Wilson merging with CMS Cameron McKenna, CMS managing director (Scotland) Allan Wernham states that he does not regret “for a minute” the decision to move on from his firm’s historic name, an elite brand in Scotland, to become part of a larger international law firm and adopt a new brand name. Being part of a global law firm offers protection against the kind of economic volatility which results in some law firms seeking mergers out of urgent necessity rather than choice.

“We could see a point where we might struggle to get the Scottish end of top-quality UK or international work,” says Wernham. “There was a period in the mid to late

2000s when Scottish legal brands were in the ascendancy with record revenues. But then the financial

crisis hit.

“We realised we were too focused on a small number of clients and were struggling to build national credibility by developing a prominent London office from scratch.”

Meanwhile Dentons, which subsumed Maclay Murray & Spens in late 2017, reported its “strongest ever set of financial results” in the UK and Middle East. The organisation, which is regularly referred to as the biggest law firm in the world, showed revenue up by 21 per cent to £205m for the financial year ending 30 April, 2018, and net profit increased by 27 per cent to £60m.

The Scottish legal sector might be a ‘safer’ place than before for many firms, but nonetheless, 2019 has not passed without a casualty. In March, the long-established Morisons LLP entered administration, despite having merged with, and absorbed, other businesses over the past ten years, including Macrae Flett and Rennie, Maxwell McLaurin, and Bonar Mackenzie.

In the aftermath of the collapse, a deal was cut for eight partners and 41 staff to transfer to Thorntons, with a further three partners and 30 staff transferring to Blackadders.

It was reported that a further three partners were to move to Gilson Gray in Edinburgh, Weightmans in Glasgow and one undisclosed firm.

It later emerged that the demise of the firm, founded in the 1860s and with offices in both Glasgow and Edinburgh, had come in the wake of a number of partner resignations.

On a more positive note, several Scottish firms successfully completed mergers during 2019. In

February, Blackadders followed up its recent merger with Glasgow firm Boyle Shaughnessy by announcing a further merger with Aberdeen-based solicitors Plenderleath

Runcie.

The following month, transatlantic corporate law firm Rooney Nimmo, formed in the 2015 merger of Edinburgh-based Nimmo WS and Manhattan-based Rooney PC, announced a new partnership with Beijing Zhongjian Law Firm to increase its global reach. 

In April, personal injury specialist Gildeas celebrated its 30th birthday with the acquisition of Glasgow firm Fulton’s Solicitors and Estate Agents, and in May, Davidson Chalmers and Kergan Stewart pooled their respective resources in Edinburgh and Glasgow to form Davidson Chalmers Stewart, which also has a base in Galashiels.

Elsewhere in the Borders, Hastings Legal extended its existing presence in Kelso, Selkirk and Duns through a merger with Berwickshire firm Doughtys WS, based in Eyemouth.

At the other end of the country, the Inverness branch of Wright, Johnston & Mackenzie acquired the practice of Calum I Duncan Corporate Lawyers in the city.

In Edinburgh, Gilson Gray WS continued its expansion with the takeover of city firm Coulters Lettings, while also announcing it has agreed terms to take over further lettings operations across Scotland, and Clyde & Co transferred its Edinburgh-based private client practice to Gillespie Macandrew LLP in September. The team had become part of Clyde & Co after its merger with Simpson & Marwick in 2015.

Mid-tier firm Anderson Strathern built on its 2016 mergers with Jeffrey Aitken and ADLP in a bolt-on with Glasgow law practice Hardy Macphail, with the smaller outfit merging its operations with Anderson Strathern’s Glasgow office.

And still in October, Lindsays announced one of the higher profile mergers of the year, taking over Edinburgh-based Hadden Rankin with all 18 of the latter’s staff transferring and taking Lindsays’ total number of staff up to 264. The deal is the latest in a string of acquisitions and mergers by Lindsays in the past decade, including

Kidstons in Glasgow in 2008, MacLachlan & MacKenzie in Edinburgh and Shield & Kyd in Dundee in 2012, RSB Macdonald in Dundee in 2015, and Aitken Nairn WS in Edinburgh in 2018.

Managing partner Alasdair Cummings says: “Throughout Lindsays’ long history we have constantly adapted and evolved.”

In the ever-changing landscape of the Scottish legal sector, the practicality of taking such an approach appears to remain as important as ever.

2019 Deals at a glance

Blackadders widens Scottish reach in merger with Aberdeen firm Plenderleath Runcie

•Gildeas acquires Glasgow firm Fulton’s Solicitors and Estate Agents

•Hastings Legal combines Borders and Berwickshire in merger with Doughtys WS

•Gilson Gray WS takes over fellow Edinburgh firm Coulters Lettings

•Anderson Strathern bolts on Glasgow law practice Hardy Macphail

•Lindsays registers its sixth merger in 11 years with Hadden Rankin tie-up

•Thorntons and Blackadders take on board Morisons staff after collapse

•Davidson Chalmers and Kergan Stewart join forces to form Davidson Chalmers Stewart

This article first appeared in The Scotsman’s Scottish Legal Review 2019. A digital version can be found here.