SCOTLAND’S commercial legal sector has too many lawyers though the likelihood of further large-scale mergers may be limited, according to the head of one of the country’s most prominent mid-tier players.
His comments follow a rush of industry mergers and takeovers, with some traditional names swallowed up by larger UK groups.
At the upper end of the size scale, Dundas & Wilson is to become part of the global CMS Cameron McKenna brand, the world’s tenth-largest law firm, with offices in 31 countries, while Pinsent Masons acquired Scots practice McGrigors.
Unveiling an expansion of the firm’s Edinburgh operation after a record year, Harper Macleod chief executive Martin Darroch told The Scotsman: “I believe there is excess capacity in the legal industry by number of lawyers. There are also too many firms around that do not have any differentiating factor.
“The firms that will be successful will be the ones with strong balance sheets that are nimble, and I think there are many out there that aren’t.”
He added: “There might be one or two more medium to large firms [that are acquired/merge]. However, some of them are laden with significant problems and it is unlikely that you would want them.”
Darroch’s candid comments came as he revealed that fees for clients based in the east of Scotland had grown by 23 per cent in 2013 to just under £4.6 million, accounting for more than a fifth of the Glasgow-headquartered firm’s overall turnover of £21m.
Fee income from lawyers solely based in the capital leapt by 42 per cent, though that has yet to factor in the full impact of several appointments from other firms made during the latter part of the year.
There are 22 staff based in the firm’s Melville Street offices, including nine partners, with that total set to grow in 2014. Further space in the city is now being sought.
Darroch said the growth had led to an increase in specialist, high-value work with a focus on commercial property, energy and natural resources, as well as the establishment of a “phenomenally successful” infrastructure and projects (I&P) team.
Euan Pirie and Euan Mitchell joined the firm from rival McClure Naismith early in 2013 to set up the I&P team. Steven Brown – a marine energy expert – joined the Edinburgh office shortly after, also from McClure.
Towards the end of the year, they were joined by two further key hires. Ken Ross, a former managing partner at Burness, joined from Balfour & Mason while Chris Noble made the jump from DWF Biggart Baillie.
Darroch added: “To us, the rapidly changing face of the legal scene presents opportunities, particularly for firms with a purely Scottish identity. It’s this, and demand from clients, that has led us to increase our presence in Edinburgh and it shows no sign of slowing down.
“We will be looking to increase our footprint even further and take more space in the city.”
Total staff numbers at the firm, which is celebrating its 25th anniversary this year, are just under 300 with 52 partners. It also has an office in Inverness, where 14 people are employed.