Latest cross-border legal merger set to complete

It may not grab the headlines like Pippa Middleton's wedding did over the weekend, but the senior partners who have thrashed out next Thursday's official tie-up between Scotland's HBJ Gateley and England's Addleshaw Goddard argue it will be a good marriage for all.

Addleshaw Goddard's John Joyce, left, and Malcolm McPherson of HBJ Gateley have spent months finalising their merger plans. Picture: Chris Watt

The deal, finalised over the last six months after the 230 or so partners from both firms backed the proposal, will create the 13th-largest firm in the UK with more than 1,100 lawyers across 11 offices.

Between them the two firms act for many of the biggest names in Scotland’s private and public sectors including RBS, Standard Life, SSE, Diageo and the Scottish Government.

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With 45 partners and 134 lawyers across its Edinburgh, Glasgow and Aberdeen, HBJ is the eight-largest Scottish law firm with turnover of £21.9 million in its last financial year. Addleshaw Goddard, which operates from offices in London, Leeds, Manchester as well as the Middle East and Asia, is by far the bigger of the two partners with 188 partners and a further 770 lawyers in four operating divisions and a turnover of £201.8m.

The deal, which partners unanimously backed last November, represents the latest transaction to see a Scottish legal name disappear after a merger with a larger English practice following the fate of the likes of Biggart Baillie, McGrigors and Dundas & Wilson.

But according to Malcolm McPherson, HBJ’s senior partner who will become senior partner for Scotland alongside a new role on the Addleshaw Goddard board, reaction to the deal from clients has been positive.

“Most of our clients are business people and can understand the rationale of the deal when you explain it to them,” he said.

“They want to be sure the terms we work for them on will be the same and we have the same people and so one but no-one has registered any major concerns.”

When the deal was announced late last year, McPherson said he was confident that the combined firm’s cross-border capabilities “will quickly lead to an increased pipeline of business, as existing and future clients learn more about the significant advantages this deal will deliver for them”.

He said the last six months spent working on the integration process had made him even more optimistic about the benefits.

“I think as people have got to know each other better they have seen even more opportunities ahead. There is a lot of excitement across the business right now.”

McPherson believes clients in Scotland will also see benefits from the tie-up.

“They’ll have access to a broader level of expertise and in areas we don’t cover currently. If you are doing bigger deals we will also have more people to throw at a transaction.

“Being part of a larger organisation also brings other benefits – we have had a team of 18 working on the IT for the merged company and that is an example of a support a biggest organisation has.”

Although there has been a fair degree of client overlap between the two firms, McPherson said there have been relatively few areas of conflict. “On those that have cropped up we have managed to organise things between us without too much difficulty.”

He also sees opportunities for the team in Scotland to get involved with work for Addleshaw Goddard clients north of the border, particularly in sectors such as real estate for banks and retailers.

Although there continues to be speculation about further merger deals amid continued consolidation in the legal sector, John Joyce, Addleshaw Goddard’s managing partner, said there was nothing on the table at the enlarged firm currently.

“We have plans to grow in whatever we can but there is nothing specific we are looking at. This deal gives us a great platform in the UK and we see potential to grow in Scotland as well as England.”

The merger comes at a relatively buoyant time for the legal sector as it continues to recover following the impact of the global financial crisis. According to the latest annual UK Legal Benchmarking Report from Henderson Loggie published last week, the sector saw a third successive year of growth partly driven by mergers and the volume of corporate transactions.

Most firms saw increases in net profits of between 2 per cent to 5 per cent, their highest levels in the last three years. Large firms saw a 4 per cent increase fuelled, in the main, by a 20 per cent increase in fee growth in the year and greater control on expenditure and overhead reductions,

The largest firms saw a recovery in their profit per equity partner performance from a drop of 16 per cent in 2015 to an increase of 36 per cent in 2016.

David Smith, managing partner and head of the professional practices sector at Henderson Loggie, said the report “reflects a sector in good financial health”.