Lindsays agree second merger in six months

The new 29-partner firm will be known as Lindsays and the merger will take effect from next Monday, 8 October. MacLachlan & MacKenzie staff will move to the Lindsays offices at Caledonian Exchange, behind Edinburgh’s Lothian Road.

The merger is the latest rearrangement of the Scottish legal marketplace over the last two years or more in which some long-established names disappeared from letterheads as the sector, worth an estimated £1.2bn to Scottish GDP, prepares itself to deal with new demands and pursues new business models.

Cross-border mergers – sometimes more accurately takeovers – have resulted in Biggart Baillie joining with DWF; Andersons with DAC Beachcroft; Anderson Fyfe with TLT; McGrigors with Pinsents; and Archibald Campbell & Harley with Shoosmiths. The merged outfits have tended to aim at establishing a presence in a particular UK or international specialism or offer corporate services that follow the business footprint of their clients.

Mergers within Scotland have included Tods Murray/Fyfe Ireland; Turnbull & Ward/TC Young; and, in May, Lindsays themselves with Tayside firm Shield & Kyd. Their aim has been to consolidate within Scotland by increasing their share of the legal market here and pursuing economies of scale.

Lindsays’ current turnover is in the region of £11m and MacLachlan & MacKenzie’s approximately £1.1m. While it is almost a requirement for the parties in a merger to refer to “synergy”, it does seem to apply in this case.

Alasdair Cummings, managing partner of Lindsays, says the similarities between the two firms in terms of the services they offer were key.

“We are multiservice firms. MacMac have a similar client base to ours – private individuals and SME companies – so the DNA of the two firms, the things we are good at, are very similar,” he said.

“We are very proud of winning two classes in the Scott+Co legal awards earlier this year as residential team of the year and family law team of the year.

“That ripples very much into the area of business that MacMac are strong in so we feel that combining the two will give us greater scale and stronger foundations for the work we both like to do.”

In personal terms it is the completion of a career circle for Cummings: “My first ever pay packet came from MacMac. When I was still at school and applying to do law at university my dad made me write to a few firms offering my services. Not many wrote back but MacMac did and I worked as a court runner for them during the summer holidays for two or three years.”

Personal coincidence, however, played little further part in the negotiations that began with some mutual soundings after “a mutual contact” suggested almost exactly a year ago it might be worth them speaking to each other.

MacMac’s Andrew Diamond says within the firm, the history of which stretches back to the 19th century, they were asking themselves some fairly fundamental questions.

“A large proportion of our clients have been with us for a very long time. However, we couldn’t ignore the fact that in these days where there is a greater and greater requirement for specialists within legal services, there are some specialisms that we just couldn’t provide from within our resources as a four-partner, eight-solicitor firm.

“We had a serious discussion among ourselves about where we saw ourselves in a year, in three years and five years’ time, and what we needed to do to broaden our offering to clients and move with the times. We looked at it on the basis that if a client had come to us for advice, what would we have told them they had to think about: ‘Have you considered all the options – the external options as well as the internal ones?’”

So was there a beauty competition of potential partners?

“We had a number of interesting conversations with a small number of other firms but Lindsays was the very first meeting and we came back to them because we felt that this was the proposition that was most suitable for us and our clients. It isn’t that if we hadn’t done the deal with Lindsays we would have done it with someone else. We might not have done the deal.”

There is a lot of activity and manoeuvring within the legal sector as all sorts of firms, large and small choose between staying where they are, hooking up with bigger outfits operating at UK level, or building deeper foundations within Scotland.

There are no easy options. The latest Quarterly Legal Sector Survey from business advisory firm Deloitte, also published this morning, reports that the UK’s top-100 law firms report fee income growth of 3.8 per cent for the quarter ended 31 July 2012. Even after a series of mergers and takeovers that is the slowest rate of growth for six quarters.

Across the Deloitte top 100, inhabitants of the legal stratosphere, chargeable hours per fee earner increased by 0.7 per cent, with fees per fee earner up by 1.5 per cent, indicating that clients are still driving hard bargains on their legal outlays.

Mike McGregor, partner with Deloitte’s private market team in Edinburgh, said: “A large number of Scottish firms are looking at three things as they look to the future – scale, operating structure and delivery model. As a result there are lots of conversations taking place between firms but it’s a bit like going dancing – only a few are going home together in the taxi afterwards.”

Cummings is clear on the choice Lindsays has made: “At the moment we see consolidation within Scotland as the most sensible route for us to go down. Alternative business structures in Scotland are still behind England and Wales. I think it’s fair to say there’s a bit of a watching brief on that at the moment. People are interested to see what’s going to happen and how that is going to change the landscape we’re all operating in.

“We see some large firms pursuing cross-border mergers. That is a different type of firm with a different type of client base from us. We are general practitioners providing a full legal service. I guess we are in the middle. I suspect those who are feeling the  cold winds of change at their chilliest are the smaller firms where the volume of work is drying up. It’s harder for them to provide the specialisms their clients demand, within the price constraints in current economic circumstances.”

Is Scotland big enough? “I would say so,” added Cummings.

“We are proud of our position in Scotland and the regional network we have developed from the Borders to Tayside. In times as challenging as these we have to be imaginative and innovative in the way we serve our clients, as well as extremely effective in the work we do for them.”