THERE are plenty of positives in giving up independence, writes Fraser Hardie
The Scottish Legal Awards, which I recently attended, is where the profession north of the Border celebrates the success of “Scottish” commercial law firms. I use the term “Scottish” loosely because nowadays more and more of what were once independent legal practices based in Scotland have merged with (or perhaps been taken over by) larger firms from south of the Border.
Following the event, I reflected on the evening and on who the various successful firms were, and came to a few potential contentious conclusions.
Firstly, a number of the larger firms who have been the product of the mergers referred to – for example, Clyde & Co, HBJ Gateley, Ashurst, TLT and Irwin Mitchell – all appeared to be absent as table hosts and DLA Piper appeared to be there only because of a pro bono award for which they were in the running.
This got me wondering where a number of larger “independent” Scottish law firms – such as MacRoberts, Burness Paull, Brodies and Harper Macleod – are heading over the next five years and how many will be around in the same name and/or form at the end of that period?
I also wondered if Shepherd & Wedderburn (the firm’s chief picked up Managing Partner of the Year and the firm is, at present, possibly the most successful of the independents) might look to reverse the “takeover” trend and become the first Scottish legal practice to acquire a significant contemporary in England.
The relatively recent financial failures of other traditional Scottish firms such as Tods Murray, Semple Fraser and McClure Naismith have led to a number of practices north of the Border seeking the comfort of a larger rival, eg CMS’s takeover of Dundas & Wilson.
A merger with, or an acquisition by, the right partner can have a number of benefits. Many firms pursue mergers because they fear being left out of an elite legal group or panel who are likely to be the first port of call for tenders and other significant business opportunities to act for major corporate clients and/or carry out significant corporate/commercial legal work.
Also, a depressed economy has always led to an increase in mergers because, faced with a tougher market and increasing costs, many firms see economies of scale and cross-selling opportunities.
Some firms, such as the then Bird Semple, were quick off the mark when, in 2000, they became part of what is DLA Piper. As a partner at the time in Bird Semple, I was widely chastised in the profession for having “sold my soul to the devil”. On the contrary I, and my then partners, anticipated correctly that our action would become a model which many contemporaries would follow in the future.
At the moment, increased competition involving mid-tier legal firms such as Harper Macleod and MacRoberts, and upper tier firms such as Brodies and Burness Paull will, I believe, lead at some time in the next five years, to a merger with, or acquisition by, an English or overseas legal firm. The younger partners will press the old guard to give up continued independence to gain access to more exciting and more financially rewarding legal work enjoyed by the larger firms on cross-border and global work.
Studies by accountancy firms such as BDO already suggest that in relation to “69 per cent of their respondents it was believed that there are still too many legal firms, and lawyers, in Scotland with 53 per cent stating that they had held merger discussions last year”.
Merger with, and acquisition by, English and overseas firms will continue to happen as pricing remains competitive and the pool of legal firms and lawyers remains large in relation to certain legal work.
Mergers and acquisitions between Scottish firms of a particular size will also continue in order for them to create, or to consolidate, a presence in a particular location or particular business sectors.
• Fraser Hardie heads Blackadders’ Edinburgh office. These views are his own.