BLG chief exec: Clydes deal is no rescue merger
Potential merger would ’destroy the competition’ in insurance sector
Barlow Lyde & Gilbert (BLG) chief executive David Jabbari has refuted claims that the firm has been forced into a potential merger with insurance rival Clyde & Co (3 June 2011), despite sources claiming that the firm had no option but to agree to the deal.
While Jabbari said the discussions with Clydes proved his firm was “bold and innovative”, he stressed that at this stage the merger is not a done deal.
“BLG has a variety of options in pursuit of its strategy of growth in its core markets in the UK and internationally,” he said.
That said, a source close to the firm claimed that a weakened international presence and collapsing rates in the domestic insurance sector, particularly in the commoditised market, meant the firm was strategically “backed into a corner”.
The assertion is backed up by other senior ex-BLG partners, who said the firm’s management had told partners earlier this year that the firm would cease to exist as an independent entity by the end of the 2011-12 financial year.
One said: “My understanding is that the partners have been alerted that the firm needs a merger because it can’t regroup and rebuild.”
Outside perceptions are that any union would be a takeover by Clydes rather than a merger of equals. Financially there is a large disparity between the two firms’ profitability, with BLG’s average profit per equity partner (PEP) figure for 2010-11 estimated to be around £300,000, while Clydes’ figure for 2009-10 was £605,000. It is understood that this could result in a number of BLG’s equity partners being demoted to salaried status in any merged entity.
In turnover terms, however, the deal would be transformational in the insurance sector. Based on figures for 2010-11, the combination would result in a firm with a revenue
of £306.5m, giving it a sporting chance of entering the UK top 10 and, as a BLG insider said, “destroying the competition”. Rival Holman Fenwick Willan posted a revenue of £112.5m in 2010-11, while Kennedys’ turnover for 2009-10 was £88.2m.
A partner at a rival firm said: “It’s a seismic move that will have consequences for all firms in the insurance market.”
The deal would give Clydes an instant domestic network, while BLG would gain access to Clydes’ network of 22 international offices.
In addition, Clydes would pick up BLG’s highly respected professional indemnity team, led by Sarah Clover, and the bulk insurance practice recently acquired from defunct
firm Halliwells.
View results 10 per page | 20 per page | 50 per page
Readers' comments (24)
Anonymous | 6-Jun-2011 3:21 pm
a lot of BLG partners were left totally unconvinced about the Jabba's strategy for saving the firm. Clint gave it a good go, but he moved it too far away from its base. No wonder so many corporate partners left after Jabba pointed out to them that their salaries were dragging the firm down.
Stripping it back down to focus on litigation and insurance is a good thing, but Jabba has to carry people with him an judging by these comments, he is failing in his task
Unsuitable or offensive? Report this comment
Anonymous | 6-Jun-2011 3:35 pm
how and why did this leak?
Unsuitable or offensive? Report this comment
bankrupt lawyer gentleman | 6-Jun-2011 3:56 pm
I can't see how this works for anyone at BLG. Turkeys voting for Christmas anyone?
Unsuitable or offensive? Report this comment
Beastie Boys | 6-Jun-2011 4:01 pm
@Anonymous | 6-Jun-2011 3:35 pm
I'd like to quote the Beastie Boys to you and say: "It's sabotage!"
But, seeing the following quotes from BLG this week - which rather gives it away, it seems they may have leaked in order to try and drive this through - i.e. let the media and the market push this one along by presenting the BLG partnership with a fait accompli they cannot escape from.
Mind you, risky strategy - many BLG partners will simply vote for this for fear of no alternative, keep their heads down, and then head for the exits as soon as the ink is dry. (And then there's the ones who'll be pushed........)
Unsuitable or offensive? Report this comment
White Flag | 6-Jun-2011 4:31 pm
I'm sure Clyde's management will have done their research into BLG's negotiating tactics when they bought Halliwells last year.
Unsuitable or offensive? Report this comment
Anonymous | 6-Jun-2011 4:43 pm
With a fiercely independent partnership like Barlows has, there is no way they can be going into this deal voluntarily.
Clydes is known for its no nonsense stance and in any other market would be considered the venture capitalist in this deal. In other words, come in and take the value and leave others to pick up the rest.
I think comments regarding Jabba go too far. He has inherited a firm which needs to address its financials. Such a deal, if successful, would be a major coup for any manager working with such a firm as BLG. It is the best option going forward, if this is right, it could be the only option...
Unsuitable or offensive? Report this comment
RIP RPC | 6-Jun-2011 6:34 pm
This deal is really excellent news for the competitors of BLG and Clydes. Also, latest astrological projections show that the world will end on Wednesday afternoon.
Unsuitable or offensive? Report this comment
Private Equity's Darling | 6-Jun-2011 6:48 pm
The hard truth is, like it or not, the Jabba is the face of future law firm management. He does not appear to care two hoots about BLG's history or what its staff think. He has gone into BLG and salvaged a business that had lost its way for 15 years. In private equity terms, this merger is a 'liquidity event' for the senior partners of BLG. The future will be all about people like him being able to come into ailing law firms, turn them around and negotiate the best possible exit for the owners of the business. That will be the world of private equity. People who think it is failure not to make BLG a world beater on its own really live in cloud cuckoo land. There are too many dusty old management teams in law firms pursuing the myth that their firm has the right to exist independently for ever. Many of them are in the insurance sector. They should have a look at their clients and ask themselves how many times there has been merger activity involving their key clients over the last 10 years.
Unsuitable or offensive? Report this comment
Anonymous | 7-Jun-2011 3:05 pm
Everywhere I look at the moment firms are trying to come to terms with what happened to them during the recession. BLG is no different. A controlling senior equity partnership which earned to much for too little almost drive the firm into the ground. The recesssion enabled the firm to let go of a few of those egos and start to refocus on its core practice of insurance. It may have been too late by then, of course, because the insurance market has contracted, there is less work around. So for BLG the world has changed around it, leaving it wanting to retrench to its core base, except the core base has disappeared.
The only option left is a merger, and for BLG to have attracted Clydes is a major coup.
Jabba most certainly is the future face of law firm management, and hopefully everyone, including clients, will be better off for it.
Unsuitable or offensive? Report this comment
Anonymous | 7-Jun-2011 3:47 pm
nonsense. Look at how profitable BLG was in the early noughties and how since then Clydes and others have left it trailing. The decline set in long before the recession. The figures and the departures of many quality lawyers, including its best insurance lawyers, tell their own story, no matter how hard apologists for the present and recent management try to pretend otherwise.
Unsuitable or offensive? Report this comment