DAC and Beachcroft moot £175m merger
Davies Arnold Cooper (DAC) and Beachcroft are in merger talks to create a £175m insurance giant, The Lawyer can reveal.
Danny Gowan
The two firms are understood to be voting on the proposal next week.
Confirming the talks, Beachcroft managing partner Paul Murray said in a statement: “Our merger discussions with Davies Arnold Cooper are driven by the opportunity to enhance how we work with clients in industry sectors in which both firms specialise, and in particular the insurance sector.”
DAC senior partner Danny Gowan said: “In addition to creating a stronger offering to the insurance sector and increased investment internationally, a merger would provide significant advantages to our real estate, corporate and employment teams, which have grown significantly over recent years.”
Despite the January 2008 takeover of KSB Law, which added £8m to the firm’s top line, DAC has struggled to grow organically. In 2010 turnover dropped by 2 per cent from £45m to £44.1m, with profit per partner (PEP) falling from £361,000 to £278,000.
Paul Murray
Beachcroft has added £10m a year to its revenues over the last three years, with PEP hovering around the £310,000 mark in the same period.
A merger will strengthen the combined firm’s London offering as well as giving Beachcroft a foothold in the key insurance markets of South America. With an existing office in Mexico, DAC has lately established associations in Chile (29 November 2010) and Brazil (6 September 2010). Beachcroft’s most recent international foray was Singapore (3 January 2011).
Murray said: “The combination of Beachcroft’s leading volume and UK insurance practice with Davies Arnold Cooper’s strong insurance and dispute resolution team in London, Spain and Latin America could create a distinctive full-service offering for our insurer clients.”
This is the second major combination under discussion in the legal insurance sector, coming hot on the heels of the talks between Clyde & Co and Barlow Lyde & Gilbert (6 June 2011). If that deal goes through the resulting firm will have a turnover of some £307m , based on 2010-11 revenue figures.
How the financials stack up:
2009-10:
Beachcroft £131m turnover PEP £314,000 and profit margin 19 per cent, 148 partners
DAC: £44.1m turnover, PEP £278,000 and profit margin 18 per cent, 77 partners
2008-09:
Beachcroft: £121m turnover, PEP 301,000 and profit margin 21 per cent, 135 partners
DAC: £45m turnover, PEP £361,000, and profit margin 24 per cent, 75 partners
2007-08:
Beachcroft: £114m turnover, with PEP £310,000 and profit margin of 23 per cent, 133 partners
DAC: £37.3m turnover, with PEP £357,000 and profit margin 27 per cent, 70 partners
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Readers' comments (18)
Jackson | 23-Jun-2011 2:08 pm
If Beachcroft are so keen to boost their insurance work, then why were they so desperate to champion Jackson's reforms? The abolition of the success fee now means fewer marginal claims will be run, which means fewer claims will be referred to the likes of Beachcroft to defend and thus less revenue from insurance work.
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Anonymous | 23-Jun-2011 3:48 pm
@ Anonymous | 23-Jun-2011 11:58 am - Yes short-term RPC, and all other firms in the sector, will benefit from consolidation even if they aren't participants, as suppliers' pricing power increases and the firms engaging in mergers go through the process of integration.
Medium- to long-term being sub-scale will pose an ever greater challenge to their business however. This doesn't just apply to RPC though - in 20 years time very few of the current City firms will still be in existence.
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Anonymous | 23-Jun-2011 4:48 pm
Can someone point out where the conflicts are in the BLG Clydes merger: it's only marine that they have in common. This is good news for RPC in the same way that digital photography was good news for Kodak.
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Anonymous | 23-Jun-2011 5:06 pm
Anonymous@ 4:48pm
Your knowledge of what Clydes and BLG do is clearly lacking. Both are leading players in the non-marine insurance and reinsurance legal market. They are likely to be on opposite sides of a plethora of disputes - hence very substantial risk of conflicts. RPC (and others) may well prosper as a result.
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Happy Hippo | 23-Jun-2011 5:28 pm
I think Anonymous @ 5.06 is being a little unfair to Anonymous @ 4.48. In the insurance world, Clydes are best known for their marine work, BLG for their non-marine. Reinsurance is irrelevant, as there is virtually no dispute work around any more and Clydes are unlikely to want whatever is left of BLG's reinsurance practice as it is a terrible drain. Having said that, by all accounts, the deal at BLG's end is being driven by Tim Taylor, BLG's head of marine, so maybe he is prepared to lose some conflicts for the greater good.
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Anonymous | 23-Jun-2011 11:03 pm
The attempts by RPC to portray being outmanouvered as some sort of strategic acumen are frankly laughable. They can't decide whether they are a corporate or an insurance firm and are sub-scale in both. Not easy to see that they have a strategy. It is merge or become tomorrow's DAC for RPC.
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Anonymous | 24-Jun-2011 7:21 pm
It would be an error for Clyde & Co to merge with BLG. Why not just move into Botolph House and pick off the BLG London names they want (and thereby avoid the cost of BLG's belated/costly forays into the regions).
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Anonymous | 27-Jun-2011 10:57 am
I wonder if RPC are going to grow by merger with another law firm? Why not merge with an entity that has a good corporate client list but no (present) ability to service their legal requirements?
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