Highland bling

The big four Scottish firms – McGrigors, Dundas, Maclays and Shepherd + Wedderburn – are holding their own. But it is London that is providing the means. By Brendan Malkin


These days any focus on the leading firms in Scotland means a shining a light on the capital – and we don’t mean Edinburgh. London has now become the most important of all the big four firms’ (Dundas & Wilson, Maclay Murray & Spens, McGrigors and Shepherd + Wedderburn) offices.

Aberdeen is also a bigger blip on the radar than ever before, as US companies continue to drive forward their exploration of the North Sea’s energy capacity. The year has also seen a number of smaller-scale mergers, as well as the usual flurry of lateral hires.

McGrigors has had a testing year. It has extricated itself from KPMG and KLegal, with which it had a bumpy relationship that began in the spring of 2002 and which formally ended late last year. On paper the firm has ridden the wave well. Profit per equity partner (PEP) grew last year by £2,000 to £238,000, turnover dipped by a mere £500,000 to £41m, while revenue per lawyer (RPL) remained static on the previous year’s figure of £173,000. The source for growth now will be London, which McGrigors claims has the highest revenue out of all four of the firm’s offices.

Dundas & Wilson’s ties with Andersen Legal, on the other hand, are a distant memory. Dundas has had a prosperous last three years, with PEP growing from £211,000 to £236,000 – the highest increase among Scotland’s big four. It is even more impressive when one takes into account the fact that Dundas is the only one of the four with an all-equity partner structure.

Dundas’s turnover has remained static at £40m for the last two years following a growth of £2m in 2002. This is despite a recent smattering of lateral hires, including that of former MacRoberts joint managing partner Lindy Patterson. However, with healthy PEP and the lowest cost per lawyer (CPL) figure among Scotland’s top four firms (£117,000 in the last year), Dundas has reason to celebrate. The key for consolidation now is London, according to Dundas managing partner Chris Campbell. “It’s our principal area of growth,” he says, “particularly in financial services, real estate and infrastructure.”

It has been a year of change for Maclays, which has seen turnover grow by £2m to £38m, following a £3m growth spurt in 2002-03. This upturn is likely to continue as the financial impact of its merger with London family practice Fenners in June 2003 becomes apparent.

PEP at Maclays has fared less well. After growing by an impressive 26 per cent to £220,000 in 2003, last year it dropped by £25,000 to £195,000. Maclays is the only Scottish firm in the big four not to see its PEP grow last year. However, its decision to shed 12 lawyers and support staff suggests it is making efforts to get back on track. Also, its PEP dip is set against solid RPL growth, from £132,000 in 2002 to £174,000 this year.

Shepherd + Wedderburn’s decision to open in London in 2001 may have been a slow burn, but it paid dividends this year with turnover having risen since then by £4.9m to a latest figure of £29m – the highest rate of revenue growth in Scotland’s magic circle. The growth is partly down to the firm’s recent penetration of small and medium-sized markets and its focus on AIM companies.

There are other causes for celebration. Shepherds is the only Scottish magic circle firm not to slip down The Lawyer 100’s league table. The firm remained static in 65th place, while McGrigors and Maclays both dropped four places and Dundas fell by six. However, Shepherds has paid for this income upturn with an almost 90 per cent increase in CPL in the last financial year, from £103,000 to £191,000.

Brodies, the firm closest to the Scottish magic circle in turnover terms, has had a healthy financial year. Turnover grew by 11 per cent to £16.6m, partly on the back of an upturn in corporate work, which has seen it advise on £150m worth of deals in six months during 2004. Its 22 per cent PEP growth in the last year, from £192,000 in 2003 to £239,000, is one of the highest in the Scottish legal market.

Characteristic of firms just outside the Scottish magic circle, Brodies’ CPL, which dropped £3,000 last year to £93,000, is comparatively low.

Similarly, Biggart Baillie slashed its CPL last year from £110,000 to £98,000, while also increasing turnover in 2004 by £1.4m to £15.1m and PEP by £8,000 to £193,000. It is a solid performance, reflecting the consolidation since its assimilation of property heavyweight Steedman Ramage in 2002. The progress was achieved while keeping its partner count at 41 since 2002.

Straddled at the end of Scotland’s highest earner list are two firms which both make it into The Lawyer’s Small Cap 50 (to be published in the 29 November issue). They are Edinburgh-based Anderson Strathern and McClure Naismith, which report turnovers of £12m and £11m respectively.

But the firm way ahead of the profits field in Scotland is 15-partner private equity boutique Dickson Minto. Turnover at the firm rose by a whopping 29.7 per cent to around £24m, compared with £18.5m in the previous year. The boutique, a unique beast in Scotland and increasingly focused on London, has rocketed to third place in the PEP stakes with £709,000. Only Slaughter and May (£819,000) and Macfarlanes (£720,000) performed better. Furthermore, Dickson Minto’s latest record PEP follows a comparatively poor 2003, when PEP dipped by £35,000 to £545,000.

Dickson Minto’s CPL of £244,000 in 2004 is far higher than those of its Scottish rivals (the next highest is Shepherd + Wedderburn, which posted a CPL figure of £191,000 in the last financial year). This is explained partly by the fact that London is its main operational hub. The firm, ranked seventh in the CPL table, would no doubt point to this as a positive differentiator from its Scottish rivals than as a problem. Although on balance, it would probably prefer to see this as one financial indicator that could do with shrinking next year.