Office launches and mergers as Scottish firms battle a flat market
The last financial year was one of significant change for the Scottish practices in The Lawyer’s UK 200 listing, with one firm being taken out by merger while others sought to consolidate their positions through office launches. Meanwhile, further change came in the guise of a number of English firms entering the market viamergers with firms outside the top 200 leaderboard.
The most significant deal of 2011-12 came right at the end of the financial year when McGrigors tied up with Pinsent Masons, seeing its brand disappear in theprocess.
Despite this, and despite the fact that McGrigors had a September year-end, the firm would still have topped the list of Scottish firms by turnover, with an estimatedrevenue figure of £74m. That represents a rise of 6 per cent on the previous year’s £70m.
The remaining three of the so-called Scottish ‘big four’ – Dundas & Wilson, Maclay Murray & Spens and Shepherd & Wedderburn – had less impressive years, with allposting falls in turnover and Shepherd & Wedderburn once again losing out on the number four slot to Brodies.
Dundas, which had a mixed year that saw it shelve merger talks with London’s Bircham Dyson Bell and announce plans for an Aberdeen launch before managing partner Donald Shaw unexpectedly stepped down part-way through his term, was the biggest loser in the group, with turnover slipping by 12 per cent, from £62m to£54.5m.
That was still enough to rank it second in the group though, with nearest rival Maclays posting a turnover figure of £46.9m after a dip of 3.5 per cent. While the turnover figure represents a fall of 23 per cent on the firm’s 2007-08 high of £61.1m, chief executive Chris Smylie says he believes the £46.9m figure “marks the bottom of the curve” for Maclays. He adds that although the headline figures show a drop in turnover from 2010-11 to 2011-12, the previous year’s figure includedrevenues from compliance advisory subsidiary Regulatory Solutions, which the firm sold at the end of the 2010-11 financial year.
With Shepherd & Wedderburn also posting a drop in turnover – of 1 per cent to £37m – Brodies’ 16 per cent rise, from £36.9m to £42.8m, saw the Edinburgh firm once again leapfrog its UK-focused rival, this time more definitively. In 2009-10 Brodies broke into the big four for the first time, with a revenue figure of £35.8m against Shepherd & Wedderburn’s £35.3m. The following year Shepherd & Wedderburn regained its big four spot with a growth in revenue of 6 per cent to £37.3m,overtaking Brodies’ 3 per cent hike to £36.9m.
Alongside a strong 2011-12 turnover rise, Brodies, which experienced stellar growth under managing partner Bill Drummond in the eight years to 2007-08, was also the strongest performer in profitability terms on the previous financial year, posting average profit per equity partner (PEP) growth of 10 per cent to £400,000. This compares with McGrigors’ estimated growth of 3 per cent to £255,000; Dundas’s 35 per cent drop to £210,000; Maclays’ 4 per cent rise to £270,000; and Shepherd &Wedderburn’s flat performance of £263,000.
Brodies’ Drummond, who oversaw a Brussels launch during 2011-12, put the performance down to the firm’s steadfast commitment to the Scottish rather than widerUK market.
“This included the expansion of our oil and gas and wider team in Aberdeen, and our decision to open an office in Brussels in recognition that the work of the European Commission will have an ever-more direct impact on both corporate and public sector activity in Scotland,” says Drummond. “This investment strategy, combined with careful management of underlying costs, means we have no reliance on external debt, putting Brodies on a firm footing for growth over the next twoyears of our 2011-14 strategic period.”
Aping Brodies’ success, another strong grower in the Scottish market was Harper Macleod, which saw revenues rise by 12 per cent to £19.1m over the year to give it a 10th-place ranking. Chief executive Martin Darroch says that just under 30 per cent of this year’s revenue came from the firm’s public and third sector group, with afurther 28 per cent generated in the insurance group.
He adds that the growth in turnover was down to the firm rather than the wider market, saying: “We don’t regard this as an upturn – we regard it as a businesssuccess. There’s no upturn in the Scottish market.”
Elsewhere, merger remained a key theme for Scottish firms, with Tods Murray absorbing two-partner private client firm Fyfe Ireland this January and eighth-place Anderson Strathern taking over fellow Scottish property player Bell & Scott in July 2011. The latter two firms’ combined revenues were around £23m at the time of the merger and while Anderson Strathern has an August year-end it is estimating that the figure will remain unchaged at £23m for the 2011-12 year. Effectively the Bell & Scott deal has added 8.5 per cent to Anderson Strathern’s turnover, although the combined firm has not experienced any growth since the deal was signed.
Other mergers in the Scottish market saw a number of firms outside the UK 200 snapped up by larger English players towards the end of 2011-12 and into the current financial year. DAC Beachcroft took over Andersons Solicitors, Bristol’s TLT merged with Anderson Fyfe and Shoosmiths bolted on Edinburgh’s Archibald Campbell &Harley.
In June DWF signed a deal with Biggart Baillie meaning the latter, which is ranked 12th in the Scottish turnover table for 2011-12 after seeing revenues fall by 4 per cent to £15.5m, will disappear from the leaderboard in the current financial year.