News that Bond Pearce and Maclay Murray & Spens have called off merger talks after months of discussions (TheLawyer.com, 14 March) sheds new light on the rush to consolidate among mid-market firms – all the mergers that have been announced in the past few months and all the merger talks known to be going on at the moment are only the tip of the iceberg.
“Consolidation is a feature of the market at the moment – there’s no doubt about that,” says Maclays chief executive Chris Smylie, whose firm was in talks to merge with Bond Pearce until a couple of weeks ago when the pair called it off – for the time being, at least – citing “commercial reasons”.
The talks, which began in late summer 2011, were abandoned before getting to the stage of a partner vote and, according to Smylie, Bond Pearce is not the only firm that Maclays has held talks with. Maclays, like many other firms that occupy the same section of the market, is aware that staying still in terms of size is no longer an option.
“The position here is that we have a strategy that involves adding scale,” says Smylie.
“It won’t come as a surprise to learn that there’s a lot of activity going on among other firms that are facing up to the same issues at the moment as us, and there are a lot of talks that go on between firms that don’t come to much. We’ve had discussions with various firms that have not amounted to anything.
“We’re of the view that if the opportunity for us to grow our business arises, we’ll look at that opportunity seriously. We acknowledge that having scale is a good thing in the marketplace right now, but our position is that [a merger] needs to be for other reasons than scale for scale’s sake. We’d definitely look at a merger if the partner and chemistry were right, but, most important of all, only if it served the needs of our clients.”
A tie-up between Plymouth’s Bond Pearce – which has Aberdeen, Bristol, London and Southampton offices – and Scotland’s Maclays – which has offices in Aberdeen, Edinburgh, Glasgow and London – although unlikely to set the market ablaze, seemed a sound proposition. The merger would have created a national firm with critical mass. While that is not the most secure model of law firm right now, it would have kept the wolves from the door.
The combined firm would have had around 529 lawyers, including 140 partners, and a turnover of £95m – placing it at number 32 in The Lawyer’s 2011 UK 200 league table, above Macfarlanes but below legacy Barlow Lyde & Gilbert (now Clyde
& Co). Bond Pearce makes most of its revenue from litigation, closely followed by corporate, while at Maclays corporate dominates, closely followed by property.
The two were matched closely in terms of financials. Bond Pearce pulled in £46m in the 2010-11 financial year and had an average profit per equity partner (PEP) of £220,000. Maclays brought in £47.2m, with an average PEP of £220,000.
A Bond Pearce spokesperson says of the failed merger talks with Maclays: “We’re committed to our strategy of client alignment and growth to support our clients’ needs. We’re growing organically along with exploring various options including merger and acquisition in order to support our strategy. We’re not in formal discussions with anyone.”
Unity is strength
Maclays’ management undoubtedly has been spurred on by activity among other members of the so-called ‘Big Four’ Scottish firms and in the mid-market more generally.
Earlier this year McGrigors announced that it is merging with Pinsent Masons to create a £282m firm, while Dundas & Wilson was revealed to be discussing a tie-up with West End firm Bircham Dyson Bell before abandoning talks after failing to win partner backing (The Lawyer, 10 October 2011).
Shepherd & Wedderburn is the only firm not to have been embroiled in merger talks of late, although it was linked with Lawrence Graham (LG) in 2011.
Likewise, Cobbetts and DWF both came close to merging until they called off the deal earlier this year, citing “uncertain market conditions” (The Lawyer, 31 January).
Other fish in the sea
In fact, of all the talks that have taken place, only two small-to-mid-market mergers have managed to complete this year: Ashfords and Rochman Laundau, which combined in early March to create a £30m firm (The Lawyer, 5 March), and Cumberland Ellis and Wedlake Bell, which are set to merge on 1 April, creating a top 100 UK firm by revenue. The McGrigors-Pinsents deal is set to go live in May.
That still leaves plenty of firms for Maclays and Bond Pearce to try their luck with.