Apart from four standout performances, a tough year for Scottish firms was characterised by a static market.
Collective revenues across the top 20 Scottish firms rose by just 2 per cent in 2010-11, from £497.8m to £506.6m, with the firms in the top and bottom spots on the leaderboard holding on to their positions.
Edinburgh-headquartered McGrigors was the largest firm by turnover after a rise of 1.5 per cent took its revenue figure to £70m. At the opposite end of the spectrum, a 3.3 per cent rise to £9.5m saw Aberdeen firm Ledingham Chalmers, which lost its oil and gas team to McGrigors in 2006, maintain its number 20 spot.
The year was marked generally by muted growth across the board, with the Scottish market feeling the impact of public sector cuts. That said, four firms had standout years of double-digit growth: Burness, Dickson Minto, Harper Macleod and Semple Fraser.
Posting growth of 17.6 per cent, Anglo-Scottish firm Dickson Minto was the best performer overall, with senior partner Alastair Dickson hailing “a fantastic year” that saw the firm’s private equity client base regain its confidence, while a number of one-off deals also came the firm’s way.
The firm is by far the best performer in the group in terms of revenue per partner (RPP), with each of its 16 partners attracting an average of more than £2m in revenues.
That is double the RPP figure of the next-best performer, Edinburgh private client outfit Turcan Connell, and in fact holds up well among the top UK performers: in
The Lawyer UK 200 Annual Report 2011, Dickson Minto ranked 11th in terms of RPP, coming directly behind Freshfields Bruckhaus Deringer, Linklaters, Allen & Overy and Clifford Chance, which ranked seventh, eighth, ninth and 10th respectively.
The firm with the next-best revenue growth, Harper Macleod, did not perform nearly as well in RPP terms, but for a firm that derives its revenue solely from Scotland its 13.2 per cent turnover rise represented a solid performance.
The turnover growth came from significant investment and a number of lateral hires in the 2009-10 financial year. In particular, Harper Macleod’s insurance and litigation team has grown to the extent that it now accounts for 57 per cent of total turnover. The rest of Harper Macleod’s departments have also grown in revenue terms, although private client work has been fairly static.
For Burness, which saw turnover rise by 10 per cent to £23.4m and net profit jump by 18 per cent to £9.3m, 2010-11 was such a strong year that all non-partner staff were awarded a bonus equal to 10 per cent of their 2010-11 pay.
Chairman Philip Rodney says the firm’s performance was down to a combination of winning greater market share from existing clients while also upping its profile in, and hence instructions from, the City.
“In a market where most of our competitors were flat or had declining revenues, our moderate growth was a very good outcome,” he says. “What was good about it was that it wasn’t on the back of any specific department – every department’s turnover was up.”
For Semple Fraser a growth in revenue of 10.8 per cent represented a turnaround from the previous year’s disappointing 11 per cent slide, which in itself was the culmination of several years of declining performance.
Its turnaround can in part be put down to a strong showing from its Manchester office, which opened in 2009 and which saw its revenue quadruple in 2010-11 from the previous financial year’s performance.
At the opposite end of the table, Lindsays had the worst year overall, seeing turnover drop by 13.8 per cent to £10m. This was due in large part to a drop-off in corporate, property an banking work, which resulted in the firm laying off nine people from its corporate, litigation, property and support groups.
With none of the Scottish firms expecting particularly strong growth to come out of their home market in the current financial year, management teams are finally catching on to the concept of merger as a means of adding revenues.
Until now only McGrigors has shown itself open to merger, adding teams in London, Belfast and Manchester in the past few years.
While Scottish firms’ traditional conservatism has dissuaded them from following suit until now, in the past year Edinburgh-headquartered Anderson Strathern took over fellow Scottish property player Bell & Scott on 1 July. Anderson Strathern chairman Robert Carr said at the time that the main reason for the tie-up was to consolidate his firm’s position in the Scottish property market. The deal should propel the firm up the rankings, putting it on a similar turnover to that of Burness.
The deal that would really transform the Scottish leaderboard, though, is the proposed merger between Dundas & Wilson and London’s Bircham Dyson Bell. Dundas has long vied with McGrigors to be the largest Scottish firm by turnover, both never being more than £10m apart. If the merger goes ahead the resultant firm would have a turnover of £93m based on 2010-11 figures, giving it a £23m lead on McGrigors.
However, with profits in the lower-margin Scottish market continuing to be squeezed, any firm that adds revenue for revenue’s sake does so at its peril.