Top Scottish firms have plenty to gain from the right merger – but suitable partners are proving elusive.
Of the pure Scottish players, Brodies remains the largest firm in turnover terms, rising well up the table after generating a revenue of £37m – more than double the figure it posted at the end of the 2003-04 financial year.
Despite this, and despite moving up the ranks at a significant rate each year, when viewed in a UK context Brodies remains one of the smaller players, positioned as it is at number 70 in the league table.
With so much strength among the Scottish firms at the bottom of the 100, Brodies, which remains staunchly committed to its pure Scottish focus, could easily consolidate its position in the UK table via a merger.
Harper Macleod would offer a good fit – both firms have biases towards litigation and property, and while Harper Macleod does not have much in the way of a finance practice, banking growth is an area of specific focus for Brodies.
With a combined revenue of £51m, the resultant firm would leap up the league table and would be significantly larger than Scottish-turned-UK national rival Shepherd and Wedderburn (S&W).
Brodies managing partner Bill Drummond is certainly a man who is willing to embrace change (a decade at the helm has seen him revolutionise the firm’s fortunes), but neither firm has shown any appetite for a merger of this scale.
Set next to Brodies’ significant growth in recent years, Harper Macleod’s 16 per cent revenue increase to £14.2m last year looks minor. But, as The Lawyer reported earlier this year (19 June), the firm is already targeting organic growth in its Edinburgh and Glasgow offices. A larger deal may have to wait.
An equally radical step could see Edinburgh-based private client firm Turcan Connell, which was spun out of Dundas & Wilson in 1997, merge with Aberdeen’s Ledingham Chalmers.
The latter’s partnership was halved in 2006 when its energy team left to join McGrigors, but the firm’s private client team thrives in the oil-rich North East
of Scotland. Ledingham’s northern coverage (the firm also has a base in Inverness) would complement Turcan Connell’s Central Belt bias. Property is another key area of overlap.
Turcan Connell’s revenue of £21.2m added to Ledingham’s £9.4m would see a combined firm overtake Burness and UK regionals such as Fladgate Fielder and Lewis Silkin in the top 100.
Sadly for this marriage, the mismatched profitability of the two firms would derail the deal before the two parties ever sat down to talk. Ledingham’s 24 equity partners pocket an average of £173,000, while Turcan Connell’s 15 take home £438,000.
Four Scottish firms that are certainly ripe for merger are the so-called big four of Dundas & Wilson, Maclay Murray & Spens, McGrigors and S&W, each of which is desperate to reposition itself as a UK national through a determined focus on London.
The firms have already embraced mini-mergers – Maclay teamed up with London corporate boutique The City Law Partnership as well as Aberdeen-based Iain Smith & Co, while McGrigors recently took on Mayfair litigation firm Reid Minty – but are all keen to bulk up in London.
The quartet differs from the domestic Scottish players in that they are all in favour of law firms receiving external capital – money that could be put to use on buying up smaller firms.
However, a series of bolt-ons could prove problematic when it comes to integration, making full-blown mergers of equals a preferable option.
All-equity Dundas has long set its face against a merger, but S&W could benefit from a link-up with a US firm with a strong equity practice. (Perhaps Chadbourne & Parke could be persuaded, London Bridge-style, that the Scottish firm’s City office is also an icon and that it should snap it up along with the firm’s practices north of the border.)
But the firm that most needs a deal remains McGrigors. With the exit of former head and arch UK strategy proponent Colin Gray to Eversheds this year, McGrigors’ hopes of achieving a market-changing deal with an English firm appear to have vanished. Perhaps new head Richard Masters could be persuaded to reopen lines of communication?
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