Mid-market merger mania? Maybe next year
12 December 2011
Lawyers and market-watchers have been predicting a tidal wave of mid-market mergers among firms for close to a decade – and every year the market disappoints.
But in a year that has witnessed the UK’s largest-ever merger by turnover (between Clyde & Co and Barlow Lyde & Gilbert (see page 16)), as well as prolific international expansion by firms, it is easy to forget that mid-sized and regional practices have continued to expand through tie-ups at a steady pace – just not in their droves – in a bid to secure the critical mass needed to avoid the squeeze in a hungry and overcrowded market.
Martineau and Sprecher
Most recently, on 1 December Birmingham firm Martineau merged with London outfit Sprecher Grier Halberstam, becoming SGH Martineau. The merger created a firm with more than 200 fee-earners and a turnover of around £30m.
“As part of Martineau’s business plan, we made no secret of the fact that we’d like to find a suitable merger partner in London,” says managing partner Bill Barker, who adds that Sprecher was at the larger end of the firms he was looking at merging with.
For Sprecher, however, the merger was opportunism. The firm had been through a strategic review in 2010 and decided to remain independent. But when a KPMG consultant who was working with Sprecher mentioned that Martineau was on the lookout, Sprecher managing partner Emma Shipp, who will be on the board of the merged firm, agreed to meet.
It was not long before both parties realised that they were looking at a good fit. Both firms had open-plan offices in place and similar partnership structures. Martineau, as the larger firm, had more bandings in its structure and as a result Sprecher’s more senior associates will become… senior associates, while its fixed-share partners will all become senior fixed-share partners. The firm proudly boasts that not one role will be made redundant as a result of the merger.
“In terms of putting two businesses together, we go together really well,” enthuses Shipp. “Certainly, putting our restructuring and insolvency expertise together is a big benefit, and Martineau’s banking arm was also a plus – that was easy to spot early on.
“Also, we didn’t have a private client practice, although we do act for high-net-worth individuals, and it’s a hard area to just break into and Martineau has a lot of expertise there.”
Shipp says the oft-talked about pressure on regional and mid-sized firms to consolidate did factor into the firm’s thinking, although it did not consider itself at risk.
“We did look at the mid-market merger angle,” admits Shipp, “and in the early strategy talks consolidation was mentioned – we thought there’d be more of it and maybe that mid-sized firms could be squeezed out of the market.
“But I wouldn’t say we felt worried about it. We believed we had enough of a story to offer clients, but we did consider it when we were asking if we had enough strength and depth and financial resilience.”
DWF and Crutes
North West firm DWF is another that had a mind for expansion in 2011. It started with an announcement in May that it was going to launch a full-service practice in Newcastle after hiring Dickinson Dees partner John Flynn as executive partner.
In July the firm revealed that it would be opening an office in Birmingham following a partner hire from Shoosmiths.
Perhaps unsurprisingly given its record, the press jumped on the discovery in November, published by website Roll on Friday, that the firm had registered the domain name ‘dwf cobbetts.co.uk’ as a sure sign that the firms were set to merge.
Later that month DWF did indeed announce a merger – but with £5m Newcastle firm Crutes.
However, that is not to say a merger with Cobbetts is off the cards. DWF managing partner Andrew Leaitherland admitted (TheLawyer.com, 10 November) that he was usually in talks with two or three firms and also picked out Scotland and Bristol
as markets where he would like to see the DWF flag.
Penningtons and Dawsons
Penningtons chief executive David Raine, after his firm subsumed Lincoln’s Inn firm Dawsons in May, also said he had his eye on further expansion (The Lawyer.com, 3 May). Not strictly speaking driven by the pressure to consolidate, Dawsons, which has existed for more than 200 years, was forced to seek a merger after successive raids reduced its partnership to just seven – down from 21 at the end of the 2009-10 financial year.
Early on in the year Dawsons managing partner Martin Codd told The Lawyer (14 February): “Like many other law firms, at this time we’re facing a challenging economic climate and we’re taking the necessary steps to ensure the firm remains strong and profitable.”
The merged firm, which kept the Penningtons brand, has 62 partners. The shell business of Dawsons went into voluntary liquidation in June (The Lawyer, 23 June) after failing to pay creditors, including Barclays Bank, which was owed just under £1m.
Penningtons also merged with Wedlake Saint in April.
Hunters and Vernor-Miles Fellow Lincoln’s Inn firm Hunters also profited from Dawsons’ merger, snatching its former head of corporate and commercial Stephen Morrall in May. The previous month Hunters had merged with Gray’s Inn boutique Vernor-Miles & Noble, adding three partners to its ranks.
“It fits because [Vernor-Miles] had a charity, private client and property practice and were choosing to refer commercial work to other firms,” said Hunters senior partner Paul Almy at the time.
“This will give them the opportunity to bring all that in-house.”
Weightmans and Mace & Jones
Like DWF, Weightmans was another North West firm with a taste for expansion in 2011. In March the firm announced that it was acquiring Vizards Wyeth’s insurance team, taking on 25 lawyers, including 13 partners.
The same month Weightmans explained that it had agreed merger terms with Mace & Jones, a corporate, commercial, employment and property firm with more than 160 staff in offices in Liverpool, Manchester and Knutsford.
In the end Weightmans became a £75m firm, theoretically making it the 43th-largest law firm in the UK, above Travers Smith.
Dundas and Bircham – not
Scottish firm Dundas & Wilson and London’s Bircham Dyson Bell never achieved a merger. They spent a large part of 2011 discussing a tie-up before abandoning talks in October after failing to win partner backing.
Although they failed, the talks between the firms were interpreted as a clear-as-day indication of the pressure on mid-sized and regional firms.
“The potential merger between Bircham and Dundas is a sign of the increasing consolidation,” said one Scotland-based lawyer at the time. “But any merger, to be successful, needs to have a strong strategic basis and that basis isn’t immediately obvious in this situation.”
It would hardly be surprising if either or both Dundas and Bircham cropped up in merger talks with other firms in 2012. At Dundas’s partner meeting in November it is understood that management made it clear that, although Bircham was not the right fit, the firm had better come to terms with the idea of merging.
With continuing pressure in the legal market against a backdrop of economic uncertainty (if not disaster), there could be plenty of similar speeches at partner meetings in 2012.
But of course, that is what people have been saying for a decade.