21 January 2002
The news that McGrigor Donald has lost a chunk of its London property team to Altheimer & Gray is threatening to cast a nasty shadow over an almost fallout-free merger deal with K-Legal; and the fact that they are all sharing the same external PR agency must have made for some interesting conversations on damage limitation.
The departure of former London managing partner Steven Scates will come as no great surprise to those in the loop. Although he favoured merger, he hardly made a secret of his reluctance to become part of the legal arm of an accountancy giant. Worse for KLegal is the fact that partner Mark Johnstone and senior associate Ann Krieger have chosen to go with him to continue developing their projects-focused property practice, leaving one London property partner. And there is no question that they were pushed. So where does this leave the combined KLegal-McGrigors real estate practice when the merger goes live in February? Scates says he has arrived at Altheimer with a full caseload. But McGrigors and KLegal are wasting no time in accentuating the positive.
After all, the merged firm will boast a massive planning, property and environmental practice of 74 fee-earners spread across London, Edinburgh, Glasgow and Belfast, with a further 22 fee-earners specialising in construction. The combined property practice is already being organised into a new infrastructure group in line with KPMG, led by McGrigors partner Colin McKay. And latest KLegal hire Richard Goodman from Camerons brings further expertise in property-based finance structures.
The firms' financial figures reflect a shared commitment to real estate. At KLegal, real estate brought in £1.9m of a £16.5m turnover in the last financial year, largely down to client work brought in by Philip Burroughs from Coudert Brothers. Not bad, given that the practice was only set up in May 2000 with the hire of Bruce Dear from CMS Cameron McKenna and Stephen Sumpton from Baker & McKenzie, both senior solicitors who came in as directors, and associate Matthew Newing from Stephenson Harwood. They were joined by Burroughs, Coudert's former London managing partner and head of property, in October 2000. The most proactive clients that moved with him were Hilstone Corp, Fairview New Homes and MCI WorldCom. Suzanne Gill also joined from Coudert and was made up to director last October. This small team has felt rather stretched, particularly when brought in on large KPMG instructions.
At McGrigors, real estate accounted for 26 per cent of a £34.6m turnover last year; in the first six months of the current financial year, it brought in £5m, up 23 per cent on 2000-2001. Clients include Glasgow's LNC Properties, BDL Hotels, Bank of Scotland, Royal Bank of Scotland and Northern Bank. It is one of four firms taking the cream of Scottish property work. But with the Scottish market pretty saturated when it comes to lawyers, the appeal of the KLegal deal is abundantly clear. McGrigors' property lawyers will enjoy far better access to international markets, and possibly some KPMG clients too.
Just as important for KLegal is the much-needed planning, environmental and construction expertise that McGrigors provides. Ditto its experience and track record in the important fledgling area of property outsourcing. Most recently, it advised BT on the Scottish aspects of its £2.4bn outsourcing to Telereal Holdings; what McGrigors gains here is an attractive link into KPMG's real estate group, which includes a strategy consultancy service to corporates. And a final synergy worth highlighting is in property-related PPP/PFI. This is already a key area for KLegal under Gareth Davies, who joined from Simmons & Simmons, while McGrigors has just advised on the £120m Edinburgh Schools PPP project. The firms now have their work cut out making the most of these opportunities.
If you are a property lawyer, the chances are that KLegal has not shown up on your radar yet. But if the rest of the McGrigors practice has bought into the multidisciplinary message, then it won't be long before it does.