20 June 2005
Maclay Murray & Spens' acquisition of City financial services boutique The City Law Partnership late last year confirmed the Scottish heavyweight's appetite for the grand gesture. Set against Shepherd + Wedderburn's softly-softly approach and Dundas & Wilson's lateral hiring programme, the move suggested that if Maclays was going to ramp up its London offering it was prepared to get its chequebook out.
The deal came less than 18 months after a similar bolt-on for Maclays with property boutique Fenners. "All three firms [Dundas, Shepherds and McGrigors] have done a lot of lateral hiring," says Maclays chief executive Magnus Swanson, "but we believe that our way is more efficient. It can have a more positive impact on the firm if you can integrate them."
That is, of course, a big 'if'. The City Law deal is only six months' old, so it is too early to judge how successfully the 22 lawyers and six partners will slot into Maclays' London operation. But Swanson will be hoping it is a more successful deal than Fenners ultimately proved to be. In May 2003, senior partner John Fenner and his son Robert joined Maclays as partners. Both have since left. Swanson preferred not to comment, except to say that "property in London battles on in good style".
Maclays' progress in London, based partly on an acquisition strategy, carries the risk that along with the jewels comes some unwanted baggage. "There's always the potential to pick up off-strategy clients or lawyers that don't fit with the firm when you do a major merger or bolt-on," says William Cock, director at First Counsel.
The City Law deal brought with it a solid client base, including Aberdeen Asset Management, Century Life, Restaurant Group and Rock Construction. "We've worked hard to make sure that the City Law clients are pleased with the deal, so this approach can be more secure than an individual lateral hire, where the following can be more uncertain," says Swanson.
Swanson believes that a mass hire, be it a boutique or a team, can have a better effect on his lawyers' confidence levels than a constant drip-feed of laterals. It is a belief that will be tested over the coming months. Meanwhile, Swanson's priority in London is finding a new office. "We need to get all our lawyers into one location," he says. And singing the same tune.
All four of Scotland's major firms have made London a priority. For these giants of the Scottish marketplace, competing in London is akin to starting from scratch (albeit all four have been working in the City for years). "I can't think of a [London] deal where we've been on the other side of a Scottish law firm," Scottish firms: London headcountFirmTotalTotalpartnerslawyersMcGrigors 16 114Maclay Murray & Spens1454Dundas & Wilson1451Shepherd + Wedderburn733Source: The Lawyeradmits McGrigors London head Philip Burroughs. "This is an English law practice that's competing with English law firms."
All four have a major advantage over many of their City rivals in that they can source work in London and do much of it at a reduced cost in Scotland. All four also have strong connections to Scotland's powerhouse financial services institutions, providing a steady flow of work. But all four are taking different routes to launching their attack on the City.
The cherry picker
Dundas has had a good run recently. In fact, compared with the dark days of the post-Enron/Andersen collapse, it has all seemed plain sailing. Then Chris Campbell dropped his bombshell. The managing partner for nine years and the man most closely associated with pulling the firm through the Andersen mire (and with bringing it in in the first place) was off to the Royal Bank of Scotland (RBS).
Campbell joins the bank on 1 August as director of group legal services and deputy general counsel (as first revealed on www.thelawyer.com, 26 May). He had signed on last year for another four-year term as managing partner that would have taken him to 2010, but then the RBS job came up, which was just too good to miss.
Campbell will leave Dundas in mid-July in good shape. Revenues for 2005 are expected to be up by around 11 per cent to approximately £44.5m, while average profit per equity partner (PEP) is projected to reach £256,000. And that is against a background of some heavy investment in lateral hires over the last year, all of them in London.
"We've taken on five laterals in London in the last 12 months," says Campbell. "There's also been investment in IT and knowledge management."
Then there are the deals. Like Linklaters with its 'platinum' client plan, Dundas has a key client base of around 25 to which it devotes time and attention above the norm. This approach, coupled with its lateral hiring spree, has paid dividends in the last couple of years.
Dundas's role for Scottish and Southern Energy on its £3.2bn acquisition of the gas distribution network from National Grid Transco was a vindication of its key client strategy. It was comfortably the largest deal of the year by any of the Scottish quartet. Euan Robertson, the rising star of the firm's corporate group, who relocated from Scotland to London last year, led on the deal.
Bank of Scotland has also provided some weighty London deals, including an £800m European hotel acquisition and the £230m purchase of The Savoy and Simpson's-in-the Strand. The firm was also appointed by Scottish Widows to form one of the first property unit trusts in the UK.
The London office has doubled its revenues in the last 12 months, so the investment looks like it is paying off. But the exit of Campbell has raised questions about the immediate stability of the firm. One man does not make a firm, but Campbell is undoubtedly one of the Scottish market's leading lights.
His exit prompted former senior partner Neil Cochran to come out of retirement until a new head is appointed at the end of the year. Cochran is well up to the task, but the firm will be looking at losing another fee-earning partner to management in the near future - and one who has big boots to fill.
McGrigors has, of course, had a bit of a head-start in London. The firm's KLegal adventure, which ended in April 2004, gave McGrigors a major leg-up in London. It created a platform for taking on the City competition.
All four Scottish firms are making headway in London, but it is McGrigors that has bounced back the most. London is now its largest office, both in terms of headcount and revenues. Indeed, the period when McGrigors could not hire to save its life is over. And its half-year results (the firm's financial year runs to 30 September) were positive, with turnover reaching £23m. As London head Burroughs puts it: "If we don't hit £46m this year, I'll be disappointed."
These days the core strengths of the London office are corporate, banking, real estate and projects, and the relationship with accountancy firm KPMG remains key.
"We realigned the relationship with KPMG in April 2004," says Burroughs diplomatically. What was in fact the most turbulent period of McGrigors' history was bookended by the departure of iconic managing partner Shonaig Macpherson and corporate partner Morag McNeill, who went in-house to Forth Ports late last year. Now the firm is intent on putting those days behind it and is at last less focused on internal matters and looking to drive the business forward. London remains crucial.
The accountancy giant is McGrigors' biggest client and referrer of work, so keeping that relationship fruitful was key to the health not just of London, but of the firm as a whole. The feedback the firm has had from KPMG is that the UK realignment was "far and away" the best globally.
Surprisingly, Burroughs says the greatest synergy between the two organisations is the multidisciplinary concept. "Selling this to new and existing clients is where we see the most benefit of the relationship," he says. In terms of work, that is best seen in tax litigation, people services and corporate.
McGrigors is also on RBS's UK-wide panel for all lending-related work "without financial restraint", as Burroughs points out. "We compete at the top end against the likes of Allen & Overy and Clifford Chance," he adds.
A London team led by Colin McKay is advising RBS on the £1.5bn Silvertown Quays development. The property team last autumn acted for Hilstone on the acquisition of John Madejski's Sackville Properties in a deal worth more than £200m. It has also just advised on the sale of a £70m portfolio of property to Mapeley. Its successful PFI practice is advising Premier Transmission Financing on the gas interconnecter agreement providing gas to Northern Ireland, while a team advised on the acquisition and £107m bond financing of the Scottish-Northern Irish Gas Pipeline in March 2005. As one recruitment consultant put it: "McGrigors is in very good shape."
New home, new goal
Shepherds has suffered image-wise for years as the most conservative and low key of the big four. Rivals, damning with faint praise, call it "solid" or a firm that "continues to do what it does".
The firm has been working in London, albeit from a Scottish base, for 20 or more years. In 2000 it moved into an office in Cannon Street and then, in the autumn of 2004, it had an adrenaline injection with its move to 9,000sq ft of space in Arthur Street. At last, Shepherds appears to have announced its intention to make an assault on the capital.
James Will, UK head of corporate, who originally established the London office in 2000, now has responsibility for it, although it is without a head on the ground. Will is keen to stress how "integrated" his firm's "UK-wide practice" is. "We're not a Scottish firm doing Scottish law in London," he says. "We're competing head-on with City firms. But this is very much a UK firm; the groups are truly integrated and it's one profit centre."
It is a familiar line from all the four firms, but in truth Shepherds has the toughest job selling it to the market. Its London office is still too small in comparison with those of McGrigors and Dundas, while Maclays arguably has stronger credentials in the City.
Shepherds does, though, have a first-rate energy and projects practice and has just completed a £600m PFI deal for the Ministry of Defence, which was won out of London. On the quoted side, the firm has been involved in 21 listed deals since March 2004, including two main list jobs. The most recent, the £40m float of pharmaceuticals business ProStrakan, closed last Thursday (16 June).
Shepherds has always had close links with the Scottish financial services sector, although the London launch four years ago was trailed as a media and technology play. "In fact, it was always listed company work that we were mainly doing in London," claims Will, speaking from north of the border. "It's just that, at the time, there was a lot of technology-related work around." Well, for a few weeks maybe. Then the market did not so much crash, it disappeared.
Shepherds sees its new office as a catalyst for focused growth in the key areas of corporate finance, technology and media, property, corporate tax and construction and projects. "It will never be full service, as we don't want to replicate Shepherd + Wedderburn in London," says Will. Arthur Street can take 75 staff and it is currently at 47, so expect some rapid hires.
|Scottish firms: London headcount|
|Maclay Murray & Spens||14||54|
|Dundas & Wilson||14||51|
|Shepherd + Wedderburn||7||33|
|Source: The Lawyer|
|Recent London laterals|
|Firm||Partner and area||From and date|
|Dundas & Wilson||Mark Brumwell, environment||SJ Berwin, 1 Sept 2004|
|Jim Hillan, tax||E&Y/ Tite & Lewis, 1 June 2004|
|Gawain Hughes, investment funds||Osborne Clarke, 11 August 2004|
|Edwin Godfrey*, PFI||Simmons & Simmons, 1 November 2004|
|Rhodri Davies, banking||Pinsent Masons, 28 February 2005|
|Maclay Murray & Spens||David Fitzgerald*, property||Payne Hicks Beach, March 2005|
|Graeme Davidson, Philip Skerrett,||The City Law Partnership, November 2004|
|Gordon Brough, Joanna Higton,|
|Julian Walton, all corporate|
|McGrigors||Gary Freer, head of people services||Barlow Lyle and Gilbert, Oct 2004|
|Allan Reason, commercial litigation||Davies Arnold Cooper, April 2005|
|Rod Lambert, head of competition||Henderson Boyd Jackson, Nov 2004|
|(includes London responsibility)|
|Shepherd + Wedderburn||Jenny Cottrell, corporate tax||Stephenson Harwood, 1 May 2005|
| *Consultant |
Source: The Lawyer