Ten months in, and while the financials may be unimpressive, Blake Morgan’s Mr Merger is staying upbeat.
There’s a whole lot of movement going on at Blake Morgan, the firm that on 1 May this year kicked off its first full financial year since the 2014 marriage of Blake Lapthorn and Morgan Cole and has spent much of the past 10 months of trading focused on post-merger integration.
First the nuts and bolts. At an operational level the firm is moving to a new practice management system. Both legacy firms’ systems were due for an upgrade which was the cue for the combined firm’s migration to Peppermint’s PMS at the end of 2015.
The firm has also brought in a new business development and marketing director, Jane Bohling, from Charles Russell Speechlys. Bohling’s chief task will be to help the still nascent Blake Morgan ramp up its brand in its core sectors (more on this later) and also enhance the firm’s client-listening programme.
Much more visibly, there is significant physical movement taking place. In Cardiff the firm is gearing up to move into new offices after the existing lease on the legacy Morgan Cole premises ended. Next February the firm will move into around 22,000 sq ft of space at new build 1 Central Square, part of the Central Square development around Cardiff Central train station.
One thing hasn’t changed. Blake Morgan continues to be led by former the Blake Lapthorn managing partner Walter Cha, who since his appointment in 2000 has overseen six mergers and is a bit of a specialist when it comes to post-merger integration.
Cha says the new office in Cardiff will actually have slightly less space than in the pre-merger firm’s old Park Place premises but being open plan and significantly more modern, will not only cost about the same but has more scope for the firm’s future expansion.
It would also appear to be a financially significant move for other reasons. Prior to the firms’ merger last year Morgan Cole managing partner Elizabeth Carr had attributed her firm’s falling revenue and profit partly to an issue with its premises portfolio. In 2013 turnover at the firm fell by 7.6 per cent from £36.6m to £33.7m and profit per equity partner dropped 37 per cent.
But that was then. Now the freshly minted Blake Morgan, and Cha, can unveil the first financial results since last year’s merger. And naturally when any firm posts its first financial results since a transformative deal all eyes will be on whether that integration, always much trumpeted by management, has actually translated into greater fee income.
The answer so far for Blake Morgan? Not so much. At least, not yet.
In 2014/15 the majority of Blake Morgan’s key indicators went down. Total headcount reduced from a combined 1,050 to 905 while the total number of fee-earners dropped from 609 to 548.
Average profit per equity partner fell, from above £200,000 at both legacy firms to £175,000 at Blake Morgan. The equity spread ranged from £97,000 to £200,000, with the plateau being more than £40,000 off the top at legacy Blake Lapthorn’s £241,000 (Morgan Cole’s top of equity last year was £222,000).
As for the top line, compared with the combined revenue of the pre-merger firms’ 2013/14 turnover of £76.2m in last year’s UK 200 it fell to an annualised £71.9m.
But there is a caveat here. Blake Morgan’s first reported turnover was always likely to be down a bit on the combined 2013/14 results of the legacy firms because pre-merger Morgan Cole hived off much of its volume insurance claims practice to DAC Beachcroft and Berrymans Lace Mawer (now BLM).
Cha says that this year’s turnover is actually pretty much in line with the bolted-together budgets for 2014/15 of both legacy firms, which means that for a purely financial indication of how successful the merger has been we’re likely to have to wait until next year.
Still, he insists that there are plenty of other signs that things may be bedding down well.
“Post-merger we’ve maintained our focus on our routes to market, including corporate, public bodies and private client,” says Cha. Legacy Morgan Cole had solid reputation for acting for the likes of NHS England while the merged firms clients include the Nursing and Midwifery Council (NMC), housing associations and both central and devolved government.
“We’ve also strengthened our regulatory practice [indeed it was already pretty strong, evidenced by the fact that the firm won this year’s Regulatory Team of §the Year prize at The Lawyer Awards] and also strengthened our teams in health and social care.”
The firm has also boosted its private client and high-end property credentials in London with the acquisition of Piper Smith Watton (PSW) this August, adding 12 partners and some £6.5m in revenue.
“Unlike several other firms we still have significant private client work, we decided not to divest ourselves of it,” adds Cha.
Blake Morgan’s client base in London includes owner-managed businesses and entrepreneurs while much of the client base in regions tends to be more about old money and landed estates, although Cha insists there is also new money coming onto the blocks.
“So we had to sharpen that part of our offering, hence the merger with PSW,” Cha adds.
Asked how the current market is for additional, offering-sharpening, mergers Cha replies, “buoyant”, a sure sign that more deals may be in the acquisitive Blake Morgan managing partner’s pipeline.
One other financial indicator that is going down rather than up but which will be pleasing to Cha is the firm’s net debt, which dropped to around £5.4m at the end of the 2014/15 financial year from a combined £9.6m at the legacy firms.
“It was a good year in terms of cash collection,” confirms Cha.
There are other physical signs of movement and integration at Blake Morgan. In London next May the firm will be shifting offices from Clerkenwell to New Fetter Lane. The rent is around 40 per cent higher than in Clerkenwell, Cha confirms, but he insists that its “better positioning” in a part of London that is rapidly developing into a legal services hub (other firms within shouting distance include Taylor Wessing, DAC Beachcroft, Bird & Bird and Weightmans) will be beneficial.
Once more, the new office has roughly the same square footage as the previous one but the new home will be spread over two floors rather than five, something Cha believes will help promote “greater integration and interaction”.
And of course in the first year after any merger it’s all about integration. According to Cha, so far things are going to plan on that score.
“The merger has given us greater strength in depth to operate in our areas of focus,” he insists. “We have people working across teams and regions and across our sector focus. Where we’ve been able to field cross teams in that way we’ve been more successful in wining clients. We’re certainly now winning work neither firm would’ve won prior to the merger.”
That is of course the Holy Grail. If that wasn’t going to happen then why bother?
Cha offers a few examples of new projects but says the real meat of the deal is in the way it should allow Blake Morgan to strengthen several of its core sector areas by attracting and retaining talent.
The past 10 months have already seen it embark on this mission, with partner hires including regulatory specialist Clare Strickland from the NMC, construction development expert Chris Dolan from Shoosmiths, and property litigation team head Daniel Kidd, who joined from Dentons.
Gayle Curry, a health and social care specialist who had previously been a Morgan Cole partner, left to join Mills & Reeve, and then came back. The firm also brought in former 1 Grays Inn Square employment barrister Allan Briddock in 2014 to head the immigration team.
So from a recruitment point of view the merger appears to be doing the trick. As for the financials, they look to be still very much a work in progress.