Going global for new alliances

The beauty of Scotland is that it is big enough to be important in the UK and small enough for everyone to know everyone else.”

Secretary of State for Scotland George Younger's made this comment on Scotland generally, but it is particularly apposite to the country's legal profession. The legal community is small enough for everyone to know exactly what all the others are (or are not) doing. And one firm in particular has been noticed.

Last December an announcement was made that Dorman Jeffrey & Co had “joined the international network of firms associated with the Andersen Worldwide organisation,” through its association with Garrett & Co.

The move has prompted mostly sceptical reactions. The size of the legal profession north of the border and the difficulty of breaking into what is already an overcrowded market have been cited as the reasons for an existing firm joining the Andersen network instead of setting up a Garrett & Co-style firm from scratch through head-hunting and lateral hiring, as has happened south of the border.

Dorman Jeffrey & Co is the result of partners breaking away from Biggart Baillie & Gifford and Boyds in 1979 to set up Scotland's first exclusively commercial practice.

One of the founder partners of Dormans, Brian Dorman, comments that the move has made “the odd ripple with the other law firms, but has not made any great difference as regards our clients. A number are very much aware of the move and have received the concept well, seeing only an advantage in the resources which they are now able to call upon. The banks in particular have certainly seen it as a positive move.”

Comments from other firms range from quips that Dormans would now be “off the other accountants' Christmas card lists” to opinions that “the Scottish market isn't sufficiently large and profitable – I don't expect to see similar moves.” Rumours that Coopers & Lybrand made initial approaches to Dormans before the move, and Price Waterhouse may also be moving to set up an operation in Scotland similar to that of Arnheim & Co in London, have been denied – so far.

Dorman adds that the reactions of the other Big Six accountancy firms were mixed. Several were initially apprehensive, and took the view that the association meant that the firm was a threat. “They thought that we were out there as a Trojan horse trying to get business into Arthur Andersen, but that has gradually become less of a problem. It is now settling down, and several have since referred work to us – law firms tend to be in a stronger position and are able to provide a depth of service not yet available in accountancy firms.”

Some have commented that Dormans was not Garretts' first choice and that the firm lacks depth in the areas of intellectual property, commercial property and litigation and that it was “saved from either having one foot on a banana skin or in the grave”. Dorman says: “The facts speak for themselves. Andersens does not have a reputation for getting involved with lame ducks.”

He adds that it can only be beneficial to form an association with a worldwide operation which is involved in areas such as accounting, management consultancy and other business services.

Whether the move, following those south of the border, and creating a virtual multi-disciplinary practice, is a threat to other firms, remains to be seen.

Among large firms such as McGrigor Donald, Dundas & Wilson and Maclay Murray & Spens, as well as other firms generally, there is a 'wait and see' attitude. McGrigors' managing partner Niall Scott does not believe that there is a demand from the business community for one-stop shopping. “The interests of the business community are best served by law firms remaining independent,” he believes.

Dundas & Wilson partner David Hardie comments that lawyers “should not under estimate the impact that such moves have on law firms”.

Insiders consider that one of the reasons for this is that, as in the South, there are already too many firms chasing the work, and competition is also coming from the south in the shape of English firms.

However, not all attitudes are hostile. A recent trend has been for Scottish firms to add a tartan dimension to City firm deals from south of the border. For example, Maclays has been involved with Allen & Overy on a private finance initiative (PFI) project in Fort William and Inverness. Other new alliances include Shepherd & Wedderburn linking up with Bevan Ashford for the Western General project, and Lovell White Durrant and MacRoberts jointly appointed for the Edinburgh Infirmary project.

But a number of the firms involved stress that this is the exception rather than the rule. McGrigors' Scott says: “There is no need for linking up. It is highly desirable for the Scottish profession not to link up because it is able to do the work independently. Indeed, it is doing that work independently.”

Shepherds partner Jim Saunders adds: “Unfortunately the perception is that there is sometimes seen to be a credibility gap, which is one of the reasons for clients to look south initially.” But he stresses the majority of ground-breaking projects and deals are being done by Scottish firms alone.

Maclays partner Magnus Swanson adds that it has been a good year even if there have been no mega-transactions. Generally, firms are concentrating on consolidating their practices, with expansion by many of the firms in their core areas as well as in other offices (see table opposite).

With the Scottish legal profession sometimes seen as increasingly marginalised in the globalisation of business generally, as well as competition from the City and national and regional firms, the consensus is that they have to continue to consider their positions and re-think their strategies.

In some cases the north-south dimension is being concentrated on: it ranges from London to Aberdeen and all stops in between. Others are looking east-west, which does not mean just Glasgow and Edinburgh. But there is no single solution for Scottish firms.

Generally, there will have to be radical changes. As one managing partner says: “Scottish law applies to 5 million people in a tiny island of about 60 million. It cannot prevail. English law is generally acceptable to the US and Europe, whether in a dispute or a conflict of laws. Scottish firms are having to, and are, positioning themselves appropriately for the changes. Whether it is casting their nets overseas in common with other firms, or linking with other professions, the issues remain the same. No one can afford to be complacent.”