Shakespeares’ merger play, Part V

Shakespeares continues on its path to Midlands domination with its fifth merger in two years, but can it give Wragge & Co a run for its money?

The thinly disguised acrimonious ending of merger talks between Field Fisher Waterhouse and Lawrence Graham was just the latest tie-up to be left in the gutter.

So perhaps the surprise aspect of Shakespeares and Harvey Ingram agreeing terms to officially joining forces last week was how what chief executive Paul Wilson termed a “complex arrangement” went so smoothly.

Talks to form the new-look firm took just over four months and were unanimously voted through, with the aim of forming the dominant Midlands-based presence. The deal brings together 360 Harvey Ingram and 455 Shakespeares employees. Currently only Wragge & Co is bigger in the region.

Paul Wilson
Paul Wilson

Wilson has stated publicly his aim to grow his firm into a £50m mid-tier heavyweight by 2014, edge into the top 50 UK law firms and shore up its regional practices.

This latest acquisition of another Midlands mid-tier neighbour is Shakespeares’ fifth merger since April 2010 and puts the new-look firm 18 months ahead of schedule in terms of its turnover target.

Management is attempting to position the business way ahead of other local firms in terms of depth and variety of resource, and is offering competitive pricing against what it describes as “expensive Midlands and London law firms”.

Wilson told The Lawyer that the merger was voted through unanimously by both sets of partners with no stumbling points and that his position of chief executive of the combined entity was ratified by the Harvey Ingram board.

Harvey Ingram senior partner Stephen Woolfe said the tie-up fits hand-in-glove with his firm’s own growth strategy by creating an East and West hub of a “dominant” Midlands presence. Harvey Ingram had also aimed to be part of a £50m “large and efficient” firm by 2015, with the ultimate aim of examining the possibility of external investment.

At face-value a look at the profile of both firms suggests a nice fit. The tie-up deal will bolster the firm’s presence in Birmingham and Leicester – although it will trade in the latter city as Harvey Ingram Shakespeares for 12 months on account of what Wilson terms the firm’s “well know and respected” brand. The deal also adds Newport Pagnell, Bedford and Milton Keynes offices to Shakespeares’ existing bases in Nottingham, Solihull, Stratford-upon-Avon, Shipton-on-Stour and Moreton-in-Marsh.

Shakespeares is relatively new to Leicester and brought in corporate head Roy Botterill directly from Harvey Ingram in April to spearhead the Leicester launch.

At the time, Botterill described the move as “very motivating” and said it gave him the chance – after years heading Harvey Ingram’s corporate team – to form new client relationships and “work alongside quality professionals who share an in-built entrepreneurial vision”.

Six months earlier, Lisa Botterill (no relation), also a corporate partner, made the same move across from Harvey Ingram to Shakespeares.

Those two moves left Harvey Ingram’s corporate team with five partners bringing in £1.5m – or eight per cent of total revenue – according to its 2011-12 figures. At Shakespeares they contribute to a team of 15 partners led by corporate head Duncan James that brought in £5.3m – or 17.9 per cent of total revenue, in the last financial year.

Shakespeares’ biggest contributor to turnover is property, with £8m (27 per cent) in revenue, whereas 38 per cent (£7.25m) of revenue at Harvey Ingram is from litigation. The next biggest category at Shakespeares is ‘other’ – which includes high-net-worth private clients – raking in 33 per cent, or £6.3m, in revenue.

Both Woolfe and Wilson have suggested the synergies between the two firms was “impossible to ignore”.

Wilson said the merged firm will aim to secure more instructions as principal or panel solicitors in the property, retail, technology and telecoms, banking, insurance, manufacturing and public sector sectors.

The 2011-12 figures are still being tallied up, but initial estimates suggest that Harvey Ingram’s average profit per equity partner (PEP) figure looks to be back above 2009-10 levels after a big rise in turnover coupled with a number of partners being taken out of the equity in its fluid system of full-, part- and fixed-share partners. It is now at 20 equity partners for 2011-12 having been as high as 31 following Harvey Ingram’s acquisition of Borneos in January 2011.

Both equity structures are based around a meritocracy and there are no concerns over debt, said Woolfe.

Another major attraction for Shakespeares is Harvey Ingram’s total turnover figure for 2011-12. It has jumped from £14.2m in 2010-11 by more than a third to £19.1m – again as a result of its own merger with Bornoes, which created a five-site firm across the Midlands and Home Counties.

Shakespeares’ December 2011 merger with nine-partner firm Wood Glaister saw the Solihull-based property development, commercial property, commercial litigation and personal injury specialists continue to trade under the same name until later this year.

That was weeks after Birmingham-based two-partner specialist social housing practice Gorrara Haden had been snapped up.

In November 2010 legacy firm Shakespeare Putsman officially subsumed Nottingham-based Berryman, bringing in 17 partners plus a £6m turnover, and before that Wilson had set the ball rolling with the June 2010 merger with rivals Needham & James. The Stratford-based firm had seen turnover decrease to £7.3m and both firms highlighted the need to merge in the face of the crippling economic climate and Legal Services Act.

With so many mergers in a short space of time, there may now be a period of bedding in the new arrivals while implementing what Wilson called “likely” redundancies where there are duplications following a strategic review mentioned by Wilson last week. But that does not mean mergers are off the table and, true to Wilson’s “recruit and grow” mantra, the next acquisition will likely be early next year.

Is such activity likely to have existing Midlands heavyweight Wragges quaking in its boots, though? Even after the Harvey Ingram deal Shakespeares is still half the size of Wragges in turnover terms and, crucially, Wragges is way ahead when it comes to profit margin, with its figure hovering around the 30 per cent mark for the past three years while Shakespeares’ has been closer to 20 per cent.

But with Wilson unashamed in his quest to market Shakespeares as a low-cost alternative, it could just be that the Midlands is big enough for two leaders.