Mid-market is here to stay

Does this sound familiar? Apparently the UK legal profession will shrink to around 20 firms. There will be some niche players in specialist areas, but the City mid-market will be engulfed in a frenzy of consolidation.

This theory has been around for more than a decade, but is, in fact, complete balderdash.

Instead the mergers are happening way down the charts, and mostly in the regions. As we report in this issue, South East firm DMH Stallard (£21m turnover) is exploring a merger with £7m-odd London firm KSB. Last week (21 May) we revealed that Scottish-Birmingham firm HBJ Gateley Wareing, which turns over some £31m, was taking over Scottish firm Boyds just a month after snapping up shipping boutique Shaw & Croft. Meanwhile, Blake Lapthorn (£33m) appears to spend its entire time hoovering up smaller practices, the most recent being Tarlo Lyons.

But within the heftier City mid-market, in the £50m-£200m bracket, there is simply no appetite for consolidation. There have been only three truly successful mergers within this grouping: Addleshaw Goddard, Berwin Leighton Paisner and DLA Piper. In any case, with Addleshaws and DLA Piper the mergers essentially delivered London presences to two ambitious out-of-towners.

The jury is still out on Pinsent Masons, which is just getting its act together after two years of integration. Other mergers from the earlier part of the decade have been a mixed bag. Stephenson Harwood had years of trouble digesting Sinclair Roche & Temperley, and its renewed vigour has less to do with the merger and more to do with a management team that knows what it’s doing. And the Denton Hall-Wilde Sapte and Hammond SuddardsEdge Ellison mergers hardly inspire confidence.

There are 38 independent firms in this apparently doomed mid-market. The law is not like accountancy – yet. Even Clementi doesn’t herald a sudden reshape of the profession. It’s more likely to affect the volume service providers such as Irwin Mitchell, whose takeover of Golds conforms to the trend of strategic acquisition with a regional flavour.

If the consultants want to earn their fees, they should stop predicting meltdown in the mid-market and look at firms with turnovers of less then £30m. And get out to the regions more – that’s where the consolidation is.