Merging two firms with different histories, characters and personalities is never going to be easy. That’s a lesson that Speechly Bircham has learned the hard way.
Last year’s failed merger talks with fellow private client-focused firm Withers fell flat after just two months of discussions (23 May 2013). Their collapse was partly due to the sheer size of its suitor. Withers had 12 offices to Speechly’s five, and more than twice the global revenue – £117.8m as opposed to £57.2m.
“It was definitely going to be a takeover from Withers,” says one source close to Speechly. “The partnership structure would’ve changed, so that Speechly partners were a rung down from Withers.”
Despite management on both sides desperately trying to push through the deal, it’s thought their partnerships simply weren’t convinced. Both firms ultimately voted in opposition to the tie-up.
“Even some equity partners weren’t happy with the idea,” noted the source.
So, this time round the firm has set its sights on a firm of a more equal stature: Charles Russell with its six offices, £13.7m turnover and similar legal specialisms.
The two firms are well known to each other. They have distinct practice overlaps, and frequently compete for the same client appointments. They’ve also managed to orientate their sizeable private client strategies in the same general direction.
As one source puts it, “Speechly manages to act for the super wealthy, but also has a role in addressing the mass affluent – the rich in the home counties and London who are based in the UK and have around £2m to £3m in assets. Withers lost that mass affluent group, but Charles Russell has a foot in each camp. Plus, it’s Guildford office taps into Speechly’s core markets”.
Charles Russell would gift Speechly a handful of regional offices, in Cheltenham and Guildford, and offerings in Doha and Manama. Meanwhile, the larger firm would benefit from a plumped-up European offering, thanks to Speechly’s offices in Paris, Luxembourg and Zurich.
“Charles Russell is accepted as a peer firm,” says one insider, while another insists, “they’re definitely a better fit than Withers”.
It almost sounds too good to be true. Yet, despite their many commonalities the two firms also have some fairly enormous obstacles to wrangle over.
For starters, there’s the small matter of their office space. Both Speechly and Charles Russell took on flashy new City offices just as the credit crunch took hold, in 2008 and 2009 respectively.
Speechly initially took on 80,000 sq ft over six floors at New Street Square, before gradually reducing this to about 64,000 sq ft. According to The Lawyer UK 200 it shelled out £3.5m in rates and rent in 2012/13.
Charles Russell, on the other hand, resides in 78,000 sq ft at the City’s 5 Fleet Place which cost the firm £5.4m over the course of the last financial year.
That’s 6 per cent and 7.8 per cent of the firm’s total revenue for 2012/13 spent on their City residences alone. And it’s thought that neither of the pair has a break clause approaching soon.
The firms IT systems are understood to be another sticking point.
“Their IT systems are beyond incompatible,” says one source. “There’s a lot of groundwork to be done to find out if it’s viable.”
Despite these challenges, the consensus is that Speechly is not going to let this merger slip out of its grasp without a fight.
It may have already registered the name Charles Russell Speechlys with Companies House, but rather than rushing the process – talks with Withers crashed and burned in just two months – Speechly is taking it slow. It is understood that a preliminary partner vote on the matter has been pencilled in for August 2014, giving the firms plenty of time to do their due diligence (11 April 2014).
As one insider put it, “when Speechly goes for something, it goes hell for leather”.
It will be hoping that this time it has picked the right partner.