The Scottish market is awash with merger rumours. Perhaps the imminent tie-up between McGrigors and Pinsent Masons has kick-started the recent developments but Scottish managing partners now have consolidation high up the agenda.
The marriage between McGrigors and Pinsents, which is expected to go live in May, will create a national heavyweight with combined revenues of roughly £282m and over 1,500 lawyers, pushing the new venture comfortably into the top 15 of the LB100.
Received with some initial market scepticism (some said the deal only provides scale and nothing else), the merger between Pinsents and McGrigors signals what is likely to become a growing trend nationally.
In September, fellow Scots outfit Dundas & Wilson confirmed that it was in talks to merge with City practice Bircham Dyson Bell. But that deal was scuppered not even a month after the pair confirmed they were flirting with each other. Bircham said the ‘downsides outweighed the potential upsides’.
Similarly, merger talks between Scottish heavyweight Maclay Murray & Spens and South West firm Bond Pearce were recently called off. If the pair had joined forces, it would have created a £95m firm.
And rumours that Shepherd and Wedderburn was in talks with City player Lawrence Graham were immediately dismissed by management.
Scotland’s firms are approaching the merger market from a position of financial strength.
Even so, there is a developing pattern emerging from some of the largest Scottish players, who despite rough trading conditions across the region, are keen to avoid navel gazing and further expand their offerings.
And on the whole, they don’t present too bad an offering. According to LB100 numbers for the 2010/11 year, revenue among the Scottish players rose 4% to £31.5m and average profits per equity partner (PEP) climbed by 8% to £392,000. These numbers bode better than some potential merger partners’ in the South peer group, which on average saw fee income fall by 1% to £31.7m, while PEP climbed just 4% to £205,000.
Scotland’s firms are approaching the merger market from a position of financial strength.
Despite the collapse of the Bircham talks Dundas chairman David Hardie is still very much open to the idea of merging with another firm, but told LB that his firm would have to find the right partner.
‘If there are opportunities to improve the firm and enhance our offering to our clients then we would be mad not to pursue that. We are also realistic about the difficulty of doing these things,’ he said.
This begs the question: do Scottish firms really need a merger?
With little to no international coverage, Scotland’s majors are going to have to act fast to try to position themselves in an already oversaturated global market. One way to do that is through consolidating with a London firm that mirrors but adds to the existing business.
People can fault the tie-up with Pinsents all they want, but the deal has given McGrigors international reach it could only have dreamed of.