CMS UK news, updates and analysis | Page 17 of 20

The fallout from Dundas & Wilson‘s recently announced takeover by CMS Cameron McKenna has begun in earnest, with the Scottish firm confirming that a number of partners are to leave.

Construction partner Siobhan McCloskey-Oudahar; head of real estate disputes Andrew Walker; employment partner David Walker; head of environment Mark Brumwell; employment partner Mandy Laurie; IP/IT partner Allan Wardhaugh; and corporate partner and former chairman David Hardie have either left or will leave the ailing Scottish giant ahead of the merger this summer.

On the departures, Dundas co-managing partners Caryn Penley and Allan Wernham released a statement this morning (8 January): ‘Both CMS and Dundas & Wilson have been pleased with the enthusiastic response from clients, partners and employees to our proposed merger. Over the next few months our focus will be on combining the strengths of CMS and Dundas & Wilson to ensure our clients receive the very best of our expertise and innovation from 1 May 2014.’

‘Shortly before we put the proposal to combine with CMS to our partners, Siobhan McCloskey-Oudahar, Andrew Walker and (as previously announced) David Walker intimated their intention to resign from the firm. Siobhan is leaving us to take up a position as a legal adviser with the Government Legal Service in the Department for Transport towards the end of February. Andrew and David retired from the partnership at the end of 2013. In addition, Mark Brumwell, David Hardie, Mandy Laurie and Allan Wardhaugh have decided to leave the firm before we merge.’

While it has since emerged that David Walker has moved to Morton Fraser’s employment team in Glasgow, the destination of the remaining departees remains unclear.

The departure of former chairman Hardie is particularly significant as he held the role during one of Dundas’ most difficult recent periods, including being quoted in The Herald in 2012 as saying: ‘It is not that we have taken out 30 people and shot them’ in response to news that the firm was to make around 30 staff redundant.

Though the recent confirmation of a tie-up between CMS Cameron McKenna and Dundas & Wilson before Christmas came as a surprise to many in the profession, the news that partners are to leave beleaguered Dundas in the aftermath of the deal may not.

The latest departures Dundas are a reminder of the pressure faced by one of Scotland’s most storied firms following multiple exits in 2012/13 including corporate partners Julian Matthews and Simon Sale, along with banking and finance partner Michael Wrigley, while the London office lost Martin Thomas, one of the firm’s top litigators, to Wragge & Co, along with banking partner John Pike, who quit for Osborne Clarke.

Dundas is set to officially lose its name and be rebranded as CMS Cameron McKenna following a transitional period while partners and staff at Dundas’ London office will also move out of their current premises in Aldwych to CMS’s new City premises Cannon Place, where the lease will officially begin in 2015.

The merger creates a firm of 830 partners and 5,600 employees operating in 57 offices in 31 countries with revenues of around €900m, if you count the CMS international grouping. A merger with the actual Cameron McKenna partnership creates a far smaller firm – with combined revenues of less than £300m. The vote follows six months of talks that were held closely within both firms.

sarah.downey@legalease.co.uk

‘I believe the market lends itself to opportunities for growth and successful law firms will take advantage of these opportunities. It is good for the market and clients. Let’s hope there are more [mergers] in the future.’ So says CMS Cameron McKenna’s managing partner Duncan Weston, who oversaw his firm’s successful tie-up with Scotland’s Dundas & Wilson during an autumn/winter period that has also seen the merger of Wragge & Co and Lawrence Graham, Slater & Gordon’s acquisition of the personal injury business of Pannone, and Pennington’s takeover of beleaguered Manches, to say nothing of the talks announced and not yet concluded or that fell at the final hurdle.

In the second week of December, Cameron McKenna and beleaguered Dundas announced their merger, creating an 830-partner firm with revenues of around €900m, if you count the CMS international grouping.

CMS, which came at the merger from a position of strength, established an energy-focussed office in Aberdeen 20 years ago and an Edinburgh office 15 years ago, where the merger will help the firm expand its presence in the region, while for Dundas, it gives them much needed strength in mass across the UK and internationally.

As observed by Legal Business at the time the merger was announced, integrating the two partnership will come under scrutiny given the wide gap in profitability between Camerons and Dundas. The Scots firm’s 78 equity partners averaged profits of £164,000 in 2012/13, far lower than the CMS-wide average of £439,000. Dundas – for years Scotland’s top firm – has struggled since the banking crisis with revenues falling by 35% over the last five years.

The merger, set to go live in May 2014, throws up numerous parallels with other recent tie-ups, including that between leading Midlands firm Wragge & Co and City outfit Lawrence Graham (LG), announced in November and confirmed in the December.

For one, much like Cameron McKenna, Wragges has been linked to numerous merger talks and in this case its merger partner was also arguably ripe for the picking, LG having fallen outside of the UK top 50 after a prolonged period in which it has struggled for growth. The 200-lawyer firm saw income of £51.8m in 2012/13, a decline of 23% over the last five years. PEP declined 14% over the year to a current total of £260,000.

After a majority vote of more than 75% required and achieved from both partnerships, the combination, which goes live on 1 May 2014, will create a £171m business with 1,300 staff, including 770 lawyers, operating from ten offices worldwide. The two firms had previously held merger talks in 2009, which floundered amid the post-banking crisis recession but were rekindled in July this year.

For Wragges (as with Dundas), the move will finally give the firm the credible London foothold that has so far eluded it.

The desirability and strategic need for a City base is a theme currrently being played out in the merger talks of acquisitive Midlands firm Shakespeares, which ended the year in talks with 80-lawyer West End firm Davenport Lyons, as reported on 16 December. The two firms combined would generate around £67m in turnover, closing in on the Legal Business’ top 50 UK firms by revenue.

Again, Shakespeares is the financially stronger suitor, after Davenport Lyons saw other firms in West End such as Mishcon de Reya, Forsters and HowardKennedy FSI push ahead since the turn of the credit crisis, with its revenues falling 11% from £24.5m to £21.9m in 2012-13, while profit per equity partner (PEP) dropped 12.5 per cent to £197,000.

This is in stark contrast to Shakespeares financials, which saw revenues rise by 55% to £45.4m in 2012-13, due in large part to its merger with Harvey Ingram. Shakespeares also obtained an alternative business licence (ABS) to cater for its insurance clients earlier in the year.

Another new, financially strong player to have taken the personal injury market by storm is Australian-listed Slater & Gordon, which at the end of November announced it long-awaited tie-up with the PI business of Manchester’s Pannone in a deal worth £33m.

The November announcement followed a series of other mergers and acquisitions in a market hit hard by the Jackson reforms and where many law firms are looking for firms with deep pockets and a long-term strategy. The Australian firm has so far in the UK acquired clinical negligence and PI practice John Pickering & Partners, personal injury firm Fentons in August, adding around 280 staff to the rapidly growing firm, Goodmans Law and the personal injury practice of Taylor Vinters, as well as Russell, Jones & Walker for £53.8m last year.

That deal followed the announcement in October that private client firm Penningtons had rescued 139-lawyer Manches from administration to create a £60m firm with over 300 lawyers.

The deal originally had the hallmarks of straightforward merger talks, before it became apparent in October that Penningtons had acquired the trading operations of Manches in a deal brokered by PwC as administrators, which saw 265 Manches employees including 46 partners move to Penningtons.

The list of also-rans; the firms that very nearly secured a merger but were unable to get past the final post include 153-partner Kennedys, which at the start of December abandoned its agreed takeover of Scots practice Simpson & Marwick due to ‘complex reasons’, following 18 months of negotiations and a formal announcement of the union in the summer. The tie-up would have created a £160m practice with strong national coverage in insurance.

Earlier this year, merger talks between private client law firms Speechly Bircham and Withers were abandoned in May, while Addleshaw Goddard and Nabarro also called off merger talks after entering early-stage negotiations over a £280m tie-up in March.

Closely watched US talks that failed included Orrick, Herrington & Sutcliffe in its potentially game-changing talks with New York-headquartered Pillsbury Winthrop Shaw Pittman, and Dentons and McKenna Long & Aldridge, which this autumn voted against a tie-up after talks kicked off in September.

With 2014 just round the corner, Dundas & Wilson managing partner Caryn Penley told Legal Business: ‘It’s something firms will have to do in order to compete in the market as firms continue to consolidate.’

Jaishree.kalia@legalease.co.uk

Talk to any partner at Dundas & Wilson in the early 1990s – when Cameron McKenna launched its fledgling oil and gas outpost in Aberdeen – and any suggestion that the City firm could challenge the Scots leader on its own turf would elicit snorts of derision. The notion that the two most prestigious law firm brands in Scotland – Dundas and McGrigors – would be consumed by Cameron McKenna and Pinsent Masons in 20 years’ time would have been seen as laughable.

But the recent confirmation of a tie-up between CMS Cameron McKenna and beleaguered Dundas still came as a surprise to many in the profession.Announced yesterday evening (12 December), the merger creates a firm of 830 partners and 5,600 employees operating in 57 offices in 31 countries with revenues of around €900m, if you count the CMS international grouping.

A merger with the actual Cameron McKenna partnership creates a far smaller firm – with combined revenues of less than £300m. The vote follows six months of talks that were held closely within both firms.

Dundas attained the 75% majority vote it needed to push the deal through, while CMS required 80%. The merger is set to go live on 1 May 2014. Integrating the two partnership will come under scrutiny given the wide gap in profitability between Camerons and Dundas. The Scots firm’s 78 equity partners averaged profits of £164,000 in 2012/13, far lower than the CMS-wide average of £439,000. Dundas – for years Scotland’s top firm – has struggled since the banking crisis with revenues falling by 35% over the last five years.

All Dundas partners are expected to hold partner status at Camerons but a firm spokesperson refused to comment how many would join the equity ranks.

Dundas will lose its name and officially be rebranded as CMS Cameron McKenna following a transitional period. Senior leadership roles at CMS Cameron McKenna will remain unchanged. The merged firm will be running ‘integrated practice groups, with practice group manager counterparts in Scotland’. Dundas chairman Laurence Ward will be senior partner in Scotland, while co-managing partner Allan Wernham will be the Scottish practice group manager for real estate. Fellow co-managing partner Caryn Penley will be the Scottish practice group manager for banking and will be on the CMS UK partnership board.

Partners and staff at Dundas’ London office will also move out of their current premises in Aldwych to CMS’s new City premises Cannon Place, where the lease will officially begin in 2015.

Speaking to Legal Business, CMS energy partner Stephen Millar, who led the merger discussions along with CMS managing partner Duncan Weston and senior partner elect Penelope Warne, said: ‘It’s entirely strategic. We’re committed to Scotland and we see a lot of prospects going forward in the energy and financial industries. Dundas & Wilson is very strong in financial and energy so the two are entirely complementary. It’s a great vote of confidence in the legal sector here.’

The deal has, however, provoked rivals to suggest that it’s a surprising choice of partner for CMS to make.

One managing partner at a peer Scottish firm commented: ‘Dundas & Wilson is not the powerhouse it once was so despite everything they’re saying, I think CMS are getting a firm with good bits but isn’t consistently of the standard it once was. There’s the potential to make it into something but there would have to be some pretty rigorous management done. It’s a reasonable fit – and a good fit for Dundas because they had nowhere to go. I think management just couldn’t make up their minds about the direction of travel, at least now there is one.’

One City-based managing partner at an international firm added: ‘It’s an inevitable move for Dundas & Wilson. I don’t think they had an independent future after recent severe performance and the loss of so many partners.’

It has emerged that the Dundas partnership were not informed of the deal until last week. Speaking to Legal Business Ward, who along with Penley and Wernham led negotiations for the Scots firm, said: ‘With all these things, it’s on a need-to-know basis, to be honest. Once we had a fully formed proposal to our partners, we did that at the earliest opportunity. It’s distracting for partners if they are focusing on mergers. We need people to be focused on our clients.

‘The reason we’ve been able to move very quickly is because we had taken everything to the final position and were able to present all the facts and say: “this is exactly how this will affect you, and you now have time to make a decision about it”. Our partners were always open to the idea of a merger. The concept didn’t have to be introduced to them. Many years ago, we understood that this was a possibility. What’s really impressed partners from both firms is the huge professionalism.’

Turcan Connell senior partner Douglas Connell, himself a former Dundas & Wilson partner, commented: ‘This will have been planned as part of the objectives of the partnership. They will have managed people’s expectations very carefully. I have a huge regard for Dundas & Wilson. It sounds as if this has been well handled. Not everyone will agree with it but this has been very substantially approved.’

One outstanding question is whether Dundas will be looking to make any redundancies. On this Ward would only say: ‘There are efficiencies we need to look through – that’s probably for another day. We need to get to that.’

The deal comes after years in which Camerons has been often attached to attempted mergers both nationally and in the City. The firm had even at one point toyed with a strategy of pursuing multiple mergers in the UK and internationally, an approach that was dubbed the Magnificent Seven.

With that concept failing to attract partners, Camerons instead focused on rebranding the CMS alliance of firms as a single organisation, despite the firm maintaining partially differing brands, management structures and separate profit pools.

While another potential Anglo-Scots merger between Kennedys and Simpson Marwick was called off this week, the Dundas/CMS union was not the only high-profile tie-up of the past few days, with Lawrence Graham and Wragge & Co announcing their merger will also go live in May next year.

Sarah.downey@legalease.co.uk

For more commentary on the Scottish legal market, see Setting the heather on fire