Law Firm Mergers

Law Firm Mergers
Merger or Takeover? Mutual or Forced?

A debate on Law Firm Mergers was held at the Royal Faculty of Procurators in Glasgow on 5 September 2013.

Chaired by the President of the Law Society of Scotland, Bruce Beveridge, the debate saw differing opinions expressed by the two speakers: Austin Lafferty and Gilbert Anderson.

Austin’s view was that it was “better to reign in Hell than serve in Heaven” (John Milton – Paradise Lost). As an aside Steven Raeburn told us, via Twitter, that in the Star Trek episode ‘Space Seed’, Milton is referenced by Khan and quoted by Kirk.

Anyway, back to planet earth and Austin was telling us that running a law firm was not about being a good lawyer. Management and business skills were equally important. A recurring theme in posts on this blog. If you deal with the business aspects of running a law firm you will have a better business. Austin was of the opinion that you should look inward and see what you can improve within your own firm before you consider merger as an option – or the last throw of the dice. Many mergers are to do with safety, security and making the best of a bad lot. None of us make the best out of clients that we can. If your starting-off point for running a law practice is your client’s best interests, you can’t go far wrong, as long as you see that term and its meaning in its widest context.

Gilbert Anderson knows law firm mergers first hand: his firm, Andersons, merged with DAC Beachcroft. He believes that the merger has benefitted the firm’s clients. If the clients benefit then the firm does through client retention and more work. The benefits have been an ability to deliver a wider and better added value service to clients. This has in turn produced more work.

With insurance being Andersons core work (80% or so) and insurers reducing their panels of solicitors then merger was perhaps inevitable. They had a number of key clients with DAC Beachcroft and a merger enabled them to offer cross border services within the UK. This may also be true of the merger announced this past week of Scottish law firm Simpson & Marwick with international law firm Kennedys. This is the latest in a series of Anglo-Scottish mergers following on from the recent mergers of Shoosmiths with Archibald Campbell & Harley, DWF with Biggart Baillie, Pinsent Masons with McGrigors and TLT with Anderson Fyfe. There have been less notable purely Scottish mergers but one in recent times was Burness with Paull & Williamsons.

Gilbert Anderson mentioned boutiques emerging in niche areas and then merging with larger firms. My own view is that boutiques may be better off remaining independent and not merging. John Flood joined in, via Twitter, to comment that boutiques “can foment more boutiques!” I have made reference before on this blog and will do so again to John Flood’s post on The Rise of Boutiques? Again on Twitter Matthew Denney thought if boutiques merge then they risk losing the reason they existed in the first place. Continuing the Twitter debate, Jon Busby tweeted “merging, I suspect, is the end of the ideas road for firms”. Some more from Jon on mergers can be found on his blog at Legal 2.0: Digging a hole?  Back to Twitter and Simon Arkell tweeted “for a boutique, merging could lose identity and will not necessarily fix financial woes”.

Back in the Royal Faculty (rather than on Twitter) and Walter Semple pointed out that most of the law firm mergers we have seen in Scotland in recent years have been driven by the banks and not necessarily the desire of the firms involved. As Steven Raeburn put it in a tweet: “They have all been panic takeovers, with the exception of Burness-Paull & Williamsons”. That exception to the general rule was, Steven reckoned, “just a good, organic business fit that both wanted but neither needed”.

Andy Todd tweeted: “more time will be spent talking about the new name than new opportunities”.

Discussion took place over the lack of investment by law firms in their future. New entrants (ABS) will reinvest profits in their future. If we keep the model we have now we won’t get anywhere. There is huge potential. We must do something rather than giving up. We must climb down from a position of perceived superiority and start again from a different mindset. Indeed, as I blogged in my last post, we must do – don’t just talk. If law firms did so then they may find that they have less need to consider a merger.

What do you think?

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  1. I find at least 3 things fascinating about law firm mergers:

    1. They are never about efficiencies – about reducing cost to provide more value to the customer. They are always, in the end, about hubris – not the customer. Despite what firms like to say and or think (delusionally, by the way) customers simply neither ask for nor want merged larger law firms – we generally have our networks already. So unless there is better value proposition, there is no interest in changing horses.
    2. Law firm mergers always, and I mean always, result in higher costs for the customer as the rates equalize at the higher billing rates as opposed to the lower ones.
    3. Perhaps most importantly, in the non-law firm world, what folks like me call the real world, mergers aren’t really mergers – they are always acquisitions. And these transactions simply cannot occur based on consensus or democracy – the team at the top does the deal, then the deal is announced. Retaining the necessary people from those that are the best people on both sides is always an objective – and there are always casualties. For those involved to find this shocking and/or surprising in the context of any law firm merger is sad — but predicatble given the bar’s procivility to view themselves as “different”

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