The economic slump is prompting a rush of law firm combinations
The difficult market conditions and appeal of certain geographical locations have made 2012 the year of the merger – or in some cases, the failed merger attempt.
The year has provided mega-mergers between Norton Rose and US firm Fulbright & Jaworski – creating the world’s third-largest firm by lawyer numbers – and a three-way deal between Anglo-American outfit SNR Denton, European firm Salans and Canada’s Fraser Milner Casgrain.
The US is a lucrative market for European firms, and Canada is full of natural resources. So is Australia, the destination of many UK firms this year, including Ashurst, which linked up with Blake Dawson, Herbert Smith, which merged with Freehills, and Linklaters, which set up an exclusive alliance with Allens Arthur Robinson (now just Allens) and is looking to do something similar in South Africa.
The biggest UK domestic mergers have been in the mid-tier. These firms have been squeezed the most in the financial downturn because they do not have a big enough international network to bring in clients
from booming locations and they do not mark themselves out enough from smaller but more specialised competitors.
Two good examples are Field Fisher Waterhouse (FFW) and Lawrence Graham (LG). Both are mid-sized and do not really have a standout strength that marks them out from others. FFW has lost a lot of partners to other firms in the past couple of years and LG has had difficulties renting out space in its inefficient headquarters near London Bridge.
The two firms held merger talks in the early summer, but these failed fairly acrimoniously. FFW went on to chat tie-ups with another mid-tier but much stronger firm, Osborne Clarke, but they could not make it work either.
There have been a number of regional mergers: the North East’s Dickinson Dees and the South West’s Bond Pearce are in merger discussions, while the latter called off talks with Scottish firm Maclay Murray & Spens in early 2012.
This was one of many examples of Scottish firms’ desire to tie up with London-based or national firms in the past 12 months, including Manchester-headquarted DWF with Scotland’s Biggart Baillie, Bristol’s TLT with Glasgow’s Anderson Fyfe and City firm DAC Beachcroft with Andersons. The biggest was between English firm Pinsent Masons and Glasgow’s McGrigors.
These border-crossing deals are largely down to Scottish firms’ contacts in the Edinburgh finance and insurance scene.
But at the core of the merger mania is the squeeze on fees from clients who want more for their money or, in many cases, more for less of their money. Firms cannot cope on their own without size and access to emerging markets. There will be more combinations to come, no doubt.