The recent spate of Anglo-Scottish mergers will not be the last as Scotland gears up for its own alternative business structure (ABS) regime going live, it has been predicted.
An assessment published by accountants and advisers Baker Tilly said there has been a “surge in merger and acquisition activity in the Scottish legal market” over the past nine months.
“The profession, both north and south of the border, is going through a period of unprecedented change and this combined with the continuation of the worst recession in living memory is encouraging more and more practices to seek out strategic alliances.”
ABSs are coming in Scotland, although non-lawyers can only own up to 49% of them and a date for implementation has not yet been set. “Even though external investment is more limited in the Scottish model, it is important for Scottish legal practices to prepare early for the opportunities that ABS presents,” said Edinburgh-based partner Shirley McIntosh and George Bull, Baker Tilly’s head of professional practices.
“There have already been a number of cross-border tie ups, including the merger between corporate and technology specialists MBM Commercial and Stuart Malcolm in September last year, commercial law specialists Anderson Fyfe with TLT announced in May and most recently the merger of Biggart Baillie with DWF. More seem likely.”
The pair said that increasing globalisation was a factor in the biggest of merger of the last nine months, between McGrigors and Pinsent Mason. “The merger will provide McGrigors with greater access to international markets and customers than previously,” they said.
A number of top 30 practices have also been looking for strategic mergers, the assessment said. “Morisons joined with Macrae, Flett & Rennie in September last year, following this up with Bonar Mackenzie in December. Both smaller practices had strength in private client work, including property and small business partnerships, an area where Morisons wished to expand.
“Similarly Tods Murray’s merger with Fyfe Ireland in January combines two long-standing private client firms with well-established client bases to provide a platform for further expansion in this area.”
Geography is playing an increasingly important role in strategic mergers, it continued. “In May Lindsays announced a merger with Shield & Kyd. The combined practice will extend Lindsays’ reach from its current base in the central belt and borders area into Tayside, through the Shield & Kyd offices in Dundee and Arbroath.
“More recently the merger announced between Blackadders, which has a strong presence in Dundee and Tayside, and McKay Norwell, based in Edinburgh, shows that strong regional practices are also keen to establish a foothold in the major markets in Edinburgh and Glasgow.”
Mr Bull and Ms McIntosh concluded: “Mergers and acquisitions in the legal market are not new. Whether for strategic reasons or simply to manage succession, the current economic and regulatory climate suggests that further consolidation is all but inevitable.”