This year’s indemnity insurance renewal season has not been as bad as some had predicted, but there has been an uptick in mergers and acquisitions, the Solicitors Regulation Authority has revealed.
The regulator is also working with the Law Society to consider the issues arising from what it expects to be an increasing number of such deals.
Despite warnings of a hardening insurance market in recent months, only 47 firms whose policies expired on 30 September entered the extended policy period – giving them 30 days to secure a new one while covered by their previous policy – compared to 42 in 2019.
Not all firms notify the regulator of this and the SRA picks them up through the insurer data collection exercise it is conducting this month.
If they remain without new cover, firms enter a 60-day cessation period, during which they can still look for insurance but cannot take on new clients and are expected to prepare for an orderly wind-down.
Chief executive Paul Philip said a small number of firms also notified the SRA of their closure before the expiry of their insurance policy because they could not afford the renewal premium they had been quoted.
Reporting to last month’s meeting of the SRA board, he went on: “We have noticed a slight upwards trend in firms that have merged with or been acquired by another law firm. This has been reported in the legal press as a way of firms being able to continue delivering services to their clients, whilst not having to close because of increases in insurance premiums.
“We expect merger activity to continue to be a key trend over the medium term as firms respond to the new economic environment.
“We have established a working group with representatives from the Law Society to consider whether there is any further support that we can provide to help mergers and acquisitions and orderly firm closures.”
Legal Futures has reported on several mergers and acquisitions in recent weeks (see here, here and here). Since then, Yorkshire firm Schofield Sweeney has acquired Leeds-based Prodicus Legal, a niche firm specialising in commercial litigation and corporate/commercial work.
James Wood was a partner at Schofield before establishing Prodicus Legal in 2013. He said it would be useful to be part of a larger team given that litigation activity was on the increase “and the safe assumption is that there will be significant levels of fall-out from distressed debt”.
Schofield partner Steven Millward said the firm has recruited nearly 20 lawyers since March “and look to the future with cautious optimism as we continue to grow”.