Gives an overview of what we’re seeing in the M&A market.
Harry Blakelock, Vice President, Transactional Risks Lockton.
Competition from new entrants such as foreign operations, accountancy firms and alternative business structures (ABSs) – combined with increasingly cost-conscious clients – continue to put pressure on law firms to differentiate their businesses through mergers and acquisitions.
Everybody, it seems, is looking for a merger – not least a central London firm which recently placed a half-page advert in The Lawyer seeking a merger partner.
Could this be the start of a trend? Attractive global law firm WLTM boutique, London-based investment funds practice for lasting and meaningful relationship? This may well be the future. Most firms continually strive to improve their businesses and, within the top 200, that often means through growth as firms seek to position themselves to meet market demand.
In such a fragmented industry, with c 10,200 law firms in England and Wales, there has been relatively little merger activity to date. There have been a few major international mergers – such as Hogan Lovells and SJ Berwin with King & Wood Mallesons – but few strategic moves within the UK.
Most lawyers are reluctant to change the status quo, and the pressures to do so just aren’t there. Banks are fairly benign. Interest rates are low. Compared to some other sectors, law is still a very profitable business, so why merge?
Things are beginning to change, however. The market is recovering, but pricing pressure is mitigating the increased levels of work, leaving firms feeling as if they’re running to stand still. Firms are therefore starting to ask: What piece of the market do we defend? Who can we act for? What work can we do and how can we organise ourselves to make that work? The answers to these questions will help firms pursue a merger for strategic reasons, rather than a defence mechanism.