mergers and acquisitions

The world’s first listed legal practice, Australia’s Slater & Gordon (S&G), announced its agreement to buy national UK firm Russell Jones & Walker (RJW) for £53.8 million on the 30 January 2012.  My UK-based Edge International Partner Chris Bull joins me in this post as we consider some of the implications of this transaction and how the respective markets are viewing the development.

The S&G acquisition of RJ&W in the UK is a good example of successful law firms implementing carefully thought-through strategy and vision using merger or acquisition.

The S&G and RJ&W joinder is significant:

  • an acquisition as such, not a merger, by an Australian law firm of a significant UK firm.
  • the fact that the parties operate largely in the personal legal services space rather than the corporate market.
  • it will establish, when ratified, a foreign and publicly owned ABS (alternative business structure) in terms of the new UK Legal Services Act.
  • the amount involved.
  • the exclusion of outside parties such as insurers and investment companies.

This is a positive and exciting development for the legal profession generally but particularly the UK and Australia:

  1. Merger and acquisition as an outflow of carefully thought-through strategy: as recently stated we see this as affirmation that many law firms see acquisition and merger as simply one possible strategy in achieving their vision and carefully thought through strategic key objectives. It is not a knee-jerk reaction to client or market pressure.
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In the recent WSJ article “Stark choice for lawyers – firms must merge or die  author Jennifer Smith reasons that due to client and competitive pressures law firms have a ‘stark choice:  to ‘merge or die’. As a result, she says, there has been a ‘flurry’ of merger deals.

A decision by a law firm to merge or not should ideally be the result of a carefully thought through strategy, and implementation of that strategy and the firm's vision, not a knee-jerk reaction to competitive and client pressures. It should certainly also not be because other law firms are doing it. (Illustration adapted from FT image, graphic artist unknown)

The author’s conclusions are hard to reconcile with the actual numbers relied on; only sixty deals world-wide last year (2011) which is understood to be based on the Altman Weil Mergerline. While it is hard to get accurate numbers of law firms per country, based on a rough guesstimate of close to 60,000 for the USA and say 30,000 for the rest of the world, this number represents a minuscule fraction. It leaves one to wonder what is happening to the other 99.9% of law firms?

Unfortunately headlines and statements like this appearing in a respected publication like the WSJ, when repeated, re-tweeted and commented on, can over time lead to unintended and unwanted trends in the legal profession. As I have written elsewhere, while lawyers are sometimes referred to as cats (the oft-repeated being hard to herd/manage etc.) law firms can be like sheep – if one respected firm does something (especially when the pressure is on) others are more likely to follow suit (remember the ‘wait and see’ attitude about staff cuts during the GFC?). It seems some firms will not do anything different until others have tested the water. We have all heard the question around the partners table “what are Able Bodied and Bloggs doing about this?”
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