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Identity crisis?

16 June 14

What does the merger of its former number one law firm say for the future of the Scottish profession? CMS's Caryn Penley and Stephen Millar explain why they think the outcome is positive

by Peter Nicholson

The legal firm that was once Scotland’s biggest is no more. Dundas & Wilson has been subsumed into international practice CMS. Should we be concerned?

Cross-border mergers featured in the Law Society of Scotland’s recent forum on the independence referendum, with other well-known names including McGrigors, Biggart Baillie and perhaps half a dozen more having disappeared in the last two years or so. Questioned from the floor over what the Government might do to help reverse the “worrying trend”, Secretary of State Alistair Carmichael admitted to “feeling uneasy” about it, while accepting that it may be “the way business is done these days”.

The business reasons that have driven the latest merger are no mystery. For CMS, established in Scotland for the past 20 years, it was the opportunity to achieve a major increase in scale,becoming a leading presence in sectors additional to its recognised oil and gas expertise. For Dundas & Wilson, struggling despite a London base to turn its fortunes around following the recession, it opens up whole new markets in which major clients are increasingly seeking to operate.

International presence

“From the Dundas & Wilson perspective, the merger was client-driven primarily,” comments Caryn Penley, former joint managing partner of the Scottish firm and now an executive partner on the CMS board. “A number of our clients are large and have operations across the UK and globally, and D&W wasn’t in a position necessarily to best service them in ways that they needed going forward.”

Referring to clients in Dundas’s key sectors of financial services and energy, she adds: “They have very strong connections and roots in Scotland, but they’re reaching outward and, to be able to continue to work with them, we needed to be able to do that as well. We had a relatively small London base; now we have a real City presence. Some clients are now instructing in Dubai, for example. They just didn’t have that option before when they’ve been looking to move to other places.”

Penley denies that any clients are unhappy at the loss of identity, whether firm or Scottish. She says: “It’s the same people who are working with those clients, so although the name has changed and we now have a different brand and an international reach, when a client phones up to talk to a Dundas & Wilson partner, it’s exactly the same person they are talking to and the same services being provided to them locally.”

Stephen Millar, who was CMS’s executive partner for Scotland and now shares that role with Penley, puts it in a wider context, saying: “A big theme in the economy is that we all need to be much more international and exporting a lot more, and not so domestic, so I think we’re fitting in with that theme. But I don’t think it’s just a theme for our clients, it’s a theme for the legal profession in Scotland that we have something special in a global marketplace as well, and we can essentially be exporting legal work from Scotland to the rest of the world.”

Advice for export

Some Dundas people decided not to make the transition, and some redundancies occurred, as with most mergers on this scale. But Millar is in no doubt that the future promises a larger, not a smaller, Scottish operation.

“Since the merger was announced, there have been a number of very material conversations with our clients regarding opportunities that have been brought about by this merger [he confirms that means former CMS as well as former Dundas clients], and we anticipate significant headcount increase in Scotland as a result.”

The quality of Scottish-qualified lawyers, he explains, added to lower operating costs compared with London, make it attractive, when clients are constantly seeking better value, to offer them relocation of work even with parts of major City mandates.

"What we want to do is use the lawyers here in Scotland to be doing more work here for local clients, but also to be a resource for some of these mandates which are coming into London, or in fact other of our offices around the world, so that the lawyers here can be used more and have their skills made more available.” Although the common wisdom is there are too many lawyers in Scotland chasing too little work, this thinking may explain why the Scottish market remains attractive to bigger firms from elsewhere.

Certainly Penley expects the trend to continue. “It’s just the way the market is going at the moment and, certainly for firms with similar client bases, it makes sense”, she notes. “A number of clients are looking to reduce the size of their panel, they want one firm to be able to provide services in one or more jurisdictions and the only way you can do that is by looking at merger.”

To those worried by the trend, Millar responds: “The most important thing for the profession in Scotland is that we keep producing the best quality lawyers, so at education level, let’s keep our universities producing the best possible people. If we do that, they will be extremely useful for assisting mandates both from other parts of the UK and globally.”

All of which can only benefit the economy. “We shouldn’t just look at exports from Scotland being things, whisky or oil and so on,” says Millar. “We should look at exporting from Scotland the quality of advice our people can give. That’s something that we’ve been doing materially from Aberdeen for some time, to the Middle East and other places. It’s an export in exactly the same way as an export of a thing is, and that’s what’s exciting for the profession.”

There are also concerns at the implications for the Law Society of Scotland, if the result is fewer firms and solicitors contributing to its resources, but, in this case at least, there appears to be little impact: CMS operates here as a multinational practice, subject to the regulators on both sides of the border.

The wider world

Is the outcome of the referendum, whichever way it goes, likely to make any difference to the work carried out in Scotland? “We don’t think so,” replies Millar. “We’re very positive about the Scottish economy, we’re very positive about the quality of the people here and we’d hope that, either way, neither of those things is going to change particularly. We’re used to dealing with many borders already, being in many different places, so in a sense we’ll be relaxed about that.” Penley suggests the merger will open new horizons for Scottish-based lawyers without them moving away permanently.

“Our people have opportunities to spend time in offices right across the world – 58 offices in 32 countries, that’s really attractive – and it means someone who may be tempted to go into another firm or career would actually stay based in Scotland, knowing that, if they want to spend some time based in another country, they have the opportunity to do that within this organisation, which I think is brilliant and it helps it to be attractive to Scottish graduates.”

Millar himself has some experience of this: “I’ve been involved with setting up our Middle East practice, and it’s interesting that a number of people who have been very instrumental in that are lawyers from Scotland or who have spent time in Scotland, and they now stand very well in other markets, so I think we can be entrepreneurial and use the quality of the people here to do good work here but also to be a force for exporting to London and beyond.”

Interestingly also, Penelope Warne, the recently appointed senior partner of CMS Cameron McKenna LLP – the CMS division of which the merged firm is part – was the (dual qualified) lawyer who set up CMS’s Aberdeen office, its first Scottish base.

Growth forecast

All that said, we are not about to see the entire Scottish solicitor profession taken over by acquisitive outsiders. While predicting that the trend will continue, Millar observes: “There are a limited number of firms in Scotland which have a significant number of clients who are looking globally or at least at the whole UK and beyond, so that may limit the consolidation a little bit.”

“It’s not necessarily for everyone,” Penley adds, “but it suited our client base, our partners and our structure, and at the moment it’s extremely positive and everyone’s very enthusiastic and wants to make it work.”

The message, then, is that Scots lawyers should feel confident about holding their own as part of an ambitious international firm. Asked where he sees CMS in five years’ time, Millar replies: “The merger with Dundas & Wilson has been extremely important to us, but there are many other things we’re wanting to do globally as well. It’s fairly public that we would like to expand into the US and do something significant there, and the intent is that we continue to bulk up in London as well, being such an important legal market. At CMS Scottish level, we very much want to be having increases in headcount, as more good Scottish lawyers are used here, both for the London market and elsewhere, and that’s very positive. Then for the clients here, we just want to be firm of choice for the big clients on the most important projects.”

As Penley sums up: “Scottish lawyers in the marketplace have got a reputation for quality, and I can’t see how that would change.”


Company profile

CMS: the world's sixth biggest law firm

CMS is described in one profile as “an unusual beast”, “a collective of independent European law firms operating under one banner”, but to Stephen Millar, executive partner for Scotland and a main player in the merger talks with Dundas & Wilson, the firm is structured the same way as many big international legal and accounting firms. “For example Deloittes has an identical stucture; it's very much one brand to market, there is consistency across all the different offices in terms of how the service is delivered, but there are different profit centres, and CMS is very similar to that.”

The current organisation dates from an agreement in 1999 between CMS Cameron McKenna LLP and practices in Germany, Austria, Netherlands and Belgium. More firms joined from other locations in the following years and the firm now operates from 58 offices in 32 countries, claiming a total headcount of over 800 partners and around 5,600 lawyers, making it the sixth biggest globally.

Its central headquarters is in Frankfurt, where a CMS executive committee oversees the whole CMS operation, with representatives from different countries including the UK. CMS Cameron McKenna LLP, which takes in various overseas offices as well as the UK practice, has its own board within that umbrella.


Merger opportunities, insurance style

What HBM Sayers hopes to gain from its tie-up

On the same day that the CMS-Dundas & Wilson merger was completed, Scottish firm HBM Sayers merged with English practice Berrymans Lace Mawer to create BLM, a £100 million business with 170 partners, 630 lawyers and technical experts, and a total of 1,550 employees, operating from 12 offices across England, Ireland, Scotland and Wales.

Both firms had a significant presence in the insurance sector, and the new practice styles itself “the UK and Ireland’s leading risk and insurance law business” – though the Glasgow office also retains HBM Sayers' family law department.

Both sides regard this merger also as the vehicle for further expansion. Mike Brown, senior partner at BLM and formerly of Berrymans Lace Mawer, told the Journal: “The key merger rationale was to provide clients with a full cross-border service to support business growth. For Berrymans Lace Mawer, this was the continuation of our expansion strategy, which began in 2012 with our launch in Dublin. For HBM Sayers, the merger not only allows growth in Scotland, which is a significant part of the UK insurance industry, but it has also opened up wider opportunities beyond Scotland.”

David Taylor, former chair of the HBM Sayers management board and a member of the BLM executive board, added: “The merger immediately broadened our network of highly skilled and experienced lawyers, which provides the opportunity to enter new markets and grow the business beyond Scotland... The team in Scotland has integrated to become a national firm, which has given us a new sense of purpose. We can now support more clients in more locations and offer a truly cross-border service.”

He added: “The Scottish legal market is worth more than £1bn to the economy, and Scottish Development International is promoting globally the virtues of the Scottish legal profession as a platform from which to build legal process outsourcing operations. There is pressure to have regulatory parity with the rest of the UK, so we are confident that we now have the capability on both sides of the border and will be in pole position to assist and benefit.”

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