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Across borders

18 August 14

The Word of Gold: it is neither a failure nor a betrayal for a Scottish law firm to choose to merge with a larger practice from elsewhere

by Stephen Gold

In the July Journal, Graeme McCormick lamented the postrecession trend of major Scottish law firms merging with larger English counterparts. Graeme is deeply committed to Scottish independence, so he starts from a particular perspective. I believe his implication that such firms have reneged on a moral obligation to their country and have let the side down is profoundly wrong, both in principle and in not recognising the character of today’s legal services market.

The primary purpose of law firms is to serve their clients to the best of their ability, consistent with their ethical obligations to clients, staff and society, while making a reasonable profit. Much public and private good may flow from this, not least enhancement of their country’s image. But this benefit is the result of firms fulfilling that primary purpose, not the purpose itself. No firm can fulfil it without having the right answer to the question, “What do our clients need?”

For many large corporate clients, that answer is legal advisers who are businesses of scale, able to deliver a consistently high level of service under one trusted, easily accessed brand, anywhere in the world. Such an approach may sometimes be misguided, and result in clients receiving a service inferior to a best of breed, independent, local firm. The trouble is that even when the customer is wrong, it is right, hence the constant pressure on law firms in these markets to grow through merger and consolidation.

The law is hardly unique in this respect: every major Scottish industry has significant foreign ownership.

Despite admitting his ignorance of their world, Graeme has no inhibitions about deprecating the actions of those who have “taken the shilling”, rather than “dug deep” to stay independent. No doubt in some cases better decisions might have been made during a most difficult time for the profession. But I suspect those concerned might retort that they and their colleagues have done their fair share of digging deep these last few years, and the fact that their businesses now prosper again, though under a different brand, entitles them to some credit. They no longer have the control they once enjoyed, but they have survived the car crash, and their people (though perhaps fewer) are now more secure and have opportunities not previously open to them to develop careers at a UK and international level.

It is important to stress that merger need not have the whiff of bailout. In some notable cases, the decision has been made from a position of strength for strategic reasons, and proved to be correct. As Graeme acknowledges, vibrant, successful Scottish firms remain, at every level, testament to the quality of their offering and their leaders. Their challenge will be to retain their treasured independence, while meeting the needs of clients in markets whose globalisation will continue regardless of the referendum’s outcome – a trend that is one reason why, if the polls are accurate, most of Scotland’s business and professional class will be voting for the Union.

Given Graeme’s gracious acknowledgment that his views are built on somewhat shaky foundations, may I respectfully invite him to take himself homeward, perhaps pour himself a tipple distilled in Scotland under US ownership, and think again.

Stephen Gold was the founder and senior partner of Golds Solicitors, which grew from a sole practice to UK leader in its sectors. He is now a consultant, non-exec and adviser to firms nationwide. e: stephen@stephengold.co.uk; t: 07968 484232; w: www.stephengold.co.uk; twitter: @thewordofgold

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