Inside a law firm merger

Hannah Langworth speaks to Pinsent Masons partner Kirk Murdoch about a successful join-up
Commercial awareness

Large commercial firms joining up with competing or complementary firms is one of the biggest trends in the worldwide legal market at the moment. The past couple of years have seen a high number of mergers in the sector and, according to legal industry monitor the Hildebrandt Institute, nearly 40 unions of this kind took place in the first quarter of 2012.

Anyone interested in the world of commercial law should pay attention to these deals. Looking at how a firm in this sector has grown through mergers will tell you a lot about its work and its personality today. And many firms' business strategies and plans for the future will include a merger or two.

To find out more, we spoke to Kirk Murdoch. Kirk was formerly Senior Partner at McGrigors and, following the merger of McGrigors with Pinsent Masons at the beginning of May this year, now sits on the board of the new firm, also known as Pinsent Masons.

What's cooking?

Kirk starts with his take on why so many law firm mergers have happened in recent years. He first lists some of the key reasons why law firms merge at any time: to grow their business, to develop new practice areas, and to cut operating costs through economies of scale, which allows them to keep clients happy by providing services to them at a competitive price. The last reason, Kirk feels, is a particular driver of law firm merger activity in the current economic climate: �Clients are saying that they want high-quality service and that they want the skills we can bring to them - but they don't want to pay any more than a certain amount for it." And clients with work to offer law firms at the moment are in a position to be demanding: �The lack of market growth and the lack of genuine new business, particularly in the UK, leaves law firms fighting for a bigger slice of a cake that isn't getting any bigger overall."

Kirk then explains the reasons for the recent merger between Pinsent Masons, an international law firm headquartered in the City, and McGrigors, a leading national firm with strong Scottish roots and an increasingly international outlook. �The merger gives us comprehensive strength in the UK. The new firm is the only law firm with genuine coverage in England and Wales, Scotland and Northern Ireland." McGrigors brought a longstanding strength in Scotland and a sizeable presence in the Belfast market to the table, and Pinsent Mason's strong London offering was a welcome addition to McGrigors' base in the capital which, Kirk admits, �was growing, but was not as big or as well-rounded as we wanted it to be". International considerations were also key to the deal. Being able to use a strong pan-UK platform to fuel international growth was, says Kirk, �probably the key strategic driver for the merger". At the time of the merger, Pinsent Masons already had offices in Asia and the Middle East, and McGrigors had a presence in Qatar and the Falkland Islands but, says Kirk, �the long-term aspiration of the new firm is to be a genuinely global player".

Of course, the new firm intends to grow not just for the sake of growing but to better support the firm's clients, as Kirk explains: �Both firms have evolved from regional roots - Pinsent Masons in Birmingham and Leeds, and McGrigors in Scotland - and have always been driven to expand by the need to follow our clients. As these clients grow, develop and move into new markets and sectors we need to be at their side. Because they like working with us, we like working with them, and if we don't continue to develop our business in line with their ambitions, then we're going to lose the relationship - and someone else will step in and take it."

Serious business

How does a law firm merger like the tie-up between McGrigors and Pinsent Masons come about? Kirk explains that the first stage, before any approaches are made to other firms, is a process of internal analysis. Kirk and his fellow McGrigors partners took a close look at a variety of potential merger partners: �We thought very long and hard, knowing the legal market as we did, about who could be a good complementary business to join forces with. Pinsent Masons looked like an ideal operation to us." The next step was to arrange a meeting, which was facilitated by a lucky coincidence: �A few Pinsent Masons partners had previously been partners at McGrigors, which was very helpful. We were able to contact them easily and had some preliminary friendly discussions without anything getting too serious."

Once things did get serious, as with any bringing together of two organisations, there were many practical issues to discuss. �Financial arrangements, where you're going to have offices, the new internal management structure, technology systems, and the name of the new firm" says Kirk, listing just a few. Morphing into a new entity was a complex process; the new firm has not simply adopted existing McGrigors or Pinsent Masons organisational structures but has instead in many instances formulated new ways of doing things to best suit the new firm's clients.

But Kirk and other partners at both firms recognised that the real key to completing the merger successfully would be ensuring that there was a good cultural fit between the two firms: �You've got to be satisfied that the values of the two organisations are sufficiently aligned, because delivering legal services is a people business. Our people are the most important asset we have, and they have to be able to identify with the organisation they work for."

An organisation's culture is a notoriously difficult thing to assess - so how did the McGrigors and Pinsent Masons management teams go about understanding each other's way of doing things? Says Kirk: �We took about six to eight months to genuinely test whether we felt there were sufficient common ways of thinking and common values between us. We didn't apply any scientific methodology or do a box-ticking exercise. We just spent time together talking about our approaches to doing business. What did we think was important in trying to win a client and then servicing that client? How do we treat our people?"

And the outcome of these discussions was pleasing: �We found that we had very similar approaches to many aspects of doing business. A good example is the attention we pay to trainee development. At both firms we didn't stick our trainees in back rooms doing legal research or hoovering up data, but gave them a chance to meet clients, face to face, as early as possible. Because it's by doing so that they'll understand where the satisfaction of being a lawyer comes from - helping clients to achieve their goals."

Adding up

So what does the merger mean for McGrigors and Pinsent Masons' trainees and future trainees? Kirk says that by undertaking the merger the two firms hoped to �put two and two together and hopefully make five, or six" - and this exponential increase in opportunity looks set to benefit junior members of both firms: �The combination that we're putting together, with a focus on a number of key global sectors like financial services, infrastructure, manufacturing and technology presents a raft of genuinely exciting opportunities for trainees and junior qualified lawyers to get their teeth into. Those formerly at McGrigors now have international opportunities that didn't exist for them before. And McGrigors has brought Pinsent Masons a well-regarded energy team, with expertise in oil and gas and in renewables, which should throw up some great new opportunities for future trainees of the new firm."

Trainees who join the new firm in the coming years can also look forward to being part of an organisation which, as they progress in their own individual careers, will continue to evolve with them - and more mergers may well be on the cards: �Look at the track records of Pinsent Masons and McGrigors" says Kirk. �Pinsent Masons is the product of a number of past mergers and McGrigors recently acquired a Belfast firm and previously a strong Aberdeen team. So both firms have experience of driving a business forward in this way and this merger is the latest manifestation of that experience."

What specific plans does the new firm have for the future? �We're aiming to open some new offices" says Kirk, �in Munich and Paris". The fact that today's Pinsent Masons is venturing into territories new to both what was McGrigors and what was the old Pinsent Masons is a fitting symbol of how the merger represents a fresh start for both former firms. �It's a new firm" says Kirk. �Two organisations have come together to create a stronger and better organisation - with bags of ambition!"