Legal sector will consolidate to survive in 2009

THIS next year is set to be one of consolidation for the legal sector, and three North West firms are already taking advantage of the opportunities for growth in the current climate.

Law firms across the region are struggling to bring in the fees – with larger firms forced to take on lower value work previously covered by smaller firms, and small to mid-sized firms looking to survive through economies of scale.

“Smaller law firms are not moving with the times, have their head in the sand and are not facing the realities that are coming along in the next few years,” said Andy Duxbury, chief executive of Aaron & Partners.

“There definitely will be a shake-up with a real slimming down in the numbers of firms – the market is over serviced.”

The Chester-based firm employs 90 staff, with 18 partners and 55 fee earners. It has commercial work at its core, with work for owner managed businesses and SMEs in Cheshire, as well as offering private client services.

But in April 2007, it also opened an office in Manchester, which is currently staffed by two people on a full-time basis, with eight working in Manchester on a regular basis.

It is now looking at merger opportunities, which Mr Duxbury says will give the firm a more instant presence in Manchester.

“We want a permanent presence to crack Manchester. We had advanced talks in 2007, but the market was buoyant – people were doing very well so not really interested,” he said, adding that firms are more willing to talk as they are finding it tougher to make fees.

“We are 10% higher on fees at the end of October than we are at the same time last year but the second half of the year will be harder,” he said.

Mr Duxbury wants the firm to merge with one of a similar size or slightly smaller that covers similar areas. “But also with bits that make them unique, such as personal injury, but we don’t cover,” he said.

Rowlands Solicitors in Manchester, which has 110 staff, with 22 partners and 40 fee earners, is in serious talks with other parties, and hopes to complete a deal early in the New Year.

But joint managing partner Tony Broadley’s preferred approach is to take over a firm of a smaller size, rather than to merge with one of a similar size or larger.

“Even with mergers, there will always tend to be one firm that takes the lead and that can cause difficulties. By being the larger acquiring party, you avoid all of that,” he said.

Mr Broadley added that he would be happy to take over a specialist firm. “It’s the added value point. A good deal means two plus two equals five,” he said.

According to Mr Broadley, although times are harder, Rowlands is benefiting from always having covered a broad base of private and commercial legal work, while those firms that have specialised in certain areas – particularly property – are now struggling.

Davies Arnold Cooper, in Manchester, is one firm that specializes in real estate and construction – as well as employment. It has four staff on its real estate team in Manchester, with another 75 in London.

“We aim to grow the real estate presence so that it is akin to London,” said Peter William, partner in the Manchester office of Davies Arnold Cooper on the real estate team.

To counter the property downturn, it plans to grow planning and litigation as add-ons to the work it does, and bring in fees from new streams – Mr Williams sees distress work as a growth area.

“We are on the look out to grow by way of a merger and are in talks with parties,” said Mr Williams, who added that any Manchester or Liverpool-based firm would have to have a strong property offering, and synergies with Davies Arnold Cooper’s employment department would also be desirable.

“In the current market other ambitious firms looking to grow must be looking at mergers,” he said.

“There has to be a potential for growth – it s a balance. If a firm is struggling and looking for a rescue package, that’s not what we are here for.”