Like Shakespeares, 230-partner insurance specialist DAC Beachcroft, which was created through the October 2011 merger of London-based Davies Arnold Cooper and Beachcroft, a national firm headquartered in the southwest of England, has continued to expand by bolting on new practices. The combined firm secured a tie-up with 40-lawyer Scottish outfit Andersons in March, signed a two-year alliance with Canadian insurance litigation boutique McCague Borlack in May, and merged with its two Chilean associate firms—SegurosLex and Amunategui y Cia—in November. (In a statement announcing the McCague alliance, DAC said that it also ultimately intends to merge fully with its new alliance partner.)
DAC board member Ruth Winterbottom says that consolidation within the insurance industry—publicly listed investment company Resolution Limited, for example, has since 2009 acquired Friends Provident Group plc, the majority of AXA UK plc's life insurance businesses, and Bupa Health Assurance—is driving the same process among the law firms that focus on the sector.
"The way the insurance industry has [consolidated] over the past 10 years has meant that insurers are able to put a significant amount of pressure on their advisers," she says. It perhaps explains why, in the two years prior to their merger, both DAC and Beachcroft had seen significant slumps in their profit margins—from 27 to 18 percent, and from 23 to 19 percent, respectively.
Winterbottom, a legacy partner of the largely U.K.–centric Beachcroft, says that the firm's insurer and health clients, which include Allianz Insurance plc, Zurich Insurance plc, and QBE Insurance Group Limited, were keen for it to develop its international network to better service their increasingly global needs. Winterbottom says that the firm's clients are particularly looking to develop their businesses in emerging markets such as Latin America and Asia, which have "growing middle classes and relatively low insurance penetration."
Beachcroft established an office in Singapore in 2011, but the merger with DAC secured access to the fast-growing South America market through DAC's office in Mexico and its associations in Chile and in Brazil. The combined DAC Beachcroft, which in its first fiscal year postmerger saw revenue inch up 2 percent to £182.2 million ($294 million) on a like-for-like basis, says it is now looking at establishing bases in Colombia, Panama, and Peru, while also investigating opportunities in Southeast Asia.
"The larger we've become, the more able we've been to deliver the service our clients want," adds Winterbottom, who recently relocated from Leeds to Glasgow to oversee DAC's postmerger integration with Andersons, which specializes in insurance litigation.
Scotland has been a hive of merger activity of late. The small and intensively competitive market is still dominated by independent Scottish practices—DLA Piper, Eversheds, and Pinsent Masons are the only English firms to have ventured north of the border—but the Scottish firms' traditional reliance on property and financial services work meant they were hit harder than most by the financial crisis. There have been five Scottish law firm mergers so far in 2012, involving some of the market's biggest names. DAC and Andersons got the ball rolling in March, and Bristol-based TLT merged with Glasgow firm Anderson Fyfe in May. Then, in June, Edinburgh debt recovery specialist Archibald Campbell & Harley combined with fast-growing English firm Shoosmiths, while expansionist Manchester firm DWF agreed to a merger with Glasgow-based Biggart Baillie—DWF's third acquisition in just six months. (DWF took over Newcastle insurance firm Crutes in 2011 and Birmingham insurance boutique Buller Jeffries last April, although its talks with 240-lawyer local rival Cobbetts collapsed last January. DWF has seen its revenue climb to £120 million, or $193 million, as a result of its various additions.) Most recently, in October, Glasgow-based Burness—a 150-lawyer firm best known for its expertise in corporate finance and litigation—united with 40-lawyer Aberdeen oil and gas specialist Paull & Williamsons. The new business, Burness Paull & Williamsons, is now Scotland's fourth-largest law firm, with estimated revenue of £38 million ($60 million).
But perhaps the most significant combinations came in May, when Pinsent Masons, the U.K.'s 16th-largest firm by revenue, with its own offices in Edinburgh and Glasgow, announced a tie-up with Scottish "Big Four" practice McGrigors, a 370-lawyer full-service outfit with leading practices in construction and tax.
"Like the rest of the U.K., the growth that Scottish firms enjoyed up to 2007 has come to a shuddering halt," says former McGrigors managing partner Richard Masters, now head of client operations at Pinsent Masons. "It's a small market with a lot of very good law firms—some would say too many. [Client] panels are continuing to shrink, and if you don't have the necessary size to get on—and stay on—those panels, then life can be quite challenging."
McGrigors, which has strong historic links to The Royal Bank of Scotland plc and BP plc, had already expanded beyond the Scottish borders through a combination of mergers and greenfield launches. In 2008 it acquired 10-lawyer London litigation boutique Reid Minty and opened an office in Manchester. The following year, it merged with 40-lawyer Northern Irish firm L'Estrange & Brett. Then, in 2011, McGrigors launched in Doha and signed a referral agreement with Husch Blackwell.
But the Pinsent merger has transformed its geographic reach and overall position within the market. Pinsent brings an international network that spans Europe, the Middle East, and Asia, including new offices in Paris and Munich, launched last summer after the termination of Pinsent's strategic alliance with French firm Salans in 2011. The united firm, which continues to operate as Pinsent Masons, boasts more than 1,500 lawyers and revenue of over £300 million ($485 million)—more than either Seyfarth Shaw or Fried Frank—placing it just outside the U.K. top 10.
