Two-thirds of partners expect the UK market to see more law firm tie-ups, as weaker practices eye up takeover opportunities and larger firms seek to expand their business. Emma Sadowski reports

Two out of three partners believe the recession will present attractive opportunities to secure opportunistic mergers, suggesting that the UK market could be set for a run of consolidation.

The latest Big Question survey found that 68% of partners believe the downturn will present attractive opportunities to secure domestic mergers. A further 28% thought there may be such deals, leaving only 4% claiming such unions were unlikely.

Nearly half (49%) of respondents believed there were merger opportunities that would benefit their own firm, while 30% saw such deals as 'unlikely' and 21% saw no candidates at all.

The 87 partner respondents generally believed the UK legal market was set for consolidation with 43% seeing such a trend as 'seriously overdue' or likely. A further 36% thought there was a considerable need for consolidation, leaving only 21% that believed there was little or no need for consolidation.

"Most law firms will merge on an efficient gains basis rather than scale. Historically, mergers were done for scale reasons, but now it is more focused on efficiency," Clifford Chance senior partner Stuart Popham told Legal Week.

The findings underline expectations that the UK is set for more domestic tie-ups as weaker firms search for takeovers and stronger practices seek opportunistic expansion, Denton Wilde Sapte recently entered into merger talks with top 100 US firm Squire Saunders & Dempsey, while Wragge & Co recently told Legal Week that it would consider a union with another firm in a bid to increase its City presence.

In April, Hill Dickinson and Middleton Potts merged businesses, while Speechly Bircham recently took over Campbell Hooper. Other large firms cited as being interested in mergers include CMS Cameron McKenna, LG, Manches and McGrigors.

Berwin Leighton Paisner managing partner Neville Eisenberg commented: "There may well be opportunities for mergers. The uncertainties of the current market may cause pressures on some firms which then seek a merger as a way out. Others may see merger as a way to spread risk."

However, many partners still regard unions with firms in financial distress or that need scale to compete as inherently problematic. Sixty-one percent saw such deals as either 'risky' or 'very risky'. Only 19% said there was little problem providing due care was taken.

Allan Murray-Jones, a corporate partner at Skadden Arps Slate Meagher & Flom, commented: "If two firms with problems merge, then you have a much larger firm with problems, and it will be much more difficult to manage. There have to be really positive reasons for doing it – the larger partner needs to be strong, and the merged firm requires really good management."

Taylor Wessing senior partner Martin Winter said: "Any trend towards increasing consolidation comes at a time when pushing revenue is particularly key. There may be good merger opportunities out there but people should make sure there are no distractions from driving forward their core business."

Eisenberg added: "I would strongly urge firms considering a merger to be clear about the realistic strategic benefits before taking such a major step."

Partners on mergers

  • 44% see substantial opportunity to secure a foreign merger
  • 43% see believe the UK is to a considerable extent 'ripe for consolidation'
  • 23% 'very much' see UK mergers that would benefit their own firm
  • 6% believe the UK market is too mature to benefit from mergers