Clyde & Co and Barlow Lyde & Gilbert are in advanced merger talks, Legal Week can reveal, with a potential deal set to create a £300m law firm in one of the largest-ever unions between two UK practices.

Senior partners at the two firms have been in discussions for several months, and it is understood that details of the proposed union could go to partners as soon as the end of June, when Clydes will hold its annual partner conference.

A tie-up between the two firms would create a firm with over 1,000 lawyers and combined revenues of more than £300m, based on 2010-11 figures.

The merger would also be timely given that Clydes is set to move into the St Botolph offices next door to Barlows' City base in August this year.

Both firms are expected to need the backing of at least 75% of their respective partnerships in order to push ahead with the merger. No decisions have yet been made about the likely name of the combined firm or the management structure.

Clydes chief executive Peter Hasson (pictured above with BLG senior partner Simon Konsta) said: "Given our strategy to be the leading firm in our core sectors, it is natural that we look at all opportunities to achieve this which also maintain or promote the profitability of the firm. A combination of Clyde & Co and BLG may have the potential to provide significant benefit to the insurance market both in London and across our network so is worthy of serious consideration."

Barlows chief executive David Jabbari said: "As we have said in the past, as part of our ongoing strategy to grow the firm both in the UK and internationally we have been exploring a number of avenues in various regions. A merger is just one of several options.

"With BLG and Clyde & Co operating in many of the same markets, with the best lawyers in their fields, and with several clients in common, it's easy to see the obvious potential of such a combination. What I can say is that we would only pursue a tie-up with another firm if we believed doing so would be in the best interests of our employees, the firm and its clients."

Barlows is known to have been seeking a merger partner for some time, but it was previously thought to be keen to secure a deal with a US firm rather than a UK competitor. The firm has struggled to match either the turnover or international growth of Clydes, with revenues falling by 6% in 2009-10 to £80.8m alongside profits per equity partner (PEP) of around £300,000.

However, Barlows recently announced a 17% increase in revenues for 2010-11 to £94.5m, with net profit believed to be up by around 35%, although the firm has yet to confirm its 2010-11 PEP.

Clydes, meanwhile, posted revenues of £212m for 2010-11, marking a 10% increase on the previous year's figure of £192m. The firm has not yet announced its 2010-11 PEP, but last year posted a 10% rise to £605,000.

A merger between the two firms would gift Barlows its first presence in the US, Continental Europe and the Middle East, where Clydes has 10 offices, compared to Barlows' seven offices in the UK, Asia and South America.

A decision has not been made on what would happen in the locations where both firms have a presence – London, Hong Kong, Shanghai and Singapore.

Partner reaction

One partner from a rival insurance firm said: "Everyone knows that Barlows has been looking for a merger for some time, although I'm surprised that they have chosen Clydes as I think they will disseminate them. This is a huge opportunity for us because they are in markets that we're in and will now just be consolidated as one player. Clydes can be pretty ruthless and will just take the bits they like and get rid of the bits they don't."

Another senior partner at a rival insurance firm commented: "This is not what I would've guessed was going to happen but it's interesting, more than interesting. When we've grown over the years I have always seen it as two plus two equals five, and I'm not sure that this does this, I would say it adds up to more like three and a half. Barlows is very strong in professional indemnity, but I think they will just collide in areas like marine and some parts of insurance."

One ex-Barlows partner said: "I would have thought that out of all the insurance firms Clydes would be the one Barlows wanted to steer clear of because they are their direct competition and old rivalries die hard. It makes sense in terms of being a good move for its insurance partners, in terms of taking advantage of Clydes' international reach, but for those who don't have such a strong insurance background it might make them question whether to be part of that brand or not."

For more analysis, see Clyde & Gilbert – some initial thoughts and click here for an in depth feature on Barlows from February.

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