Emerging insurance giant set to rationalise London presence; ambitious revenue targets set for 2011-12

Newly-merged DAC Beachcroft has put international expansion at the heart of its combined strategy, with Latin America earmarked as a key area for growth when Beachcroft and Davies Arnold Cooper formally unite later this year.

The merger, which will go live on 1 November 2011, will create a top 20 UK firm with revenue in excess of £175m and around 230 partners working across seven offices in the UK, as well as branches in Ireland, New Zealand, Singapore, Spain and Mexico.

Strengthening legacy DAC's existing Mexico office has been identified as a key strategic goal for the merged firm's first year, with management also planning to create an international board to look at further expansion across Latin America, as well as potential launches in other key insurance markets, such as Hong Kong.

Beachcroft senior partner Simon Hodson, who will become senior partner of the combined firm, said cross-border expansion was one of the key motivations for the merger, citing DAC's international presences in Spain and in particular Mexico as particularly attractive to the national firm.

Hodson (pictured above) commented: "We wondered for some time about opening in South America. It's an emerging market with a particularly strong insurance sector. DAC has a very strong cross-border practice in Mexico and, of course, it also has a well-established Madrid office. Both teams work very closely together when advising clients in the Latin America region on insurance and reinsurance disputes."

Hodson said DAC's commercial real estate practice was also an attraction for Beachcroft. The firm will focus on the insurance, real estate and healthcare sectors, with the merger also significantly expanding the combined corporate, commercial, regulatory, employment and dispute resolution practices.

Given the predicted strength of the practice across these areas, Hodson expects turnover to be in the region of £190m for the first year – around 8.5% higher than the two firms' combined revenues for 2010-11. Partners will share the same profits and remuneration structure from the launch date.

"It's a proper merger," said Hodson. "Essentially, the work that they do will complement the work that we do. We operate under a purely merit-based system and they also have a similar structure. The new partnership will reflect both," he added.

After a break over August, senior management at both firms are now overseeing merger preparations ahead of the tie-up.

While the firm has yet to finalise details of the practice group heads and management committees at the combined firm, details of the senior management structure have been agreed.

Beachcroft managing partner Paul Murray will take on the role of managing partner at the combined firm, working alongside Hodson, while DAC senior partner Danny Gowan will become international senior partner. DAC's managing partner, Lucinda Walsh, will become a fee earner in the firm's real estate practice.

In addition to focusing on international strategy, the new firm's management has a number of operational issues to resolve as a result of the union. These include what to do with the two firms' London offices. The tie-up means the combined firm will have four offices in London, with at least one of these likely to go over time. A team has now been appointed to look at options, including sub-letting some of the existing space.

Hodson added: "In a perfect world we would have one office but I don't think that will ever happen. The best-case scenario is probably that we will eventually have two."

Management will also have to deal with a number of back-office redundancies resulting from the union. Though fee earners will not be affected by job losses, a firmwide consultation about support positions is expected to begin after 1 November.

News of the tie-up emerged shortly after insurance specialists Clyde & Co and Barlow Lyde & Gilbert entered into merger talks, with that deal, creating a firm with more than £300m in combined revenues, which is also set to go live on 1 November.

Commenting on the consolidation in the insurance sector, Kennedys chief executive Guy Stobart said: "It's fascinating being in this sector of the market at this particular time. There's been a lot of talk about consolidation for many years and we've been planning for exactly those scenarios. The only surprise – perhaps – is to see it happen so quickly and to such an extent."

A senior partner at a rival firm added: "Is it a good tie-up for Beachcroft? I'm not entirely sure what they will get out of it to be honest, besides DAC's commercial property team and a small office in Mexico. Having said that, size isn't everything, but it does have its place in the insurance sector. If I was a practice with a £20m turnover I would be a bit nervous right now."