London still the holy grail for Scots firms

Roger Mackenzie attempts to clarify exactly what McGrigor Donald in Scotland’s tie-up with KLegal involves and asks whether Scottish firms can ever hope to breach the magic circle

Speculation about proposals for the Scottish partnership of McGrigor Donald together with McGrigor Donald in Belfast to join the KLegal International network, and for the firm’s associated English practice McGrigor Donald London to merge with KLegal, ended with the March 4th announcement that the remaining formalities have been completed.

But what exactly is it the three firms have signed up to, and why? And where does it leave other Scottish firms seeking to have a market presence beyond our borders? Contrary to much of the coverage in recent months, new Chairman Niall Scott is keen to emphasise that McGrigor Donald in Scotland hasn’t entered into any merger with accountancy giants KPMG. By becoming a member of KLegal International the firm has joined the network of law firms associated with KPMG.

In Scotland the firm continues as a separate legal entity and independent law firm, as does the office in Northern Ireland. The partnership in London has merged with KLegal to form the third entity in the UK which itself is an independent law firm.

Niall Scott says the McGrigor Donald management team backed the deal in the interests of their clients and to provide opportunities for the firms’ staff and partners.

“Becoming members of KLegal International will give us as part of the network an ability to enhance the offering we have in London; essentially what this is doing is more than doubling the size of the office in London, giving us more mass and strength there to meet the needs of existing clients for work that can best be serviced out of London and to win market share from other businesses in London.

“In addition, the international range of the network will be hugely positive for McGrigor Donald’s clients in Scotland in that it allows us to introduce them to firms and people we are going to become familiar with through working with them in various jurisdictions, people who have gone through an assessment process to determine their suitability to join the KLegal International network. Naturally we have spoken extensively with many of our clients and have been influenced by their positive response to this deal

“This will be very helpful for clients but doesn’t preclude the firm in Scotland from seeking to see if an alternative means of providing a solution in a jurisdiction is better. If, for example, the KLegal International firm is weak in technology law in a particular jurisdiction we would look to the best source of advice for that type of work. But it gives us a useful starting point to determine what our advice should be to our client.

“From the point of view of the McGrigor Donald partnership in Scotland, the international network will be beneficial. It will provide us with an opportunity to sell the services we can provide in Scotland and the rest of the UK to other law firms, allowing us to generate more work through referral channels from the relationships we will develop through KLegal.”

Niall Scott describes the relationship with the London and Northern Ireland firms as one of “close co-operation in order to ensure that effective and integrated services are delivered to our clients in the UK”.

“As a result of the co-operation we will be able to deliver more focused, specialist services to clients and greater depth of resource for large transactions. In our practice we often find that a transaction requires us to produce 10-20 people very quickly, for example in a cross-border corporate finance deal perhaps involving employment issues, property assets and environmental issues. I see additional resources being useful in our main service lines which include corporate finance, banking, commercial work, employment pensions and tax, technology, property and disputes.”

While McGrigor Donald in Scotland extols the virtues of their new arrangement as a member of the accountancy-tied firm’s global network, over in St.Vincent Street, Michael Walker, managing partner of Maclay Murray & Spens, is ebullient about “being by far and away the largest independent firm in Scotland”.

“Our policy is to remain independent; we cannot see any benefit at all in linking up with accountants. We genuinely believe it’s not driven by client focus or interest, but is very much driven internally by the legal practice. We always try to focus on what clients want and clients don’t want us forming an association with an accountancy-tied law firm. Having an independent legal firm makes much more sense. If we then want to make use of particular firms of accountants we can do so.

“We would much rather be able to put clients in touch with people we know through Lex Mundi, a worldwide group of leading independent firms, which allows us to develop the relationships we have established in the past in a more formalised way.

“We all think the same way, but are independent, so when a client comes in the door who has business in Venezuela, they can talk to the Lex Mundi representative there. This is global reach in a different way.”

Michael Walker admits Maclays have had approaches which he has listened to as a matter of courtesy but says “we’re not interested and not going to hawk ourselves around the market place. We just don’t see that it stacks up.

“Unless you actually know the people you are dealing with, you could as well be dealing with an unrelated firm.

“It’s beyond me why McGrigors have gone down this route. It’s a major disappointment as far as the Scottish legal scene is concerned, though from a purely selfish point of view it has given us a lot of opportunities.”

MacRoberts too pledge “to remain fiercely Scottish and independent”. Managing Partner John Macmillan said: “The expectation of our clients is that we remain independent.”

Perhaps the McGrigors manoeuvre is testimony to the fact that Scottish firms can never really hope to be more than big players on a small stage, that making a significant impact in London, far less having any sort of global presence, is outwith the reach of the big five Scottish firms.

Niall Scott is optimistic. “You can’t look past London as a hugely significant opportunity for lawyers in the UK because there is so much international work through London, particularly in commercial and corporate work.

“One of the big drivers for what we are doing is that the international reach will be very popular with staff. Many of McGrigor Donald’s lawyers in Scotland now wish to work in an international environment and the deal makes it easier to provide opportunities to work out of these offices or on transactional work to go and spend time in different countries.”

Michael Walker is also confident that Maclays can look beyond Scotland for future growth opportunities. “Maclay Murray & Spens have a very big London office, with 65 people and our intention is to grow that. It was formed 12 years ago before the others had woken up to the idea and we’ve been developing it quietly. McGrigors’ approach has been to go head to head with the London firms but we thought there was a different way to skin the cat and Maclays in London have been successful and intend to grow. We have now reached the size in Scotland where we have to look outside Scotland for future growth. Our office in Brussels is a real office. I don’t want to appear complacent, we’re not, but we feel we are well positioned as large independent firm based in Scotland with UK reach, and Lex Mundi helps us.”

So, could a Scottish firm, on its own or as part of a wider network, ever hope to penetrate the so-called magic circle of London behemoths like Linklaters, Clifford Chance and Freshfields? That seems to be where McGrigors is hoping to position itself in the long-term.

“We find a lot of the work we do is where a magic circle practice is on the other side, we relish transactions with magic circle firms, they have high quality people and they are generally very well organised but there are still huge opportunities for a firm like McGrigors to win work in competition with magic circle firms”, said Niall Scott.

“What’s nice about the set up, is that we’re moving into a young association, KLegal International is a new network, there’s a very real feeling of excitement in joining at the formative years of the development of the KLegal International network

“That’s very invigorating to be part of, and I think we are going to continue to do work against magic circle firms, as well as a huge range of work which typically does not go to magic circle firms.

“Clearly the Scottish economy is limited and it is very common for businesses in Scotland to seek to develop by expanding beyond Scotland; we embarked on that strategy when we set up McGrigor Donald in London

“McGrigor Donald’s association with KLegal is a natural progression of that desire, and does represent a very logical response to the challenge of building a business providing greater international reach.”

John Macmillan said MacRoberts were “not competing with the magic circle”. Michael Walker said: “Realistically, to compete with the magic circle firms will be pie in the sky. We’re operating in a different marketplace, but there is a marketplace which is a very vibrant one which sits happily below that. Maclays are very happy to deal with midcap companies, up to £100 million and more. Our ambitions are not dimmed.”