Legal Business Blogs

Buy-side story: how CMS and Dundas & Wilson finalised their surprise merger

Talk to any partner at Dundas & Wilson in the early 1990s – when Cameron McKenna launched its fledgling oil and gas outpost in Aberdeen – and any suggestion that the City firm could challenge the Scots leader on its own turf would elicit snorts of derision. The notion that the two most prestigious law firm brands in Scotland – Dundas and McGrigors – would be consumed by Cameron McKenna and Pinsent Masons in 20 years’ time would have been seen as laughable.

But the recent confirmation of a tie-up between CMS Cameron McKenna and beleaguered Dundas still came as a surprise to many in the profession.Announced yesterday evening (12 December), the merger creates a firm of 830 partners and 5,600 employees operating in 57 offices in 31 countries with revenues of around €900m, if you count the CMS international grouping.

A merger with the actual Cameron McKenna partnership creates a far smaller firm – with combined revenues of less than £300m. The vote follows six months of talks that were held closely within both firms.

Dundas attained the 75% majority vote it needed to push the deal through, while CMS required 80%. The merger is set to go live on 1 May 2014. Integrating the two partnership will come under scrutiny given the wide gap in profitability between Camerons and Dundas. The Scots firm’s 78 equity partners averaged profits of £164,000 in 2012/13, far lower than the CMS-wide average of £439,000. Dundas – for years Scotland’s top firm – has struggled since the banking crisis with revenues falling by 35% over the last five years.

All Dundas partners are expected to hold partner status at Camerons but a firm spokesperson refused to comment how many would join the equity ranks.

Dundas will lose its name and officially be rebranded as CMS Cameron McKenna following a transitional period. Senior leadership roles at CMS Cameron McKenna will remain unchanged. The merged firm will be running ‘integrated practice groups, with practice group manager counterparts in Scotland’. Dundas chairman Laurence Ward will be senior partner in Scotland, while co-managing partner Allan Wernham will be the Scottish practice group manager for real estate. Fellow co-managing partner Caryn Penley will be the Scottish practice group manager for banking and will be on the CMS UK partnership board.

Partners and staff at Dundas’ London office will also move out of their current premises in Aldwych to CMS’s new City premises Cannon Place, where the lease will officially begin in 2015.

Speaking to Legal Business, CMS energy partner Stephen Millar, who led the merger discussions along with CMS managing partner Duncan Weston and senior partner elect Penelope Warne, said: ‘It’s entirely strategic. We’re committed to Scotland and we see a lot of prospects going forward in the energy and financial industries. Dundas & Wilson is very strong in financial and energy so the two are entirely complementary. It’s a great vote of confidence in the legal sector here.’

The deal has, however, provoked rivals to suggest that it’s a surprising choice of partner for CMS to make.

One managing partner at a peer Scottish firm commented: ‘Dundas & Wilson is not the powerhouse it once was so despite everything they’re saying, I think CMS are getting a firm with good bits but isn’t consistently of the standard it once was. There’s the potential to make it into something but there would have to be some pretty rigorous management done. It’s a reasonable fit – and a good fit for Dundas because they had nowhere to go. I think management just couldn’t make up their minds about the direction of travel, at least now there is one.’

One City-based managing partner at an international firm added: ‘It’s an inevitable move for Dundas & Wilson. I don’t think they had an independent future after recent severe performance and the loss of so many partners.’

It has emerged that the Dundas partnership were not informed of the deal until last week. Speaking to Legal Business Ward, who along with Penley and Wernham led negotiations for the Scots firm, said: ‘With all these things, it’s on a need-to-know basis, to be honest. Once we had a fully formed proposal to our partners, we did that at the earliest opportunity. It’s distracting for partners if they are focusing on mergers. We need people to be focused on our clients.

‘The reason we’ve been able to move very quickly is because we had taken everything to the final position and were able to present all the facts and say: “this is exactly how this will affect you, and you now have time to make a decision about it”. Our partners were always open to the idea of a merger. The concept didn’t have to be introduced to them. Many years ago, we understood that this was a possibility. What’s really impressed partners from both firms is the huge professionalism.’

Turcan Connell senior partner Douglas Connell, himself a former Dundas & Wilson partner, commented: ‘This will have been planned as part of the objectives of the partnership. They will have managed people’s expectations very carefully. I have a huge regard for Dundas & Wilson. It sounds as if this has been well handled. Not everyone will agree with it but this has been very substantially approved.’

One outstanding question is whether Dundas will be looking to make any redundancies. On this Ward would only say: ‘There are efficiencies we need to look through – that’s probably for another day. We need to get to that.’

The deal comes after years in which Camerons has been often attached to attempted mergers both nationally and in the City. The firm had even at one point toyed with a strategy of pursuing multiple mergers in the UK and internationally, an approach that was dubbed the Magnificent Seven.

With that concept failing to attract partners, Camerons instead focused on rebranding the CMS alliance of firms as a single organisation, despite the firm maintaining partially differing brands, management structures and separate profit pools.

While another potential Anglo-Scots merger between Kennedys and Simpson Marwick was called off this week, the Dundas/CMS union was not the only high-profile tie-up of the past few days, with Lawrence Graham and Wragge & Co announcing their merger will also go live in May next year.

For more commentary on the Scottish legal market, see Setting the heather on fire