Having announced an audacious union yesterday (10 October) management at CMS Cameron McKenna, Nabarro and Olswang are set to kick off the arduous process of consolidating their respective businesses over the next six months, an exercise which will see potential staff redundancies.
Speaking to Legal Business, Olswang chief executive Paul Stevens said the ‘day-to-day mechanics’ of the union are yet to be worked out including client conflicts, staff consolidation, office overlaps, and property arrangements.
Camerons senior partner Penelope Warne (pictured) added: ‘It’s very early days. Clients are learning today and were made aware discussions were ongoing.’
All three firms stated they managed to attain an ‘overwhelming’ majority to vote yes on the deal.
Camerons traditionally requires an 80% majority hurdle to pass a merger with the vote restricted to the partners in the firm’s core equity with junior partners having a restricted vote. Since its merger with Dundas & Wilson, around 40% of the partnership were sitting on the lowest tier of equity, blocking them from voting on mergers. Olswang required a 60% vote but Nabarro refused to confirm how many it needed to get the deal over the line.
CMS’s UK practice has been rapidly expanding in recent years and just two years ago it merged with one of Scotland’s Dundas & Wilson. Meanwhile, Nabarro looked to Addleshaw Goddard as a potential merger partner in 2013. Concerns over Nabarro’s pension arrangements for partners have previously hampered merger attempts. According to its April 2015 LLP filing, the firm’s pensions deficit increased from £24m to £32m.
Nabarro senior partner Ciaran Carvalho said the firm had come to an agreement with Camerons in respect of its pensions deficit but he refused to say what the specifics were.
The combination of Camerons, Olswang and Nabarro would create a UK practice with core revenues of around £450m, rising to more than £950m if you include the wider CMS network.
All three are in close proximity with profit performance: while Olswang’s turnover tumbled by 11% to £112.5m for the financial year 2015/16, PEP remained steady at £490,000.
Nabarro, meanwhile, saw a modest rise to its turnover of 3.5% to £130.4m this past financial year, but struggled with PEP as it fell by 7% to £585,000. Nabarro’s PEP had risen by 20% in 2014/15.
Market reaction on the union has been notably sceptical. A managing partner at a rival firm said ahead of the merger: ‘It’s all for different reasons isn’t it? Obviously Olswang is because of the state it’s in, CMS is desperate to bulk up; I don’t think it is that bothered about whether or not it fits a particular strategy. It is a desire to get bigger. And Nabarro has been leaking a lot of people. And I suspect it’s just looking for a safe place to try and get a bit of a strategy – because it hasn’t really got one.’
One Nabarro partner told Legal Business: ‘Everyone can see Camerons is the biggest party in the process. You can extrapolate from that, possibly, looking at the way other similar sorts of things have been done in the past. You’ve got some strong brand names and, quite rightly, people want to hang on to those.’
One former partner at Olswang said: ‘There are a lot of partners banking on this merger to give them some direction and a lift because it’s been a bit gloomy. There’s no doubt the numbers have shrunk considerably. Not least across the partner base but associates aren’t being replaced.’
Olswang has seen over 30 partner exits in the past 18 months with the firm asking 12 to leave the firm around Christmas time as part of a strategic review, Legal Business understands.
It has been suggested that Camerons and Nabarro are interested in Olswang’s more lucrative TMT and real estate offerings respectively.