Legal Business

Analysis: upheaval in Scots legal market continues as Kennedys takes over Simpson & Marwick

Insurance specialist Kennedys is the latest in line of large English firms conducting raids north of the border over the last year-and-half, sealing a merger with Scotland’s Simpson & Marwick after over a year of negotiations.

The 220-partner firm will be initially be known as Kennedys worldwide and Kennedys Simpson & Marwick in Scotland and is the most significant Anglo-Scottish tie-up since McGrigors was acquired by Pinsent Masons in May 2012.

Both firms have been in talks for around 18 months and Simpson & Marwick managing partner Peter Andersen said the merger was ‘a natural progression from the firms’ collaboration over a number of years’. It follows a similar move made by Kennedys’ international insurance rival DAC Beachcroft through its tie-up with Scottish insurance litigation firm Andersens, which went live in September 2012.

However, the union with Simpson & Marwick, which has offices in Aberdeen, Edinburgh, Glasgow, Dundee, Newcastle, North Berwick and London, should raise Kennedys’ revenues considerably. Senior partner Nick Thomas said that the combined firm would have projected revenues of £160m for the current financial year – the firm is looking at up to 21% growth on top of the £117m it posted for 2012/13, while Simpson & Marwick should add around £25m to the top line. Another £12-15m will come through the addition of aviation boutique Gates & Partners, which merged with Kennedys in June.

‘Peter Anderson and I have known each other for years and when probably 18 months ago we were both thinking about whether it was time to have a UK-wide service available to our clients, then it was natural we would speak to each other,’ said Thomas.

The union is not a full merger – there will be two separate LLPs to ensure the Scots side of the business continues to be regulated by the Scottish Bar with the English portion regulated by the Solicitors Regulation Authority (SRA).

‘We would have gone for a full merger, with fully merged balance sheets, etc, but we had to work out ways of satisfying the Scottish regulatory authorities because they won’t allow legal executives and the like to be partners in law firms,’ said Thomas. ‘We will have two separate LLPS but there will be mechanics whereby we can say to ourselves it is one partnership, one firm and not in any way competing with each other.’

The move by Kennedys comes from an increasing desire from large insurance clients for law firms to offer a seamless service both north and south of the border – a similar motivation cited by DAC Beachcroft behind its move into Scotland last year. However, the Scottish legal market also delivers considerable cost benefits to international firms, something that Ashurst has looked to take advantage of through its ‘northshoring’ move into Glasgow in June. Insurance clients are notoriously cost-conscious and this will have encouraged the expansion of their main legal advisers into lower cost centres.

‘It helps the English firms as well as the Scottish firms to say they can provide clients with a one-stop service, a consistency of service,’ said Thomas. ‘If any insurance company is going to say “I want someone to deal with my motor claims north and south of the border” – it’s always been two different firms who by definition are going to compete a little, whereas here we will be able to deliver services to the client all with the same IT bases, which is hugely important these days when it comes to delivering the legal product.’

Simpson & Marwick becomes the latest Scottish firm to effectively disappear into a larger English counterpart, although it does so from a position of relative strength – it is ranked in the first tier of The Legal 500 for defendant personal injury, professional indemnity and health & safety. Scottish law firms have continued to struggle generally, particularly at the top-end of the market with Dundas & Wilson and Maclay Murray & Spens both recording significant drops in both turnover and profits for 2013. In contrast, two firms focused exclusively on advising leading Scottish clients – Brodies and Burness Paull– continue to show impressive growth.

However Maclays’ chief executive Chris Smylie remains committed to the firm’s UK-wide strategy long-term, arguing that space in the Scottish market is finite.

‘When we started our strategic review in 2012, it was for us a process of redefinition as well as a drive for focus,’ he said. ‘With around a third of our revenue coming from our London office, we consider ourselves a UK national cross-border practice, not a Scots firm with a London office as we are still regarded in some quarters. It is this reputation that we want to build and focus on. While it has worked well for the likes of Brodies and Burness Paull to maintain a Scotland-focused practice, that wouldn’t be the right thing for our clients or our business. So whilst Scotland will remain a core market for us we wouldn’t be looking to increase significantly the relative proportion of our business there.’

For Kennedys, its long-running expansion mode looks set to continue. In addition to the Gates & Partners merger, Kennedys launched in both Ireland and Portugal in 2011, merging with Dublin-based associate firm O’Hare, O’Connor, Walshe in June and associate office Almeida & Athayde in March respectively. It also launched a presence in Brazil through an association with local firm Torres Marcellino & Associados. With insurance clients insisting on better-value delivery from firm, further consolidation is inevitable.

‘There is going to be more growth by merger in our market place and we keep our eyes open for other people who look like us and who will fit in and add to what we already offer to our clients,’ said Thomas.

francesca.fanshawe@legalease.co.uk

Legal Business

Kennedys unveils 9% turnover increase and signals further expansion to its network

Kennedys unveils 9% turnover increase and signals further expansion to its network

Kennedys has today announced a turnover increase of 9% after a year of both lateral hires and organic growth, with revenues up to £117m from £109m in 2011/12.

The results do not reflect the firm’s recent merger with aviation firm Gates and Partners on 1 June this year, which is expected to add £10m to the City-based insurance specialist’s bottom line.

The top 35 LB100 firm, which has signalled that further expansion is yet to come, has seen consistent growth over the course of the last five years, including posting a 31% increase in turnover in both 2009 and 2010. Last year the firm broke through the £100m boundary, announcing a turnover increase of 11.6% at the end of 2011/12.

Kennedys senior partner Nick Thomas (pictured) said: ‘Kennedys is going from strength to strength despite the challenging economic climate. Our success continues to be predicated on client need and organic growth. The strategy is simple but highly effective: focus on a particular sector and add real value to our clients by combining legal knowledge and industry insight.’

According to Thomas, the firm plans to build on its merger with Gates and Partners by extending its network, commenting: ‘I expect this strategy to lead to further expansion in the coming 12 months as we invest in our network to be in the places our clients need us to be. The merger with Gates and Partners should be seen as a signal of our intent.’

Key hires by the firm over the last year include Clyde & Co marine and offshore energy partner Graeme Baird and Norton Rose marine lawyer David McKie in London, DAC Beachcroft professional indemnity partner Claire Bushen in Manchester, and corporate and commercial partner Peter Cashin, who was brought in to bolster the Hong Kong office from MetLife.

In 2011, Kennedys launched in both Ireland and Portugal, merging with Dublin-based associate firm O’Hare, O’Connor, Walshe in June and associate office Almeida & Athayde in March respectively.

Other UK firms to have recently reported their financial results include SJ Berwin, which saw revenue increase by 2% to £184.6m.

 

francesca.fanshawe@legalease.co.uk

Legal Business

Kennedys seals tie-up with Gates and Partners in aviation sector shake up

Kennedys seals tie-up with Gates and Partners in aviation sector shake up

International dispute resolution law firm Kennedys and rated aviation and aerospace outfit Gates and Partners have merged in a move designed to achieve ‘an even greater international platform’ and strengthen their offering to global insurance and reinsurance clients.

The merger, which went live on 1 June, will enable Kennedy’s to offer comprehensive legal support to the aviation sector including corporate and commercial, regulatory and competition, employment, finance, insurance and dispute resolution services. The merger will also give an expanded platform to the already international Gates team, which has offices in London, Brussels, Singapore and Dubai. The merged firm will be known as Kennedys and the new team will operate as Kennedys Aviation.

The merger will take Kennedys’ partner count to 176, with over 1,120 staff members worldwide. The specialist aviation team will comprise over 60 people including 20 partners. Kennedys chief executive officer Guy Stobart told Legal Business that the united firm will aim to build in key geographic locations, focusing firstly on Asia, followed by the US and then South America.

Gates and Partners is listed by the Legal 500 as a tier 2 aviation firm with a ‘solid reputation’ in the market, and said to be ‘among the best’. The firm advised British Airways in relation to a BA38 accident, where an aircraft flying from Beijing to Heathrow landed short of the runway when both engines failed on approach. Key individuals include Neil McGilchrist, who has ‘vast experience’. Saleema Brohi and Paul Freeman are also singled out.

The merged firm will be led by Kennedys senior partner Nick Thomas, while Gates senior partner Sean Gates will retire from the firm this summer.

Thomas said: ‘Our expansion continues to be predicated on client need and organic growth and this merger enables us to do what we do best: dedicate ourselves to a particular sector and add real value by combining legal knowledge and industry insight. This approach has served us well in several other sectors. It’s a powerful combination which adds greater value to our clients’ businesses.’

Gates added: ‘I leave the firm in a tremendously strong position; Gates and Partners has carved out a position as the only international law firm wholly dedicated to the aviation and aerospace sectors and it will now be able to grow further, benefitting from Kennedys international platform, wider legal expertise and its strong sector focus.’

Other recognised leaders in the aviation field include Clyde & Co and Holman Fenwick Willan, Bird & Bird and DLA Piper. Holman Fenwick launched its aviation team in 2011 with the controversial hire of Barlow Lyde & Gilbert’s (BLG) eight-partner rated aviation team, smoothing the path for BLG’s merger with former aviation rival Clyde & Co.

Kennedys is in on-going merger talks with Scottish firm Simpson & Marwick – a move that would give Kennedys its first foothold in Scotland.

jaishree.kalia@legalease.co.uk

Legal Business

Dentons wins spot as Network Rail announces panel revamp

Dentons wins spot as Network Rail announces panel revamp

Network Rail has cut its legal roster from 12 to five core firms in a review that sees newly merged firm Dentons appointed to the panel.

Other firms awarded full service contracts for work in England and Wales are Bond Pearce (Bond Dickinson on 1 May), Eversheds and Addleshaw Goddard. Maclay Murray & Spens has been awarded the contract for Scottish law matters. All four were reappointed from the previous panel.

The firms will provide legal support to Network Rail’s entire business but with a particular focus on corporate projects, commercial contracts, dispute resolution, employment and property work.

Network Rail has also awarded three further contracts for work in specialist areas – to Clifford Chance for treasury and capital markets work; Kennedys for health & safety and regulatory enforcement; and Winckworth Sherwood for public law matters.

As of April 2012 Network Rail had a legal spend of around £15m per year.

Firms not re-appointed to the full panel are Simmons & Simmons, Berrymans Lace Mawer, Bircham Dyson Bell, MacRoberts, Schofield Sweeney and Winckworth Sherwood.

The tender, which was kicked off at a launch presentation in December, was put out to 20 firms, with a further seven unsuccessful.

The rail company’s review of its advisers, led by group general counsel Suzanne Wise, has centred on developing stronger relationships with its advisers and obtaining better value services.

Wise said: ‘This has not been about dissatisfaction with any of the company’s current suppliers. The decision to significantly reduce the size of the panel will drive efficiencies in line with the company’s business objectives. I wanted to develop deeper, more strategic relationships with fewer firms to drive better value and a more integrated approach to our work.’

A statement issued by Network Rail further explained: ‘Network Rail had found its legal spend spread too thinly across a panel of 12 firms making it difficult to develop a close strategic relationship whilst at the same time eroding the company’s ability to gain maximum benefit from the value added offered by many law firms in the market.’

Before joining Network Rail, Wise was general counsel and company secretary of Premier Foods, where she set up the FTSE 100 company’s first formal panel, appointing Eversheds, Slaughter and May and Wragge & Co.

She joined Network Rail in January 2012, with a brief to complete a wholesale review of the strategic objectives of the legal team, including a strategic vision for legal services.

caroline.hill@legalease.co.uk