Thought Leader

Law is still largely a cottage industry, with no single player having more than two per cent market share. This could change in the near future though, as more firms than ever before are opening up to the possibility of mergers and acquisitions. When conducting merger search projects five years ago, roughly one in six firms expressed a hypothetical interest. Now we need to be much more selective in terms of the targets we agree to introduce our clients to. Almost half want to explore the idea through its initial stage.

Many in the media talk about the threat of ‘Tesco law’, while many in the profession believe the best way to protect themselves is by merging with or taking over other firms to increase their national and global footprint. Rather ironically, this prevailing strategy reflects the process by which Tesco itself became so powerful.

As with most shifts in the demographic of law, we can look to our accounting friends to see what parallels exist and how they dealt with them. As recently as 15 years ago no accountancy practice had over 10 per cent of the market. Now there are four of them sharing roughly 80 per cent. Is this a shift that can occur in the legal market?

Another interesting parallel with the accountancy sector is the reasoning behind this current appetite for merger. When the big five (as was) emerged, it was on the back of a desire to develop a much larger global footprint, strengthening the relevant territories so as to become the natural choice for big ticket work. The reasons for merger vary between firms, but the concern I hear most frequently is that many firms feel they need to increase national and global reach while also gaining the critical mass to compete under the new regime. As the top regional firms aim to take more work away from the city, perhaps the strategy is inevitable among the larger players. But it also has a knock-on effect on much smaller firms.

There is always likely to be a place for niche firms regardless of how the market pans out over the next few years but the future vision that is being anticipated by many includes fewer, more powerful firms and a chasm between the next tier of mid-market operators. And as Tesco fever gets a grip, how long before the largest firms introduce loyalty schemes?

Colin White is managing director of Ortus Professional Search. He can be contacted at colin.white@ortussearch.com.