2021 has seen the usual rash of consolidator deals, but strikingly it has also seen an increased number of what might be termed traditional mergers where 2 firms come together and the equity partners combine rather than sell out. We feel this is due to 4 key elements:
Zoom
Probably the biggest difference has been the use of Zoom which has led to unexpected efficiencies in the process. We often quote timescales of 6-12 months, but the Harrison Clark Rickerbys and Hewitsons merger was completed within exactly 6 months and with relatively few face to face meetings. With the firms headquartered in Worcester and Cambridge the ability of the managing partners to quickly zoom with each other, and the wider partner teams to all get together at various points on zoom made a huge difference. I see this continuing even after the restrictions end with initial meetings by zoom (for instance a new client of ours met 3 potential merger targets by zoom just this week), and then if there is a connection we can take it forward, if there is not then very little time has been wasted.
Time to consider
The pause in general activity in Spring 2020 allowed firms to take a step back and decide on a strategy. The options are actually very simple, they will either be the predator or the prey, there are very few firms who just want to do nothing. Therefore, we are seeing that firms now know what they want to do and are motivated to do it. For instance, we introduced Glaisyers to Laytons during lockdown, where Glaisyers were motivated to grow in London and had the financial resources to do so allowing Laytons to exit their CVA far ahead of time.
Cashflow is available
Most firms have had a good Covid financially. When Covid hit firms were forced to look at their cost base and cut any un-necessary expenses. However, after a few months they found they were unexpectedly busy meaning that profits were actually up and so they had the cashflow to invest. Ampersand is currently retained by 3 firms, all of whom have come out of the pandemic in this situation and who might not have been so positive otherwise.
FOMO
Finally, FOMO (Fear of missing out). Whilst there are 10,400 or so firms in England & Wales, the 200th largest firm only turns over £10m. Therefore for firms in the range of 50-200 there is a distinct possibility that their ideal merger partner might be taken by another firm. This is especially true for those firms that wish to be the dominant party, but even for those that wish to be acquired we are noticing they are getting on with the process proactively rather than waiting to be approached.
This article was written by Andrew Roberts (andrew@ampersandlegal.co.uk or 07956 961404) of Ampersand Legal. Ampersand Legal are one of the legal markets’ most active merger advisers having completed over 30 mergers in the last 3 years (including 5 in the last 4 months). It is also a founding member of ALFMA, the Association of Law Firm Merger Advisers. The other members of ALFMA can be contacted here.