Flowering in Scotland

MASONS AND DLA are two firms which have widened their client base after setting up in Scotland.

LINDA TSANG LOOKS AT THE BUSINESS BENEFITS OF DOWNING A DROP OF THE HARD STUFF

Lawyers are not the only ones from south of the border to set their sights beyond Hadrian's Wall.

The UK's biggest bank, HSBC, has just spent 1.25 million on a state-of-the-art branch in Edinburgh, to create an all-encompassing banking centre which includes a private client fund management team, a treasury centre, and a global custody team.

It is a sign that the bankers seem to be acknowledging what a number of law firms from London and beyond already have - that there is business in Scotland for the English.

And that globalisation is taking hold in Scotland.

The impact of the English has been relatively recent, with Dundas & Wilson joining the Andersen Legal network in 1997 to join English firm Garretts.

And Masons, which set up in Scotland in May 1998 with six lawyers, has now ballooned to more than 30 lawyers in both Glasgow and Edinburgh.

Vincent Connor, joint managing partner of Masons' Scottish practice, says of his own move from top local firm McGrigor Donald to an international firm: 'It was a challenge and interesting to create a business which was quite different in what was already a mature market in Scotland.' Masons initially specialised in construction, but has also moved into e-commerce and new media, and more recently has been recruiting laterally to expand into other markets, taking Hugh Bruce-Watt from Dundas & Wilson to build up the commercial practice.

John Salmon, who heads Masons' information and technology practice, cites how the firm has developed its e-commerce Web site (out-law.com) with its English offices as one way that the practice has been developed on a nationwide basis.

Also, it has been gearing up to deal with outsourcing in the IT sector and data protection.

He says: 'Building up that practice has widened the perception of the firm beyond the construction sector, and the commercial practice is also being built up.' Mr Connor adds that a Scottish presence has also helped in servicing clients in the energy sector with oil and gas clients in Aberdeen and Norway.

One of the main advantages of the Masons' practice is access to the projects and the resources of its international offices, ranging from Dublin and Holland to South Africa andsouth-east Asia.

Mr Connor acknowledges that Scotland has not traditionally been seen as a must-go area for the London firms in terms of profitability or fee rates: 'But if Masons were not in Scotland, it would not have the benefit of that fee income at all, and there is the fact that you can consolidate relationships with existing clients.' One English firm which seems to have agreed with that view is City-based national firm DLA, which set up on 1 May 2000 by merging with the commercial practice of Bird Semple.

The firm has 14 partners in Scotland, and focuses on commercial work, predominantly property, corporate, project work, litigation and banking.Gordon Hollerin is DLA's regional managing partner for Scotland.

He comments that a lot of interest from English firms was sparked by Masons' arrival, initially in the areas of construction and construction-related work, and in particular, that southern clients' reaction was generally favourable to such a move.

He adds: 'And since we set up, there has generally been a favourable reaction from clients who were already using DLA in England.

They were attracted by the prospect of using a single firm throughout the UK.

Being a one-stop UK firm has also led to us winning new business.' Like Masons' Scots partners, he sees the scope for a wider client base.

He says: 'Internally, the move has given us access to a wider dimension than just being a Scottish firm, with access to DLA's training set-up, and to its offices in Paris, Brussels, Barcelona and Hong Kong.

'Because we already have an established base, people are watching us with interest.

The aim in the long run is to challenge the big four of Dundas & Wilson, Maclay Murray & Spens, McGrigor Donald and Shepherd & Wedderburn.

To do that, we need to increase in numbers, and we currently have 56 fee-earners and a turnover in Scotland of more than 6 million.

Realistically, we will have to treble that, which may take three to four years.'His view is that 'so far, DLA is uniquely placed to look at Scotland, and its client base'.

In England, it is a 'tremendously strong national firm', with one profit centre, based on merit, not lockstep.

'This means that the concept of a UK firm operating as one firm from a number of regions is not an alien one - any multi-office issues have already been resolved,' he says.'For many other English firms, Scotland is not on their radar; there are unlikely to be masses of London or regional firms coming from England.

Most are more interested in Europe in terms of profitability.' But that view is not reflected in the rumour mill in the Scottish legal community.

There has been speculation that national firm Eversheds was in talks with McClure Naismith, but Frank Johnstone, head of the consumer finance department at McClures, says: 'That has never been the case, although we have good relations with Eversheds and other English firms, as Eversheds has with other Scottish firms.'No doubt we are one of the firms that an English firm would be interested in, but it is a big step for any independent law firm to take, either merging with or being taken over by a larger firm.' Others may see the Bird Semple merger with DLA as a defensive one, and all acknowledge that DLA is well-known as a brand in the legal marketplace.

But for the medium-sized firms on either side of the border, the options are similar: they either have to merge to achieve critical mass, (as Dundas & Wilson did when it joined the Andersen Legal network), or strengthen a practice in a niche area.

In the meantime, the Scottish view of the English invaders is similar to that of the English firms to the Scottish firms in the City: that the Scottish firms are already in a different league and (with the exception of Dickson Minto, which has the distinction of being in the premier league in both countries for mergers and acquisition work, as well as being regarded as a Scottish version of Slaughter and May), are unlikely to be promoted.McClures' Mr Johnstone says 'the Scottish viewpoint of the English strategy is that it is easier for an English firm to set up a niche practice and to do well in that area'.

That has been the case for CMS Cameron McKenna, which has had a strong practice in the oil and gas area in Aberdeen, and Thompsons which set up its Glasgow and Edinburgh offices in 1979 specialising in trade union-related work, and also arguably for Masons with its initial construction practice, and DLA building on Bird Semple's commercial property practice.

Mr Johnstone adds: 'There are far more important legal markets for those English firms, in particular the London firms, although it can be useful to market to clients a UK-wide service, even in a niche area.' And just as England-based HSBC is looking to compete with the major Scottish banks, according to DLA's Mr Hollerin, the prospects are good for expansion and keener competition in the legal market: 'Scotland is buoyant, with its own Parliament, and both businesses and their advisers know that there is a level of work in the Scottish market that you won't get unless you are a certain size.

But there is enormous scope for that growth and to get that business.' Linda Tsang is a freelance journalist