Legal sector should look towards more merger activity

Gareth Harris: 'Those firms that are going to miss out need to start planning now.'
Gareth Harris: 'Those firms that are going to miss out need to start planning now.'
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The region’s legal sector is being encouraged to look at mergers and acquisitions to survive cuts to legal aid contracts.

On May 5 over 1,600 law firms, around 10 per cent of which are based in Yorkshire and the North East, submitted a tender to the Ministry of Justice (MoJ) to continue to provide legal aid criminal defence in England and Wales.

From September that number will be reduced to only 527 successful applicants. For those firms their fees will be reduced by a further 8.75 per cent following a similar cut the year before.

Gareth Harris, restructuring partner and regional head of the Baker Tilly Professional Services Group, told The Yorkshire Post: “There’s almost a guarantee that there will be, in Yorkshire, about 120 firms who are going to miss out.

“So those firms that are going to miss out they need to start planning now.”

Mr Harris said that, before the September announcement, firms must look to discuss acquisitions and mergers. Adding that there hadn’t been much M&A activity in the region’s legal sector.

Mr Harris said: “People may well bury their heads in the sand until they find out about the tender, because they may well just live in hope that they can actually get the tender and not be thinking about what happens if they don’t.

“If you don’t, you need to move very, very quickly to find someone to merge with or potentially your partnership is dead.”

Colin Gilbert, president of Leeds Law Society, said that mergers and acquisitions were inevitable in the legal sector.

He said: “They’ve already happened, more will happen between now and September.”

Mr Harris says that certain firms are actively seeking merger partners while others were waiting to see what happens.

He said: “The people that we talk to are telling us different things. Some clients we know are actively out there seeking merger partners, but it’s also pretty clear that there are other firms who are just burying their head in the sand and waiting to see what happens.”

He added: “These things take time. You can merge within a few days but it is a lot harder. If you start doing it now at least you’ve got a couple of months to make these things happen – make sure you’re merging with the right people, put contingency plans in place.”