Mid-size firms feel the squeeze

If 2015 has been the year of the merger, 2016 is - much like the feeling after one too many mince pies - likely to be the year of the squeezed middle.

The merger of Irwin Mitchell and Thomas Eggar may not, on the face of it, look like a perfect match, but there are undoubted advantages for both sides, as the move takes them both away from the unstable middle ground. For Irwin Mitchell, there is an eye firmly on future-proofing against further attacks on personal injury claims, and for Thomas Eggar, the improved chances of weathering the storm in a bigger ship.

A further announcement this week that national firm DWF is to join forces with its German commercial counterpart BridgehouseLaw is a good example of how other mid-size firms are looking towards international expansion. Addleshaw Goddard's move into Scotland in its planned merger with Maclay Murray & Spens follows CMS Cameron McKenna's investment in Dundas & Wilson north of the border. Of course, global competition remains high, with international and Magic Circle firms continuously expanding their reach into new jurisdictions.

At the other end of the scale, smaller firms have been forced towards innovation or extinction, as legal aid cuts continue to bite and competition from new entrants intensifies. Each week, long-established high-street firms are joining forces and working locally to protect their workforce, their clients, and their legacies. Quality Solicitors has expanded to take in more than 200 offices and has changed the way firms operate.

It's in the middle ground that the fast-paced evolution of the legal market has hit hardest. Mid-size firms might appear to be treading water, waiting for the demand for legal services to pick up again, but, in reality, the squeeze is likely to become even more unbearable, with supply continuing to outstrip demand across many sectors, and commercial clients constantly under pressure to trim a few pounds from their much-reduced budgets. FTSE 100 companies have led the charge in boosting their in-house legal departments - some competing with City firms in number - followed by commercial and non-commercial organisations that see the worth in recruiting and developing their own lawyers and aligning them with their business needs and values.

Other mid-size firms have instead undergone makeovers, dressing up their best bits and trying to catch the eye of an appropriate suitor. This may work for some, but as the number of firms decreases, there are likely
to be more than a few left on the shelf and looking for a dance partner. How firms will work together post merger will also be high on the list of concerns, with culture clashes and partner disputes being potentially damaging at the start of any
new relationship.

How the mid-level market will respond is yet to be seen, but it may now be time to re-evaluate what you want to be known for. Only then can you consider how to set out to achieve it. 

Kevin Poulter is SJ's editor at large and a legal director at Bircham Dyson Bell @kevinpoulter