Given the increasingly competitive nature of the UK’s legal sector, it’s somewhat unsurprising that law firms are constantly looking for ways to gain a competitive advantage over one another and with pressure from the Big Four mounting and the number of boutique offerings growing, practices are increasingly turning to mergers and acquisitions. Just under half (43%) of law firms are looking to merge with other businesses over this year according to accountancy firm Smith & Williamson’s annual survey.

Mergers on the rise

Feedback from over 100 UK-based law firms found that 43% were looking to merge or acquire in the next 12 months, compared to only 28% last year. Given the increased pressure from new boutique practices and the ever looming threat of the Big Four Accountancy firms, it’s hardly surprising that 59% of the firms surveyed indicated that competitive pressures have increased in the last year. According to the research, firms consider a focus on specialist sectors as the greatest opportunity in the next two to three years, followed by UK expansion and lateral hires.

Giles Murphy, head of professional practices at Smith & Williamson highlighted that “Focusing on specialist sectors can help firms to strengthen their niche and so differentiate themselves. Like any brand, being able to explain and demonstrate why your service is different and superior to the competition is fundamental to taking market share.” He noted that the right acquisition combined with an effective strategy can help firms to scale-up and develop market presence in a chosen niche or region.

According to Murphy there is a growing trend of smaller acquisitions rather than mergers which can result in two companies’ taking years to reconcile roles, remuneration structures, disparate HR policies, and working culture. The latter perhaps one of the most important, as any drastic changes to working culture could result in talent moving elsewhere.

Strong leadership crucial

It’s crucial that there are strong leaders who are dedicated to managing the merging cultures, while the most dominant culture is likely to assert itself over the new combined company, its likely there might be friction at a variety of levels. Issues at partner level are likely to set the tone for the entire practice, so it’s vital that the managing partner has a clear idea of how to tackle any discrepancies in culture.

It’s also important to emphasise the firms’ new core values, and ensure that all lawyers are aware of how they add value to the practice. Consultation should play a large role in establishing these key values, if the opinions from partners on both sides are not considered it’s unlikely they’ll be adopted effectively.

Identifying the key influencers throughout the firm is also important, often these may be senior partners who are reluctant to rack up too many non-billable hours, but they will play an important role in the cohesion of the two firms. It’s crucial to educate them on the new culture as their peers will likely look to them to set the example moving forwards.

Mergers give firms the opportunity to expand their niche or to venture further afield, and ultimately improve their turnover. However without strong leadership, they can leave firms focusing inwards, rather than outwards at the new potential that mergers bring, so a strong set of core values and a plan to tackle cultural integration is vital.

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Pay scales are a prevalent topic of conversation in almost all legal circles. However, in recent months a great deal of the discussion around remuneration has been leaning towards rising newly qualified pay, and away from the ever important topic of the gender pay gap. According to a recent study from Deloitte the gender pay gap won’t close until 2069, and as a profession known for its male heavy leadership teams, the legal sector needs to do more to address the gulf.

Gender equality – Are legal firms making progress?

The profession is certainly making progress. Earlier this year eight London law firms were recognised in Business in the Community’s Top 50 Employers for Women league table for championing gender equality. The annual league table recognises businesses that ‘demonstrate gender equality as a key part of their business strategy’ throughout all levels of their organisation – including leadership positions.

Gender equality is a concern for a number of sectors, but the legal profession frequently finds itself under fire for a having a lack of women at partner level. However, Linklaters, Addleshaw Goddard, CMS, Eversheds, Hogan Lovells, Herbert Smith Freehills, Pinsent Masons and Simmons & Simmons proved themselves worthy of a place in the top 50, by demonstrating a ‘commitment to creating workplaces and cultures that are inclusive of women.’

The gender pay gap – a long game?

However, Deloitte’s analysis not only indicated that pay parity won’t be achieved until 2069, 99 years after the equal pay act of 1970, but also that the gulf widens over time in all 10 of the most popular graduate careers surveyed. A recent salary survey from The Law Society supports Deloitte’s findings, indicating that while on average men earned 19.2% more than their female counterparts, the gap is widest for equity partners.

So while many firms are working to make their cultures more inclusive and diverse, it is clear that few are tackling the pay crisis head on. Firms need to ensure that they actively work to address the pay gulf, particularly at partner level, to guarantee that they attract and retain the top talent. Many firms are working to encourage women to stay in the profession by offering flexible working policies that allow them to effectively balance their work and home lives, but as discussions over gender pay find themselves back in spotlight, practices need to ensure they are working to close the gulf or risk losing some of their most talented professionals.

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The number of employers implementing agile working policies has climbed sharply in recent years, and as city firms battle to attract and retain top legal talent, a range of practices are introducing policies which give lawyers greater flexibility over their work/life balance. In a profession that is known for its exceptionally long hours and substantial focus on productivity, the prospect of working flexibly will likely be welcomed by many.

Understandably many firms have broached the prospect of agile working somewhat tentatively with the notable exceptions of two city practices in Schillings and Mishcon de Reya, who have both introduced new and innovative flexible working practices. Schillings recently announced that lawyers only need to come into the office two days a week, while Kevin Gold, the managing partner of Mishcon de Reya, allows lawyers to work from home as many or few days as they want.

Ultra – agile – the way to retain top legal talent?

Mischon De Reya pioneered the ultra-agile working trend when its managing partner Kevin Gold told lawyers they could work as many or few days in the office as they want, in addition to being able to take unlimited holiday. Gold claimed that the policy stemmed from wanting to foster greater gender balance within the firm, and encourage female talent to return to the profession after taking a career break to have children. Interestingly Mischon De Reya was one of few firms to post 100% autumn retention scores.

Following the upheaval of its existing flexible working scheme, Schillings is set to eliminate all fixed desks from its offices in favour of a new ‘desk booking system’ that enables lawyers to book a spot for a specific day or week. Christopher Mills, Shillings’ COO said that the scheme aimed to improve collaboration between the firm’s various teams, including cyber security and intelligence. He also highlighted recruitment and retention as a key driver behind the implementation.

Flexible working – the way ahead?

According to a recent study by Grass Roots, 49% of employees claimed that flexible working arrangements and work-life balance are their most valuable benefits. Interestingly the same study found that while 84% of all respondents indicated that their benefit package was important in keeping them in their current role, that figure rose to 93% for 25-44 year olds. These figures support the growing consensus that younger generations are increasingly beginning to value holistic benefits packages over additional cash compensation.

While the take up of flexible working arrangements in law may not be a quick as in industries such as media and tech, it’s evident that more and more practices are coming to realise the value of such policies. And with millennials searching for ever more holistic benefits packages agile working polices may set one firm out above the next when professionals are searching for a new role.