By Shirley McIntosh, partner at Baker Tilly
A wave of law firm mergers in Scotland is ample evidence that Scottish law firms – like their counterparts in England and Wales – are gearing up for the ABS era.
Since the 2004 Clementi review of legal services in England and Wales, there has been much talk of this revolution, leading to non-lawyers owning, controlling and investing in law firms.
The Legal Services Act in 2007 got the ball rolling in England and Wales, enabling the setting up of Alternative Business Structures (ABS), although it took about four years to actually start having any effect.
The Legal Services (Scotland) Act 2010, which allows for up to 49% ownership of Scottish legal practices by non-lawyers, draws up similar enabling legislation north of the border.
Preparing for change
The shake-up of the legal industry being brought about by ABS means that Scottish law firms are becoming much more active in positioning themselves for the new environment – and a rise in the number of mergers involving Scottish law firms is one of the most visible responses.
Examples of this approach can be seen in a series of cross-border mergers: between corporate and technology specialists MBM Commercial and Stuart Malcolm LLP in October 2011, a union of commercial law specialists Anderson Fyfe and Bristol-based TLT Solicitors announced in May 2012 and the tie-up of Biggart Baillie with DWF announced in June 2012.
The most recent merger to be announced is between national firm Shoosmiths and Edinburgh’s Archibald Campbell & Harley, which will give Shoosmiths its first office in Scotland as well as a boost to its work in real estate, retail, litigation and recoveries for lenders.
Threat to local firms
Traditional local law firms, whose client bases are mainly individuals with basic legal requirements such as wills, executries and conveyancing, could be particularly concerned about the ABS changes.
The Co-operative Group was by far the largest of the first three organisations granted an ABS licence by the Solicitors Regulation Authority – and it is thought by many that they could succeed in winning over local client bases with their commitment to fixed price services. In addition, Co-op, and any other large players who also decide to jump into the ABS waters (Tesco has so far decided to watch from the shore), will also have the benefit of a strong, trusted brand.
As such, local practices – and possibly also various mid-market firms which are also feeling the heat – may decide to consolidate in order to avoid being wiped out as a result of the ABS regulatory changes.
Many of the tie-ups taking place in Scotland allow practices to expand into different areas of law or extend already strong practices to a wider audience, and a number of the top 30 Scottish firms are taking advantage of this strategy.
Morisons LLP acquired Macrae, Flett and Rennie in September 2011 and merged with Bonar Mackenzie just three months later, This allowed Morisons to strengthen its practice in key areas, building on the smaller firms’ strengths including commercial property, employment law and small business partnerships.
Another strategic merger was between Tods Murray’s and Fyfe Ireland in January 2012, combining the two long standing Private Client firms with well-established client bases and giving them a stronger platform for further expansion through consolidation.
Taking the niche approach
Although the initial impulse may be to group together to increase clout and reduce exposure to the threats of the ABS era, the other approach firms are taking is to go down the specialised, niche practice route.
In the grocery market over the last decade or so, there has been a significant backlash against the hegemony of supermarkets, as seen by the growth of local organic food suppliers and farmers’ markets.
Similarly, some law firms may be able to survive and prosper in the face of ‘Tesco law’ by the same similar tactics: trumpeting their local credentials and promoting quality, independence and healthy competition.
MTM Family Law in Glasgow, for example, was recently set up by three specialist family lawyers previously with HBJ Gateley, to do just that. They believe that “being a small, boutique family law firm … operating in a niche field brings benefits” to their clients, thanks in part of the absence of “corporate pressures and targets”.
But the changing economic and legal climate means that many firms simply cannot afford to rely on their traditional business models. As well as merging to expand into other legal fields or increase the client base, another strategy behind the wave of mergers is geographical expansion.
The merger between Lindsays and Shield & Kyd, announced in May 2012, will see Lindsays expanding out of its traditional heartland in the central belt and borders area into Tayside, through the Shield & Kyd offices in Dundee and Arbroath.
Meanwhile, Blackadders, which maintains a strong presence in Dundee and Tayside, has decided to test the waters in the Scottish capital through its merger with Edinburgh firm McKay Norwell.
Broadening international horizons
The effect of globalisation means that many corporate clients have come to expect legal services to be delivered wherever their offices are in the world. One of the largest mergers involving a Scottish firm can be seen as a direct response to this: the link-up between McGrigors and Pinsent Masons, giving the former an improved international reach under the Pinsent Masons brand. As well as getting access to new markets, going global can enhance the international experience of staff by allowing them to take advantage of overseas placements.
Although mergers and acquisitions have been changing the face of the legal sector for many years, the current economic and regulatory climate seems to have caused a surge in consolidation by Scottish firms attempting to weather the storm, and this trend looks set to continue. How successful the merger strategy will be still remains to be seen.
ECB launches small climate-change unit to lead Lagarde’s green push
FRANKFURT (Reuters) – The European Central Bank is setting up a small team dedicated to climate change to spearhead its efforts to help the transition to a greener economy in the euro zone, ECB President Christine Lagarde said on Monday.
Lagarde has made the environment a priority since taking the helm at the ECB, taking a number of steps to include climate considerations in the central bank’s work as the euro zone’s banking watchdog and main financial institution.
She is now creating a team of around 10 ECB employees, reporting directly to her, to set the central bank’s agenda on climate-related topics.
“The climate change centre provides the structure we need to tackle the issue with the urgency and determination that it deserves,” Lagarde said in a speech.
She said that climate change belonged in the ECB’s remit as it could affect inflation and obstruct the flow of credit to the economy.
The ECB said earlier on Monday it would invest some of its own funds, which total 20.8 billion euros ($25.3 billion) and include capital paid in by euro zone countries, reserves and provisions, in a green bond fund run by the Bank for International Settlement.
More significantly, ECB policymakers are also debating what role climate considerations should play in the institution’s multi-trillion euro bond-buying programme.
So far the ECB has bought corporate bonds based on their outstanding amounts but Lagarde has said the bank might have to consider a more active approach to correct the market’s failure to price in climate risk.
“Our strategy review enables us to consider more deeply how we can continue to protect our mandate in the face of (climate) risks and, at the same time, strengthen the resilience of monetary policy and our balance sheet,” Lagarde said.
(Reporting by Balazs Koranyi; Editing by Francesco Canepa and Emelia Sithole-Matarise)
What to expect in 2021: Top trends shaping the future of transportation
By Lee Jones, Director of Sales – Grocery, QSR and Selected Accounts for Northern Europe at Ingenico, a Worldline brand
The pandemic has reinforced the need for businesses to undergo digital transformation, which is pivotal in the digital economy. In 2020, we saw the shift to online and cashless payments accelerated as a result of increased social distancing and nationwide restrictions.
The biggest challenge on all businesses into 2021 will be how they continue to adapt and react to the ever changing new normal we are all experiencing. In this context, what should we expect this year and beyond, in terms of developments across key sectors, including transport, parking and electric vehicle (EV) charging?
Mobility as a service (MaaS) and the future of transportation
Social distancing and lockdown measures have brought about a real change in public habits when it comes to transportation. In the last three months alone, we have seen commuter journeys across the globe reduce by at least 70%, while longer-distance travel has fallen by up to 90%. With it, cash withdrawals for payment has drastically reduced by 60%.
Technological advancements, alongside open payments, have unlocked new possibilities across multiple industries and will continue to have a strong impact. Furthermore, travellers are expecting more as part of their basic service. Tap and pay is one of the biggest evolutions in consumer payments. Bringing ease and simplicity to everyday tasks, consumers have welcomed this development to the transport journey. In-app payments are also on the rise, offering customers the ability to plan ahead and remain assured that they have everything they need, in one place, for every leg of their journey. Many local transport networks now have their own apps with integrated timetables, payments, and ticket download capabilities. These capabilities are being enabled by smaller more portable terminals for transport staff, and self-scanning ticketing devices are streamlining the process even further.
Ultimately, the end goal for many transport providers is MaaS – providing an easy and frictionless all-encompassing transport system that guides consumers through the whole journey, no matter what mode of travel they choose. Additionally, payment will remain the key orchestrator that will drive further developments in the transportation and MaaS ecosystems in 2021. What remains critical is balancing the need for a fast and convenient payment with safety and data privacy in order to deliver superior customer experiences.
The EV charging market and the accelerating pace of change
The EV charging market is moving quickly and represents a large opportunity for payments in the future. EVs are gradually becoming more popular, with registrations for EVs overtaking those of their diesel counterparts for the first time in European history this year. What’s more, forecasts indicate that by 2030, there will be almost 42 million public charging points deployed worldwide, as compared with 520,000 registered in 2019.
Our experience and expertise in this industry have enabled us to better understand but also address the challenges and complexities of fuel and EV payments. The current alternating current (AC) based chargers are set to be replaced by their direct charging (DC) counterparts, but merchants must still be able to guarantee payment for the charging provider. Power always needs to be converted from AC to DC when charging an electric vehicle, the technical difference between AC charging and DC charging is whether the power gets converted outside or inside the vehicle.
By offering innovative payment solutions to this market segment, we enable service operators to incorporate payments smoothly into their omnichannel customer experience that also allows businesses to easily develop acceptance and provide a unique omnichannel strategy for EV charging payments. From proximity to online payments, it will support businesses by offering a unique hardware solution optimized for PSD2 and SCA. It will manage both near field communication (NFC) cards and payments from cards/smartphones, as well as a single interface to manage all payments, after sales support and receipt with both ePortal and eReceipts.
Cashless options for parking payments
The ‘new normal’ is now partly defined by a shift in consumer preference for cashless, contactless and mobile or embedded payments. These are now the preferred payment choices when it comes to completing the check-in and check-out process. They are a time-saver and a more seamless way to pay.
Drivers are more self-reliant and empowered than ever before, having adopted technologies that work to make their life increasingly efficient. COVID-19 has given rise to both ePayment and omnichannel solutions gaining in popularity. This has been due to ticketless access control based on license plate recognition or the tap-in/tap-out experience, as well as embedded payments or mobile solutions for street parking.
These smart solutions help consider parking services more broadly as a part of overall mobility or shopping experience. Therefore, operators must rapidly adapt and scale new operational practices; accept electronic payment, update new contactless limits, introduce additional payments means, refund the user or even to reflect changing customer expectations to keep pace.
2021: the journey ahead
This year, we expect to see an even greater shift towards a cashless society across these key sectors, making the buying experience quicker and more convenient overall.
As a result, merchants and operators must make the consumer experience their top priority as trends shift towards simplicity and convenience, ensuring online and mobile payments processes are as secure as possible.
Opportunities and challenges facing financial services firms in 2021
By Paul McCreadie, Partner at ECI Partners, the leading growth-focused mid-market private equity firm
Despite 2020 being an enormously disruptive year for businesses, our latest Growth Index research reveals that almost three quarters (74%) of mid-market financial services companies remained resilient throughout the pandemic.
This is positive news, especially when taking into account the economic disruption that financial services firms have had to go through since the crisis began. No doubt 2021 will also hold its own challenges – as well as opportunities – for firms in this sector.
Unsurprisingly, the biggest short-term concern for financial firms for the year ahead involved changing pandemic guidance, with 42% citing this as a top concern. With the UK currently experiencing a third lockdown many financial services businesses will have already had to adapt to rapidly changing guidance, even since being surveyed.
Businesses will also be considering the need to invest in working from home operations, and there may be uncertainty over re-opening offices on a permanent basis. According to the research 30% of financial services firms are planning to adopt remote working on a permanent basis, so decisions need to be made now about whether they invest more in enabling staff to do this, or in their current office premises.
Due to Brexit, UK financial services firms are no longer able to passport their services into Europe, which may cause problems, particularly in the next 12 months as the Brexit deal is ironed out and the agreement is put into practice. Despite this, Brexit was only cited by 24% of financial firms as a short-term concern. While it’s comforting to see that UK financial firms aren’t hugely concerned about Brexit at this juncture, it is going to be vital for the ongoing success of the industry that the UK is able to get straightforward access to Europe and operate there without issue, otherwise we may see these concern levels rise.
Looking ahead to longer-term concerns for financial services businesses, the top concern was global economic downturn, of which 40% of firms cited this as a worry when looking beyond 2021.
Investing and adopting tech
Traditionally, the financial services sector has been slow to adopt digital transformation. Issues with legacy systems, coupled with often large amounts of data and a reluctance to undertake potentially risky change processes, have meant many firms are behind the curve when it comes to technology adoption. It’s therefore promising to see that so much has changed over the last year, with 45% of financial services firms having invested in AI and machine learning technology – making it the top sector to have invested in this space over the last 12 months.
One business that exemplifies the benefits of investing in machine learning is Avantia, the technology-enabled insurance provider behind HomeProtect. The business has undergone a large tech transformation in the last few years, investing in an underlying machine learning platform and an in-house data science team, which provides them with capabilities to return a quote to over 98% of applicants in under one second. This tech investment has allowed them to become more scalable, provide a more stable platform, improve customer service and consequently, grow significantly.
This demonstrates how this kind of tech can help businesses to leverage tech in order to offer a better customer experience, and retain and grow market share through winning new customers. This resilience should combat some of the concerns that firms will face in the next year.
Additionally, half (51%) of financial services firms have invested in cybersecurity tech over the last year, which allows them to protect the platforms on which they operate and ensure ongoing provision of solutions to their customers.
Clearly, there is a benefit of international revenues and profits on business resilience. In practice, this meant that businesses that weren’t internationally diversified in 2020 struggled more during the pandemic. In fact, the businesses considered to be the least resilient through the 2020 crisis were three times more likely to only operate domestically.
Perhaps an attribute towards financial services firms’ resilience in 2020, therefore, was the fact that 53% already had a presence in Europe throughout 2020 and 38% had a presence in North America. This internationalisation gave them an advantage that allowed them to weather the many storms of 2020.
Looking at how to capitalise on this throughout the rest of 2021, half (51%) of are planning overseas growth in Europe over the next 12 months, and 43% in North America. Further plans to expand internationally is not only a good sign for growth, but should further increase resilience within the sector.
While there are many concerns, the fact that financial services businesses are investing in technology like AI and machine learning, as well as still planning to grow internationally, means that they are providing themselves with the best chances of dealing with any upcoming challenges effectively.
In order to maintain their growth and resilience throughout the next 12 months, it’s imperative that they continue to put their customers first, invest in technology and remain on the front foot of digital change.
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