Law: A marriage of expedience

Merger mania has enabled small law firm Stephens Innocent to enter a whole new market.
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The Independent Culture
There is such a current mania for mergers in the solicitors' profession that most link-ups involving a medium-sized firm and a small, niche practice register little more than a blip on lawyers' consciousness.

But not every small firm would be sending merger announcements to clients such as Anthea Turner, Kate Adie, Des Lynam and Germaine Greer. And only one firm has as its senior partner perhaps the most recognisable face of the profession, Mark Stephens.

The current furore over Jeffrey Archer's now-aborted candidature for mayor of London highlighted again Mr Stephens' almost moth-like attraction for the media spotlight. When broadcasters were looking for a commentator on the legal implications of the latest Archer revelations, they turned to a well-thumbed page in their contact book. So when Mark Stephens' 20- year-old firm, Stephens Innocent, went through a somewhat tortured merger process last month, the trauma was bound to end up in the pages of the legal press.

At first the brash media and human rights firm - which, by Mr Stephens' own acknowledgement, "punches well above its weight" - was in negotiations with the City-based information technology and intellectual property specialists Rakisons. Advising Stephens Innocent during the negotiations was the established West End practice Finers. The 31-partner Finers put in its own bid for a marriage with Stephens Innocent, which was accepted, leaving Rakisons, which had by that time carried out its own due diligence and rejected a full merger, out in the cold. Finers Stephens Innocent will be formally launched this week.

At first it seemed as though the new firm would open its doors to find a formal complaint lodged by Rakisons with the Office for the Supervision of Solicitors. As one partner at Rakisons, Jonathan Polin, says: "We think Finers acted in breach of professional rules on conflict of interest. They were acting for a client when they had a personal interest in the outcome of the merger discussions."

Ultimately Rakisons decided not to make a formal complaint, calling instead on the solicitors' governing body, the Law Society, to draft a protocol for small to medium-sized mergers. For its part, Finers is dismissive of any suggestion of improper behaviour. The firm's managing partner, Richard Gerstein, says: "We are satisfied that at all times we were acting in the client's best interest."

Perhaps the more interesting question is how the cultures of the two firms will blend in the long term. Stephens Innocent has built up a reputation for flashy, and at times opportunistic, media and defamation work for high-profile clients including Paula Yates and James Hewitt. It also has a name in the human rights and pro bono fields, with Mr Stephens often repeating the claim that the firm was recently acting in 10 per cent of the cases before the European Court of Human Rights. Observers are speculating about how the firm's ethos, which historically has involved doing a considerable amount of legal aid work, will be accommodated by the larger, commercial, property-oriented Finers.

Mr Stephens himself is ebulliently confident that the merger was the right move for the firm. "Finers is a West End practice without the sort of traditional West End practice areas that we have - media, fashion, intellectual property and defamation. It has tended to be more property- and company-commercial-based. So the commercial engine that our media clients are now demanding of us is now provided."

Indeed both Mr Stephens and Mr Gerstein point to a new set of instructions involving a pounds 90m property deal that has come to the merged firm. Although it emanates from an existing Stephens Innocent client, the old firm would not have been instructed because it did not have the expertise.

"The merger opens up a whole new marketplace for us," Mr Gerstein says. "The potential for cross-selling of services is huge. The combination of e-commerce and IT/IP [information technology/intellectual property] expertise is of major importance to our clients."

The merger highlights a quandary facing much of the solicitors' profession - how best to survive in a rapidly changing business environment. The pressures on small to medium-sized firms are intense. With the Government legislating for reforms of the legal aid system and the growth and expansion of conditional fees, small - even niche specialist - firms are increasingly being viewed as an endangered species.

"Only the efficient, larger and more diverse firms will survive," Mr Stephens predicts. "We have seen that with the increasing trend to mergers across the country. The environment is the same in the City as it is in the high street. It just exhibits itself in slightly different ways. Increasingly, there will be a contraction in the number of law firms, if not necessarily a contraction in the number of practising lawyers."

It appears that being part of a larger firm will not impinge on Mr Stephens' self-anointed role as the lawyer on the telly. "I will probably focus the areas on which I want to comment a little more than I have done historically," he says. "But it does a practice no harm to have someone who is an ambassador. If you do it well, then it is exceedingly good publicity - something like pounds 100,000 a minute in terms of bought advertising." Finers Stephens Innocent will be hoping he is worth every penny.

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