MERGERS involving large Scottish legal firms have been rare in recent years.

So when two of Scotland's biggest practices enter talks with English firms within a few months of each other, it suggests something is up.

Although Dundas and Wilson did not go ahead with the tie-up with the smaller London-based Bircham Dyson Bell, partners at the £70 million turnover McGrigors will give their verdict on a merger with the larger Pinsent Masons in February.

The fact that the biggest fish in the pond are considering alternative ways to grow is an indication of the pressures being faced in the legal sector.

Factors such as a slowing in corporate deal transactions and a dwindling commercial property market mean previously lucrative areas are now offering a much smaller pot of fee income to compete for.

Alongside that, clients are keen to trim costs wherever possible and are squeezing as much value out of legal services as they can.

As a result, The Law Society of Scotland has predicted more mergers are on the cards.

Lorna Jack, chief executive, said: "Although not the only measure of achievement, economic success is vital to our members.

"The economic outlook over the next five years or so remains challenging, not least due to reductions in public spending, which will impact on access to justice as well as our members."

Chris Smylie, chief executive of another of Scotland's biggest firms, Maclay Murray and Spens, said it was in "good shape" but acknowledged the tough environment which saw turnover dip from £52.3m to £47.2m in the year to May 31, 2011.

He said: "We have resisted the temptation to add scale at any cost and are in the process of reshaping the business to ensure that it is properly positioned to meet the many challenges now facing the profession. These solid foundations have allowed us to continue to invest for the future, with six partner-level lateral hires and promotions in the last three months, across areas where we see long-term sustainable and profitable growth."

Despite the pressures, there is little suggestion of a return to the dark days at the height of the recession when lawyers were made redundant or offered unpaid holidays and career breaks.

But there are undoubtedly choppy waters to negotiate.

Brodies, which is thought to have the largest Scottish-based legal team in the country with around 300 fee earners, reported a 3% rise in turnover to £36.9m with profits up 13% to £14.4m in the year to April 2011.

Last year, it merged Davies Wood Summers into its Aberdeen office just a few months after opening in the granite city and then opened up its first non-Scottish office with an outlet in Brussels.

Bill Drummond, managing partner, said: "Merger and acquisition activity in law can be driven by both strategic planning and by pressures, internal and external.

"For some firms, it will no doubt make sense to combine efforts with other organisations that have a clearer view of the way forward. That is just sensible business practice.

"It is defeatist to say that there are too many lawyers chasing too little work. There is a considerable amount of legal work out there, though a lot of it and the way it needs to be delivered, and to whom, is quite different from even five years ago.

"As an industry, we are all in that same boat. There is no point in bemoaning the economic backdrop as no-one owes us a living and no-one is going to bail us out other than ourselves by dint of clear thinking and hard work."

David Dunsire, executive partner at Tods Murray, recently agreed a merger with the smaller Fyfe Ireland.

He said: "We are affected by tough economic conditions like any sector and a lot of practices are at best looking at flat turnover for the next 12 months.

"I would expect to see further consolidation as the year goes on."

Alan Miller, joint managing partner at Ross Harper, said: "The economies of scale which can be achieved through merger can be attractive to some commercial firms, particularly when the market is difficult.

"Whatever happens will be driven by necessity as the corporate market is not growing."

The growth of fixed-fee specialist practitioners is another worry the large full service practices could do without.

Jane Wright, chief executive of Law At Work, said: "Large businesses that have previously paid for ad-hoc employment law support from traditional law firms are increasingly looking to niche players like us."

Some lawyers believe fundamental changes in the way firms govern themselves is necessary.

No date has been set for alternative business structures (ABS), which will allow outside investment into law firms, to be brought into the Scottish market although a similar system has been introduced in England and Wales.

Alistair Morris, Pagan Osborne chief executive, said: "Every law business has to be looking at its current model and testing whether it is fit for purpose going forward. I think a lot will have to make dramatic changes in order to survive.

"I question whether two good firms coming together in a merger and bringing in new services is, on its own, going to be enough."

John Bingham, a founder of Bellwether Green in 2008, believes mergers can suggest firms are not innovative enough in looking for organic growth.

He said: "The sector is under unprecedented pressure to add value with clients increasingly looking to professional advisers for a competitive edge.

"To our eyes, it's difficult to see how the merge helps with this.

"We are already, as a profession, seen as too removed from the practicalities of business.

"A merge serves only to exacerbate this by burying the lawyers of each firm into a larger structure and further from the real world they are aiming to advise."

Not everyone is gloomy and some green shoots of recovery might be seen in The Law Society of Scotland's annual cost of time survey, which showed its first average hourly increase in three years.

Philip Rodney, chairman of Burness, which increased turnover to £23.4m and lifted profits by 40% in the year to July 31, 2011, said: "I think there will be mergers – some good, some bad, some for defensive reasons where weaker firms get together, and others which make strategic sense.

"But our current strategy does not anticipate a merger as we have a strong position. We know what we do well and it is not something we want to dilute."

The Law Society also found that 54 firms opened up in 2010/11, compared with 34 closures.

For example, Philip Hannay, an award-winning intellectual property specialist formerly of Macdonald Henderson, recently set up his own practice, Cloch Solicitors.

He said: "I am focusing on niche legal innovations where a premium service may still be rendered.

"What we may witness this year and the next is the slow democratisation of legal services at certain nodes in the legal market.

"Like so many other consumables, clients may come to dictate the terms on which they will do business and exactly who that business will be with."