The decline and fall of Turner Kenneth Brown
Turner Kenneth Brown (TKB) had been an energetic commercial and property outfit with a dynamic reputation. Its near collapse and subsequent absorption into Nabarro Nathanson in May 1995 the following year is an object lesson in how partnership solidarity can wither.
The last few years of TKB’s existence were dire. Turnover dropped from £25m in 1992 to £21m in 1993 and then to £18m in 1994. In 1992 it reached its £2.5m overdraft limit with Child & Co and it took out another loan of £2.5m. It had expensive office space in Norwich Street with a stratospheric rent of £2.5m a year – a huge sum in 1992.
And the management structure was sclerotic: a top-level management committee reviewed matters fed to it from the departmental committee, under which there
was a range of departmental managers.
By March 1992 the bankers would not give it more money, so the firm resorted to lock-in – dubbed by the management as a ‘solidarity’ agreement. This required all partners to stay for two years and add more than £1m from their own pockets to boost the capital account.
But things got worse.
In 1993 net profit reached £1m between 36 partners – some £28,000 each. Neither did it have sufficient resources in the capital account to pay its VAT bills, costing hundreds of thousands in fines.
Litigation head Stuart Benson decided enough was enough and left for Dibb Lupton – thereby breaking the lock-in. Then a group of partners came up with a document to try to save the firm, but those eight partners, who were persuaded to stay for a while, eventually left in March 1994 for various firms around the City.
And so 1994 was the crunch time. The City was awash with rumours about TKB’s debt. Finally, a new management, led by the newly appointed Jim Edmondson, took the decision to reduce overheads and made redundancies.
In March TKB engaged BDO Binder Hamlyn to search for a
merger partner. It approached Macfarlanes and Rowe & Maw, but Alsop Wilkinson was the first firm seriously in the frame, but it pulled out of the talks (it later merged with Dibb Lupton in 1997 to create DLA). For a whole year TKB limped on until it found a saviour in Nabarro, which took it over in May 1995.
Almost all those connected with TKB say that, while many core clients were loyal, the firm’s management refused to acknowledge or understand the recession and did not want to take hard decisions.
Aggressive move of the year
Garretts raided blue-chip Leeds firm Simpson Curtis (now part of Pinsent Masons) in the most eye-catching ‘mass poach’ yet seen in the UK legal market. Five partners and five associates – 11 per cent of the firm’s total
fee-earners – left.
Nigel Knowles, then head of Dibb Lupton Broomhead’s corporate team in Leeds, made one of his first appearances in The Lawyer, saying: “They’ve fallen from grace. It will take an awful lot of work from them to climb back to the top three in Leeds. The people they lost were the real workers and their structure has been badly damaged.”
Simpson Curtis claimed to be unworried, but subsequently reformed its tightly held equity structure and made promotions into the partnership.
Mergers of the year
– Eversheds merged with mid-size City firm Jaques & Lewis to find its first critical mass in London.
– Medium-sized City firm Titmuss Sainer & Webb merged with Philadephia-headquartered Dechert Price & Rhoads to become the first transatlantic partnership – although rules on multinational partnerships meant that full financial integration was some way off.
– Freeth Cartwright merged with Hunt Dickins to become a major player in Nottingham.
– Forsyte Kerman and Saunders Sobell Leigh & Dobin merged to create Forsyte Saunders (much of it later subsumed into Lawrence Graham).
A bad year for some…
A rash of claims against law firms were reported in early 1994 as the slump began to take hold. Belgium’s biggest bank, Banque Bruxelles Lambert (BBL), sued Simmons & Simmons for £50m for alleged negligence over a syndicated loan facility on a property development. Simmons denied all liability.
Linklaters, which acted for BBL on that matter, itself faced a £115m damages claim from Irish leasing firm Yeoman, but the claim was subsequently settled. Clifford Chance was sued by Barclays’ merchant banking arm Barclays de Zoete Wedd for negligence.
… and not much better for others
McKenna & Co (now CMS Cameron McKenna) was left reeling by the recession, as its property department made a loss of £656,000. Senior partner Christopher Powell-Smith acknowledged that the property group was “too heavily dependent on developer clients”.
Meanwhile, the Hong Kong office leaked money, making a loss of £108,000. Later that year the firm elected a new managing partner, Robert Derry-Evans, making a definitive break with the old regime.
Derry-Evans would later negotiate a merger with Cameron Markby Hewitt to become CMS Cameron McKenna.
Best ludicrous Germans story
In March Mayer Brown & Platt was stopped from holding a reception to launch its Berlin office following an injunction granted by a local court at the request of the Berlin bar.
Most significant partner departure
Maurice Allen quit Clifford Chance. A year later he would set up Weil Gotshal & Manges’ UK operation.
After two hard years of fractious consultation and considerable controversy, the Lord Chancellor Lord Mackay unveiled the Courts & Legal Services Bill in December 1989.
Mackay’s reforms, which included multinational partnerships, were the regulatory catalyst to the huge changes in the legal profession in the past two decades. However, his proposals on extending rights of audience to solicitors in the higher courts were reviled by large sections of the bar. Bar Council chair Desmond Fennell warned of “a new Hundred Years’ War.”
But Mackay held his nerve – despite the widespread rumour that some 20 High Court judges were poised to resign over the issue. He said: “The bill is a significant step in the evolution of a healthy and competitive profession for the needs of the coming decades.”