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Wragge & Co is to temporarily relinquish its all-equity partnership model as it aligns its remuneration structure with Lawrence Graham (LG), The Lawyer can reveal.
The two firms will merge in May to create a £170m firm under the brand Wragge Lawrence Graham & Co (13 December 2013).
A remuneration committee will assess all of LG’s 35 non-equity partners to decide if anyone should be promoted to equity before they join Wragges, which has long prided itself on its 100 per cent equity partnership.
Wragge’s senior partner Quentin Poole told The Lawyer that the decision to drop the model is transitional, with the aim being to return to Wragge & Co’s current all-equity system once the merger is bedded in.
“You can’t be all equity on day one,” he said. “At the merged firm, the bar to equity will be slightly lower [than at LG’s] as a result of the merged firm abandoning fixed share partners over time.”
The Lawyer can also reveal that the aligned structure will be a meritocratic system based on performance. A combined remuneration committee will retain control of decisions surrounding partner salaries. There is not expected to be a bonus pool.
The new structure was proposed to partners in a 100-page prospectus just before the merger vote.
“Had there been no merger, both firms’ remuneration would have been based on performance,” Poole said. “In assessing remuneration for this year, because it’s based on historic performance, each legacy firm will have to lead the decision making [on partner pay].”
LG is slightly over-partnered compared with Birmingham-based Wragges; it logged a revenue per partner of £740,000 compared to Wragges’ £1m in the previous financial year. If the firms had fully merged net profit and equity partners it would have created a PEP of £322,000, not far under Wragges’ current figure of £339,000 (25 November 2013).
Meanwhile LG’s current revenue per lawyer of £305,000, benefiting from a London weighting, stacks up well against Wragges’ £263,000.
HR directors are now tasked with aligning LG and Wragge’s current employee benefits, such as rail passes and gym memberships, and are scheduled to come up with a recommendation in the next few months.
The two firms started speaking in 2009, when Wragges began drawing up a list of London merger targets as it looked to invest £20m in reserved cash (18 November 2013). However they decided not to go ahead with the tie-up, with Wragge’s partners showing little appetite to pursue a merger a year into the recession.
After the recent merger vote got the go ahead, Poole said: “Neither firm has gone through a metamorphosis since 2009. [The previous talks] were just after Lehman, everyone was very risk adverse and you didn’t know where the world would end up. It was a mighty, mighty uncertain time. Fundamentally, the waters are much calmer [now]. The environment looks more user-friendly.”
The merger needs 75 per cent approval to go ahead. However Poole said at the time that they achieved “way more than that” with over 90 per cent giving the idea the thumbs-up.