Cobbetts coy over profit as figures fall

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  • How the bubble has burst! They believed that they could create a top law firm, yet under the leadership of Mr. Shaw and his inner circle the firm has taken on massive overheads in terms of new buildings and staff and has lost many able partners and associates. Time for a change at the top?

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  • No surprise news here. Many firms that decided to give it large have come a cropper. Better to be modest and discreet rather than shout just how great you are when there is no substance to it. Was there ever any substance to what Cobbetts actually did?

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  • Well if you think back to all the mergers over the past 5 years or so - mixing so many cultures and personalities in such a short space of time (Lee Crowder - remember that!) - honestly, is anyone really surprised. When will these regionals learn the basics: that if you look after your business, and concentrate on getting the basic stuff right - as in quality NOT quantity, use a degree of caution and focus on careful investment (ie. affordability) - the business will look after everyone!

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  • Can an expert in law firm economics explain to me what happens when a firm's costs exceed its revenue.

    What do the equity partners get?

    Or do they take home nothing?

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  • Mr Shaw only likes good news - the silence says they must have fallen way behind their peer group.

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  • To answer purple goat's questions, if a firm's expenditure exceeds its income, then
    (a) it could be technically insolvent;and
    (b) the partners have nothing to take home;unless
    (c) the firm borrows to pay partner drawings (in which case the debt goes up quite dramatically)

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  • On the very same day Cobbetts sent a mailshot to its trainee applicants saying they had been rejected, possibly trying to hide the fact that they've made a hasty decision to cancel recruitment?

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  • Re question by Purple goat and answer by Anonymous.
    - the partner's are required to make good the shortfall - they share in the profits or losses of the firm.
    - there are no drawings (on account of profit) because there is no profit - the firm doesn't need to borrow money to pay drawings. The firm may need to borrow to ensure that working capital is maintained in order to pay on-going costs such are salaries, rent etc.

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  • A propos the last comment
    1."Partners" in an LLP are not personally liable for the losses (subject to the claw back rules)
    2. If partners have had drawings on account of profits that have not been made then
    (a) the usual practice is to require the partners to repay them; and
    (b) unless a firm has large reserves of capital and cash, it would have to increase its borrowings, as sure as night follows day.

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  • So if the partners aren't liable for the losses then who is? They might not be in a formal insolvency but if a firm (or LLP) wants to contiunue to trade then the partners will have to share the losses.
    Which means repaying drawings and re-capitalising the business - as presumably the losses will reduced members interests.

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  • My concern, which I know is shared amongst the legal industry in general, is why The Lawyer acts as self-appointed arbiter on matters of commerce. I think it's high time The Lawyer stopped being so sanctimonious! When Catrin Griffiths is in the invidious position of running a £50m+ business with all the pressures it brings, she will have the platform upon which to write such scurrilous comments, but in the meantime The Lawyer ought to observe a more impartial code of reporting, and not take umbrage at being shunned in
    wanting to speak with a Managing Partner then resulting in such biased press. Catrin may not be aware, but we're in the middle of a global depression which might also account for the sparsity of advertising in The Lawyer?! I am sure on another day, The Lawyer would be happy receiving healthy contributions and sponsorship from Cobbetts for The Lawyer's annual
    flagship events- do we smell hypocrisy?

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  • I've read and re-read this article, yet I fail to see the bias and impartial reporting that Ben Haider suggests is present. All I see are facts and figures and an apparently well-informed assumption based upon such facts.
    The speculation in the opening line is surely justified given that while other firms are reporting their figures (no matter how bad, or how reluctantly) Cobbetts has chosen to stick its head in the sand. The truth will emerge in due course and I'll be extremely surprised if this speculation is unfounded.

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  • by failing to disclose these figures, however bad they may or may not be, there is bound to be more intrigue and interest. I cannot understand the reference to the non disclosure being a "business decision" very odd!

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  • The numbers are what the numbers are. There isn't much point whatsoever is suddenly turning around and saying you are not going to play anymore just because they are (one assumes) truly appalling. If you didn't like the game then you shouldn't have played in the first place and just kept silent through the good times. Talking to journalists is a game for consenting adults and if you are not prepared to engage as such then please don't whinge when the tough questions start to appear.
    A failure to disclose externally is also likely to cover a failure to disclose internally to staff who must be wondering (and potentially panicking) about what the numbers are for their firm - very poor management if that is the case.
    Finally, those of us with long memories might want to dig through the dustier parts of the brain and consider what happened to Turner Kenneth Brown in the early to mid 1990s.

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  • Re. the above post, in fairness to Cobbetts they aren't the ones whinging - The Lawyer is!
    I don't really see what the issue is here. The figures will be published when they are required to be published.
    Quite why The Lawyer seems to think it is entitled to an advance march on that story is anyone's guess.
    And if the figures don't show a loss, will the Lawyer write a Leader column about that?

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  • Cobbetts will be concerned with the interests of their:

    1. clients;
    2. bankers;
    3. staff; and
    4. last and least, the partners' financial positions.

    Heads will not be buried in sand. The only sand around is that whipped up in a swirl by the legal media.

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  • for a so called big firm who were shouting from the roof tops when times were good, it is an embarassment that they are now running scared. Blake Lapthorn released their results which must have been difficult, it is time Cobbetts grew up and did the same

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  • I work at Cobbetts and would like to add that I'm not 'wondering and panicking' about what the numbers are as someone above stated. We were all briefed last week about the line that the lawyer intended to take. It's hardly a revelation that profits have been hit and we're in no different or worse a position to many of our obvious competitors. The reality is that the 'Significant Fall in PEP' headline no longer carries any shock or novelty value, because it's hard to identify a firm that hasn't suffered on that basis. So we end up with the 'X has suffered a loss' headline instead (on the basis that they wont tell us their results (yet)).

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  • The novelty here is the possibility that the firm has actually made a loss, hence the newsworthiness.
    Many firms are announcing quite significant reductions in profit, but most are are still making a lot of money, but just not quite as much as they were.
    The firms which will clearly suffer the most will be those that didn't actually make much money when times were good.

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  • Cobbetts will not have made a loss, but profits must be well down if Michael Shaw will not comment (he likes to talk the talk). I would not like to be one of their employees. Will we soon hear reports of another round of redundancies?

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  • "Last and least, the partners' financial positions"?
    Are you kidding? I spot the Cobbetts partner and claim my £5.

    .

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  • I am an ex employee with many friends there. I had a middle management position there.

    I find it really curious that The Lawyer - which has given Cobbetts nothing but bad press for years in my recollection - suddenly decides that a mid-ranking lawfirm declining to publish and discuss its interim results, something perfectly legal, merits a big story. I can't see similar stories occurring for some of the more media friendly southern firms who've been through, and are going through, worse situations. The first we will hear about those is WHEN (not if) something dramatic happens.

    As to what is going on at Cobbetts, my understanding is that things are not greatly different to what is occurring elsewhere. They are in the same business as everybody else, so are suffering the same issues. Where there may be variance, is that the recent office refurbs and associated investments, and possibly residual merger costs, payoffs etc, are still being felt around the firm, which probably means the unavoidable costs base is higher than most. So, yep, they may well have made losses, and there may well be further hardship to come.

    That some of it might have been avoidable, that maybe Birmingham was perhaps a bridge too far, is possibly true. But I don't think you can necessarily slate the management for that; the management is a function of the partners. They elect the management and endorse their decisions, or they remove them.

    The partners endorsed the strategy and were happy to bask in the glory when things looked to be going well. Unless the partners want to claim Michael et al were derelict in somehow failing to foresee the global meltdown, I'm afraid I don't think the criticisms have any substance.

    I'd be quite happy to discuss any and all of this with the article author, once I recover from the shock of discovering I live in the North East. Meantimes perhaps some of the people here can reflect on their schaudenfraude. The partners and other lawyers will probably find other employment and probably have some reserves if things get really bad, but the reality for the support staff there, if their jobs go, is grim. Perhaps a little less smugness from The Lawyer and other commenters would be opportune; the little people are going to be the ones who cop for the worst of it, and they have done nothing wrong.

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