Dawsons and Penningtons set for imminent merger
Lincoln’s Inn firm Dawsons is close to sealing a merger with private client firm Penningtons after coming under pressure to recapitalise and keep a grip on its core partnership.
Further changes at Dawsons saw corporate partners Bernd Ratzke and Ute Mueller quit for private client firm Boodle Hatfield.
According to sources close to Dawsons, the firm has been scouring the market for months for a merger partner to help it stabilise after suffering a series of exits and being hit with two significant lawsuits.
When merger talks with Fladgate Fielder broke down before Christmas the firm was forced to introduce a four-day week and implement wage reductions.
Last month (14 February) Dawsons managing partner Martin Codd told The Lawyer: “Like many other law firms at this time we’re facing a challenging economic climate and we’re taking the necessary steps to ensure the firm remains strong and profitable.”
Both Dawsons and Penningtons confirmed the merger talks, with any deal expected to go live in July.
Codd said: “These negotiations are ongoing and we’re therefore unable to comment further at this stage.”
A statement from Penningtons added: “Part of our growth plan is to consider possible merger partners. We’ve been impressed by Dawsons’ lawyers; their practice would be a good cultural and strategic fit with our own, complementing our existing strengths.”
While Dawsons’ turnover has remained relatively static over the past few years, in July last year it was forced to settle a High Court claim for unpaid fees brought by Simmons & Simmons (The Lawyer, 5 July 2010). The firm also settled a claim for unfair dismissal brought by former chief executive Jeremy Ward that November.
Ward was succeeded by Mark Dembovsky in March last year, but the latter has since left to join Howard Kennedy as chief executive.
Meanwhile, top family partner Suzanne Kingston recently announced that she is defecting from Dawsons to Withers, taking two assistants with her.
The firm is also under pressure to vacate its Lincoln’s Inn premises to make way for Hardwicke Buildings (The Lawyer, 14 February).
In terms of turnover, the past few years have been harder on Penningtons than Dawsons, with the former’s turnover dropping by 23 per cent, from £29.1m to £22.3m, between 2006-07 and 2009-10. Over the same period its partner headcount contracted by almost a third (28 per cent), from 67 to 48.
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Readers' comments (29)
Dawson's creek | 14-Mar-2011 12:49 pm
What a truly uninspiring merger this is. It looks like Penningtons are just trying to bump up their turnover by this acquisition, but the quesiton is whether Dawsons can hang onto existing partners and staff. Does anyone know if there are any lock-in agreements in place?
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Anonymous | 14-Mar-2011 1:11 pm
@Dawson's Creek
You are a headhunter and I claim my 10 pounds.
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Anonymous | 14-Mar-2011 1:30 pm
To be fair to Penningtons, they finally got their act together by appointing David Raine as the firm's managing partner. Having worked at the firm, I know David and he is a really switched on guy. He knew the firm had to be of a certain size and he has gone out to deal with this. There won't be many good candidates in London and I think he has done well here.
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Super Dry | 14-Mar-2011 1:37 pm
how on Earth is getting together with another struggling firm going to be a good idea for Penningtons? And merging to just to bump up revenues and add on a few partners? That just means higher overheads for Penningtons' partners but no guarantee PEP will rise. If the market doesn't pick up in the next financial year it could kill off the whole, over-burdened new entity taking the legacy Penningtons partners with it.
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Anonymous | 14-Mar-2011 3:05 pm
David R. is a great guy and has made the best of a bad job. But as @superdry points out, the combination of two strugglers is unlikely to make one star. I bet they had a fight over the name : use yours. No I insist. Use yours....
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Anonymous | 14-Mar-2011 3:13 pm
From the comments of the previous writers I wonder how many of them have run a law firm or understand the pressures? Perhaps, if rather than trying to make funny (sic) comments they focused on the real facts of two firms trying to suceed, then their comments might have some value.
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Anonymous | 14-Mar-2011 3:27 pm
Well said Super Dry, there are no guarantees! I'm less sure about it substantially increasing overheads however as presumably one of the drivers for the deal is to take on the additional revenue without much by way of cost other than the direct costs of the partners and some staff. Seems to me like it could be quite an astute move by Mr Raine.
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Taggart ("There's been a merger!") | 14-Mar-2011 3:48 pm
Dear Anonymous @ 3.13pm (is it Raine or Codd?)
Two moribund firms merging is hardly a strategy for success...
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Anonymous | 14-Mar-2011 4:03 pm
I suspect (very strongly) that Super Dry is one of the aggressive head-hunters that have been plaguing Dawsons and who is now in danger of losing a fee from one of his partner candidates. Oh, I feel so sorry for you.
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Anonymous | 14-Mar-2011 4:08 pm
Dear Anon at 3.13pm.
"[former chief executive] Ward was succeeded by Mark Dembovsky in March last year, but the latter has since left".
Doesn't sound positive if the old CEO left and made a claim against the firm and then his replacement did not even last a year in the job. Who is really managing this place?
Did someone say anything about lock-ins? Is there anyone left to lock in save for the man left to turn off the lights
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Anonymous | 14-Mar-2011 4:14 pm
If the two business merges what happens to the pending claims against both firms (if not settled). Was it not reported recently that Dawsons is being sued by a former consultant to its employment department?
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Super Dry | 14-Mar-2011 4:25 pm
@ Anonymous 3.27pm
The costs aspect will be a tricky one all the same. If Dawsons as a whole came over, then that would be a lot of staff added into Pennington's payroll/office space. Associates too would be a challenge too. The other issue is leverage levels. Dawsons seems to be rather tight on the equity - hence the high PEP (for its size) - when integrated into the larger Penningtons - which appears to be slightly (but only a little) more democratic, will this work? Would Dawsons partners then no longer appear to be so profitable? This deal could work - but it could also go very wrong, Also, if a few more client-holding Dawsons partners walk, Penningtons coud just inherit Dawson's costs and staff (and law suits) and little else.
Think before you merge guys.
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Dayglo Dave | 14-Mar-2011 4:50 pm
Anonymous @ 3.13pm is right. All too often one reads cynical comments that flatter the sender by making them appear wise and all-knowing. Witness some of the comments made when Halliwells imploded. Why delight in failure? People's jobs and careers are at stake here. Combining the two firms may well be better than carrying on apart. There will be economies of scale and, who knows, the effect of combining may give them fresh energy. To succeed doesn't necessarily mean you have to be a "star". There are plenty of solid, dependable firms out there doing good work and making decent returns.
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The Late, Great Lionel Stander | 14-Mar-2011 5:12 pm
As my character Max so wittily observed in the opening credits of Hart to Hart: "And when they met, it was merger!"
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Sarah Palin | 14-Mar-2011 5:15 pm
"Merge, baby, merge!"
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Disco Dave | 14-Mar-2011 5:47 pm
@ Sarah Palin: "merge baby merge - Dawsons inferno!"
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cleverclogs | 14-Mar-2011 5:59 pm
If Dawsons joins, will all jobs at Penningtons be put at risk? Surely cost savings will be made but then will anyone care?
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worried4trainees | 14-Mar-2011 6:03 pm
What about trainees for this year and next, will they have to repay their fees etc??? Is there Law Society guidance telling them what happens, will their contracts continue with the new firm?
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The Real Sarah Palin | 15-Mar-2011 8:53 am
"But then open in Anchorage, baby, open in Anchorage!" (Lots of interesting private client work, you know...)
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Anonymous | 15-Mar-2011 9:51 am
I presume that Penningtons will have done a rigourous due diligence exercise before signing off on this one.
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