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.
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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Victor Meldrew | 15-Mar-2011 10:20 am
Dawsons merging with Penningtons; it’s like Dad’s Army meets Last of the Summer Wine...
I’m sure Southern Cross can provide the office space...
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A_Smith | 15-Mar-2011 11:14 am
Looks to me like Dawsons will have no family or corporate department anymore. Essentially looks like an overstaffed litigation firm with a few add ons. Penningtons likewise.
If the 'merger' doesn't happen does that spell disaster for all involved?
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Anonymous | 15-Mar-2011 11:20 am
@ The_Laweyer: who told you "Dawsons’ turnover has remained relatively static"? I heard turnover was down, maybe as much as 30%-50%. Not sure what that means for PEP, but doesn't sound good
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Fairpoint | 15-Mar-2011 11:33 am
I say leave the firms alone. If they can sort out a merger that can save some if not most jobs then that is a good thing and not something we should jeopardise. Admittedly it is a shame for such an old firm of 300+ years to be going through this and something terrible must have been going on over the last year or so for it to be in this position. Lawyers don't often make good businessmen and maybe this is a case in point.
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Anonymous | 15-Mar-2011 9:07 pm
Save jobs? Around 40 members of Dawsons staff have either been wrongly forced out or made redundant in the past 8 months. All I see for anyone that merges with dawsons is trouble with a capital T. The firm let so many good workers and good lawyers go just to save a quick buck that it proves further that lawyers do not always make good businessman.
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Ashley Balls | 16-Mar-2011 10:44 pm
There is nothing illogical at all about this merger unless if is being driven by the desire to join two firms together for no other reason than they fit together 'quite well'. Presumably there is some strategy behind the initiative and some economies of scale my emerge. All that really matters is the clients and how they can access and receive improved services for lower cost. To achieve that will require investment and a lttle blood letting. Otherwise it is yet another example of assuming bigger is better and that would be dumb.
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Anonymous | 18-Mar-2011 4:28 pm
Isn't it easy to pass judgement when in possession of so little factual knowledge ? Anonymous on 14th 3.13pm states that they are two firms trying to succeed. No - that is just incorrect. Penningtons are a good firm, yes. Dawsons gave up trying to succeed some time ago has been going to the dogs for some years. Why? Because the completely lost direction when they lost their private client team to Hunters about 6 years ago. The new private client team was a mish mash of people that did not get on and wanted to go in different directions; the litigation team fell out in a spectacular way culminating in Jo Keddie taking her team to Winkworth Sherwood, and EPs refused to work together with a cohesive strategy. The firm simply lost its identity and lost its way. Instead of trying to all get along and work towards the same goal, massive factions developed, and focus was lost. IN some partners meetings certain factions actually refused to speak to the other - juvenile but true.
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Anonymous | 18-Mar-2011 6:26 pm
Oh how people love to gossip! No doubt, some of the above is true and some is fabrication. Hardwicke may have earmarked the Dawsons' premises, but I gather that there is no real pressure on the firm to move. No-one has been that interested in either of these firms over the past few years, so why is this such big news? Most small-medium sized firms have been exploring merger opportunities over the past year and, naturally, this causes internal instability. There have no doubt been some disappointing departures, as well as some welcome departures. These firms each have good lawyers, good clients and a similar vision, culture and strategy. I can think of a worse way to start...
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Anonymous | 8-Sep-2011 8:35 pm
If you change the badge on a broken down car it's still a broken down car! As a former client I found a lot of sitting on laurels and not a lot of customer service. Being around a long time means nothing, you are only as good as you are found to be today.
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