Denton Wilde Sapte

UK 200 RESULTS 2010

At the start of the past financial year Denton Wilde Sapte launched a three-year strategy review, with chief executive Howard Morris speaking of the need to offer an alternative to the magic circle. What the new approach did not feature – at least publicly – was the plan to secure a transatlantic merger.

By Christmas 2009 Dentons had agreed a deal with Sonnenschein Nath & Rosenthal that would create a £500m firm with 1,400 lawyers by September 2010. Arguably the smaller, less profitable Dentons got the better deal. But Dentons has taken steps over the past financial year, including making 27 redundancies, to improve its profitability and make itself a more eligible merger partner.

As a result average profit per equity partner increased by 22 per cent, from £300,000 to £360,000, while the firm’s profit margin improved from 15 to 19 per cent. Currently partners enter the firm’s equity on 45 points and progress by five points per year until they plateaue at 90 points. Following the merger Dentons will change to an entirely merit-based system.

Dentons has been highly active in the projects and infrastructure sector, assisting the Highways Agency on the expansion of the M25, the Ministry of Defence on a 15-year shipbuilding deal with BVT Surface Fleet and Deutsche Bahn subsidiary DB Regio Tyne & Wear on its contract to operate the Tyne & Wear Metro. The hire of two nuclear sector partners from Hammonds, Rupert Cowen and Jonathan Leech, may help Dentons up its ante in that area.

Other investments included a fitout in a new base in Milton Keynes, which functions as a UK lower-cost office, and several million pounds spent on upgrading the IT system.

International now accounts for 31 per cent of total revenue and expansion abroad has continued, with associations launched in Libya and Lebanon. Dentons’ strong reputation in the Middle East has been underscored by its winning mandates from Deutsche Bahn on a $25bn (£16.01bn) project to build Qatar’s rail network and Vodafone Qatar on its $950m IPO on the Doha Securities Market.

UK 200 RESULTS 2009

Just when it looked as if Denton Wilde Sapte’s profitability was improving – average profit per equity partner (PEP) increased by 12 per cent to £470,000 in 2007-08 – the cost of expansion in certain markets, followed by the impact of the recession on transactional activity levels and the cost of a subsequent restructuring programme, saw PEP head south once more last year. Profitability dropped from 25 to 15 per cent and PEP by 36 per cent to £300,000 as a result.

The year started with the firm taking a team headed by David Pfeiffer from Bryan Cave’s established office to open in Kuwait, gaining a foothold in a market with little competition from international firms. The Gulf continues to be a strategically important region for the firm and it hired a new head of Islamic finance from the Islamic Development Bank, Muddassir Siddiqui. Together with Central Asia and Continental Europe it contributes around a quarter to the total revenue, which was reflected in its promotions rounds. Five out of twelve were made up abroad in 2007-08 and four out of six there at the start of 2008-09, while 14 fee-earners, including six partners, were seconded overseas. Billings in dollars in these jurisdictions also helped push up turnover by 3 per cent.

Back in the UK the firm had a strong year in restructuring and insolvency, with Neil Griffiths advising the administrators of European hotel chain the Real Hotel Company. It also advised Northern Rock’s board members on the bank’s restructuring and sale negotiations, it was instructed on the insolvency of five major structured investment vehicles and picked up conflict counsel roles for the administrator for Landsbanki and Kaupthing’s administration. Projects and energy also had a good year, with public sector and PFI work continuing to tick over.

However, corporate and property had predictably difficult years and the firm found that by the last quarter it couldn’t put off the inevitable and made 76 people redundant. Some 37 fee-earners lost their jobs across London and Milton Keynes, with the remainder of the redundancies affecting the secretarial, IT, telecoms and library departments. The firm took a £3.5m whack as a result.

Partners at Dentons are awarded 45 points upon entering the equity, rising by five points every year until they reach the plateau level of 90 points, where most partners sit. Forty eight per cent of partners are part of the equity. The firm asked partners to inject up to £90,000 of capital into the firm, with a £1,000-per-equity-point cash call, in what is understood to be a move to shore up its finances ahead of a possible transatlantic merger.