DLA Piper confirms move to all-equity model
DLA Piper has unveiled its plans to move to an all-equity partnership model in the non-US side of its business.
David Bradley
DLA Piper International currently has a mix of full equity, senior fixed-share equity members and fixed-share equity members, with approximately a third of all partners in each grouping.
The firm is now set to launch a consultation process aimed at moving all partners onto a single class, a transition that will require fixed-share partners to inject new capital into DLA Piper.
UK regional managing partner David Bradley would not say how much capital partners would be expected to pay but denied the move was a revenue raising exercise.
“The firm is very well funded,” said Bradley. “If we’d done this while our profitability was going down some of our partners would have understandably questioned our motives. But we’re planning for enhanced profitability this year. This move is about looking to align the interests of all the partners in the firm.”
Bradley added that there would be “safeguards” for partners’ remuneration at the lower levels.
“There will be some guarantee for partners up to certain thresholds,” Bradley said. “We’re not just going to have a free-floating system for every partner.”
As part of the planned changes DLA Piper will also even out voting rights among all partners.
“If this goes through every partner will have a vote on every issue on which there is a vote,” added Bradley. “Currently there is a complex system under the partnership agrement where some partners vote on some matters but not everything.”
The consultation is expected to complete by the end of this calendar year with a vote on the proposals expected in early 2012.
The changes, which will also require a revised members agreement, are expected to take effect from 1 May 2012.
Readers' comments (8)
Boxer | 20-Oct-2011 10:17 am
Am I alone in feeling sceptical about this? It seems a strange move against the current tide.
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Anonymous | 20-Oct-2011 12:10 pm
It's a clever move that will shake up the market.
DLA Piper has made a series of excellent decisions over the last few years.
This is driven by ABS. More than at any time, there is a need to attract the best talent. All firms are at a junction, DLA has firmly decided to offer high level specialist advice.
Imagine you're the best performing partner in a broad based firm like Burges Salmon or Dickinson Dees. You know that ABS is likely to decimate your traditional markets and your firm will need to restructure.
Therefore you can either get paid less for the next few years or you can move to a firm where your input will directly translate into profits.
Of course DLA have to pick the right people. However I imagine that most partners in the big mid-level regional firms would jump at this chance before the market changes.
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Anonymous | 20-Oct-2011 4:16 pm
The smartest guys in the room.
In almost every other firm across the United Kingdom the elder partners are using the poor market conditions as an excuse to give themselves a higher percentage of the profits.
DLA Piper have done the opposite. They've sent a message out that young over achieving partners should defect. It's a great strategy and I dare say it'll attract the best young talent.
Personally it's not for me. I imagine the demands to perform exceptionally year in, year out will be crazy. However I guess DLA Piper want the most ambitious new partners.
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Anonymous | 20-Oct-2011 6:09 pm
I am little puzzled by this announcement and wonder how much it will actually change the reality for the current fixed share partners. To my knowledge, DLA (outside the US) introduced a sliding scale of capital contributions for fixed share partners as long ago as 2007, such that a senior fixed share partner on £200,000 was required to contribute £40,000 in capital. That was a substantial contribution for a non-equity partner and it may be much higher today. I suppose it is no bad thing that such contributions could now translate into a bigger share in the profits and a greater say in how the firm is managed.
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Anonymous | 21-Oct-2011 1:00 pm
Congratulations to the DLA marketing team's comments below! Everyone knows there is equity and there is equity! A number of firms are all equity partnership and lets just say equity certainly doesnt mean fairness.There are those at the top and those at the bottom. The difference between the all equity and the more traditional model is that everyone in the former have to contribute capital - the traditional model allows individuals to be sure that they want to invest capital into the business first. I think the all equity model is a marketers dream - making out that everyone is equal - just ask anyone in an all equity firm!! Fundamentally DLA is an awesome business and doesnt have to use "smoke and mirrors" like this.
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Anonymous | 21-Oct-2011 2:17 pm
I posted the comment at 20-Oct-2011 4:16 pm. I can assure you I'm not a DLA employee. However right now I'm also very glad I'm not an employee at a mid-tier firm about to be shaken up by ABS.
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Simon | 25-Oct-2011 4:50 pm
Partners should beware of Greeks bearing gifts. No doubt those higher up the equity tree will be lining their pockets at the expense of everyone else.
there may be those with doubts, but like at the old Politburo, the vote will be unamimous.
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anonymouse | 26-Oct-2011 10:48 am
someone above wrote about a hypothetical senior fixed share partner making 200k - well, that is quite bizarre. No "senior fixed share" partner would be making that wage - that's what senior associates make at many firms. Senior fixed share partners average more than double that amount, which means that the equity contribution estimate of 50m is way low. For an average partner making 700k a year (which is less than DLA's reported PPP figure), the equity contribution will be closer to 300k.
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