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This year, The Lawyer’s annual ranking of the largest UK law firms by turnover is available as an interactive, digital benchmarking tool. For the first time this will allow you to manipulate each data set against the metrics of your choice.
DLA Piper International was boosted by a £30m cash injection after it converted to an all-equity partnership structure while capital contribution demands fell by 15 per cent as a result of the switch.
The firm switched to all equity on 1 May to reduce the its exposure to the bank lending. In the 2011-12 financial year the international LLP had £71m in bank loans and overdrafts, down from £88.5m the previous year. According to co- chief executive Nigel Knowles and CFO Paul Edwards the firm is looking to reduce bank exposure purely because it can afford to.
Knowles said: “[The switch to all equity] was done for a number of reasons: to align us with the US side of the firm, to give everybody the same interest in the firm and to take away artificial barriers to earning.”
Edwards continued: “If you’re on a team you want to be able to get the same medal for winning. [The new structure] is about aligning interests.”
DLA Piper used to have a mixture of full-equity, senior fixed-share equity and fixed-share equity partners. Former UK managing partner David Bradley – who has since returned to fee earning – said in October that under the new system there would be safeguards for partners’ remuneration at the lower levels, with a degree of pay guaranteed for partners up to certain thresholds (20 October 2011).
At DLA Piper a partner’s capital contribution requirement is calculated according to their budget for the forthcoming financial year.
Over the 2011 calendar year, DLA piper International, which excludes the already all-equity US business, had an average of 689 partners, of which 230 were equity. Using that as a guide, new equity partners contributed, on average, around £65,000 each.
Knowles added that the firm had received interest from private equity houses looking to make investments in the firm.
Edwards responded: “If I told the partners that I’d made a deal [with a private equity house] that releases, say, £50m of capital back to them in exchange for a 13 per cent return on [the private equity house’s] investment, they’d think I’d taken leave of my senses.”