Finers Stephens Innocent and Howard Kennedy agree terms for £45m merger
8 August 2012 | By Sam Chadderton
31 January 2013
9 August 2012
19 November 2012
19 October 2012
29 October 2012
West End firms Howard Kennedy and Finers Stephens Innocent (FSI) are set to merge in a £45m tie-up.
The Lawyer can exclusively reveal that management signed heads of agreement on Monday in a bid to become Howard Kennedy FSI by 1 November this year.
The combined firm will have 351 staff including 88 partners and 125 fee-earners, and a total revenue of £45m, pushing it into the top 60 of The Lawyer UK 200.
Talks began in February and the proposals have been unanimously approved by both partnerships. All staff were told this morning.
Management said that the aim of the new entity is to become the pre-eminent legal advisers to entrepreneurs, wealthy individuals and families and their businesses and funders.
The merger is being driven by Howard Kennedy CEO Mark Dembovsky and FSI managing partner Paul Millett.
Dembovsky will head the merged firm as chief executive, with Millett one of six partners – three from either firm – on an ‘integration committee’ that will be in place for the first year. After that a management committee comprising four partners will be established.
All three of the firms’ existing offices – Howard Kennedy’s in Cavendish Square and FSI’s two bases in Great Portland Street – will be maintained until at least 2014, when FSI’s lease is up. Howard Kennedy’s lease is up in 2015.
The move is the latest and most significant step in Dembovsky’s mission to radically overhaul the structure of Howard Kennedy since his arrival in January 2011.
He replaced long-serving senior partner Trevor Newey to become the firm’s first non-lawyer chief executive and oversaw its conversion to LLP status. It meant a break from tradition, with Howard Kennedy disclosing its end of year financials for the first time in 2011.
Dembovsky said his “mission” since his arrival has been to get the traditionally conservative firm firm to “confront its demons” over partner disunity and lack communication and says he has had the support of the partnership to instigate the change in strategy that has eventually led to the merger (10 January 2011).
In January this year, he told the firm’s AGM that after a “year of discovery”, 2012 would be a “year of delivery” in filling the service gaps for its clients by finding a strong merger partner.
He said he had spoken to a number of firms “on a very loose basis” about potential link-ups before coming together with FSI.
Millett added: “I believe there’s been tremendous change. I wouldn’t be doing this deal if I was not 100 per cent satisfied that the partnership is up for change. What’s in the past is in the past. Howard Kennedy is a very different firm today.”
Dembovsky said the speed of the negotiations shows the enthusiasm from both sides to get on with the job of creating “quite a strong powerhouse” from two “perfectly profitable stand alone firms”. He described the combined firm’s entrepreneurial client base as the “critical mass” on which the business will be expanded.
Howard Kennedy FSI will place its enhanced private client offering as the ‘jewel in the crown’, supported by improved IP and media, property, family, employment, retail, and funds teams.
Dembovsky said the merger was less about market pressure to consolidate and more about being able to provide a full-service offering that major international entrepreneurial clients needed.
Millet added: “There are firms with private client practices, but it’s difficult to think of another firm that would have the expertise, strategy and focus to bring together a cross-disciplinary approach to the marketplace.”
Redundancies are not planned at the moment as the enlarged firm will look for growth. Although overseas revenue from the Middle East, Asia, Far East and Europe accounts for 25 per cent of the merged firm’s revenue, it will not look to open an office abroad.
Both firms have revealed their 2011-12 figures. Howard Kennedy’s turnover was down six per cent for 2011-12 to £27.8m, compared to £29.5m for the previous year. Net profit was also down, falling 15 per cent to £3.4m from £4m, meaning the firm’s profit margin fell by one percentage point to 12.5 per cent.
Dembovsky said the departure of projects trio Deborah Mills, David Hill and Andrew Pike took out more than £1m from the firm (7 March 2011).
FSI’s 2011-12 turnover was up by 3.5 per cent to £17.6m from £17m in 2010-11.
In a joint statement, Millett said: “Our practices, people and client base are perfectly aligned and we share a common vision as to how this combination differentiates us from the rest of the legal market.
“Throughout our discussions we’ve been impressed by the cultural similarities of our firms and by the many cross-selling opportunities that will be afforded by our coming together.”
Dembovsky added: “This is an exciting time for all at FSI and Howard Kennedy and particularly for our clients. This merger will create a strong platform from which to meet the dynamic needs of our entrepreneurial client base, the critical mass from which to deliver the highest quality services commensurate with a modern day top 100 law firm, the momentum to expand our business and the strength to be the leading firm in this space.”