Halliwells’ assets up for grabs as firm files to go into administration
Firm in talks with Hill Dickinson and Barlow Lyde & Gilbert after property costs hit balance sheet
North West firm Halliwells has filed a notice of its intention to appoint an administrator, claiming that “high property costs exacerbated by the current economic climate” have “adversely impacted [its] finances”. The firm’s assets are expected to be bought by Liverpool-based Hill Dickinson.
In the past financial year the firm’s turnover dropped 14 per cent, from £77.8m in 2008-09 to £67m for 2009-10, meaning that if costs had remained unchanged on the previous year its profit margin would have fallen to nine per cent. The firm has not yet confirmed its 2009-10 profit figure.
In a statement the firm said: “Halliwells LLP is in advanced discussions for the transfer of the business in its entirety to another highly regarded firm of solicitors due to events that have adversely impacted the finances of the firm.
“These are the result of high property costs, exacerbated by the current economic climate which affected the profitability of the firm. The underlying business remains strong and has attracted interest from a number of parties.”
While Halliwells embarked on an acquisitive growth strategy during the boom years, taking on insurance practice James Chapman & Co, the recession saw the firm make several rounds of redundancies, reorganise its finances and take the unprecedented step for a law firm of using its assets as security on the extension of
its lending facilities with RBS.
The firm, which posted record profits and turnover during the bull market, ran into difficulties when it took on new Manchester headquarters at Spinningfields in central Manchester in 2007, paying top-of-market rent believed to be £35 per sq ft. It subsequently distributed a property-related windfall to partners as opposed to investing it in the business.
The firm suffered a number of partner departures during the past year, including Mike Edge, who exited for Pinsent Masons; healthcare partners Christopher Briggs and Simon Wortley, who moved to Beachcroft; and the majority of its Sheffield insurance practice, which was snatched by Kennedys.
At the end of the 2008-09 financial year the firm had 42 equity partners and 112 fixed-share partners, who also contributed capital to the firm. The firm now has 38 equity partners and 79 fixed-share partners.
BDO Stoy Haward partner Dermot Power is expected to be appointed administrator of the business by Halliwells’ bank RBS and it is understood the firm was going to enter into a pre-pack administration that will see the Halliwells brand disappear.
Discussions have been ongoing with Hill Dickinson for some time, capitalising on what is believed to be a close friendship between its managing partner Peter Jackson and his counterpart at Halliwells Jonathan Brown. Jackson and Hill Dickinson company commercial head David Wareing were part of a team set up to look at how to acquire Halliwells’ assets under the codename Project Bolton.
On Monday last week (21 June) Halliwells equity partners were informed that discussions were afoot with the Liverpool firm. On Thursday (24 June) the firm filed
a notice of intention to enter administration at Manchester High Court’s district registry. All staff have now been informed of this fact and have been told that it is “business as usual”.
The attraction for Hill Dickinson is believed to be the possibility of boosting its Manchester presence after Darryl Cooke, who it hired from DLA Piper in 2007 to develop a corporate practice, left earlier this year.
Barlow Lyde & Gilbert is believed to be interested in Halliwells’ insurance practice and is understood to be willing to pay £5m for the business.
At this stage it is unclear what the implications will be for the firm’s 813 members of staff, and doubts have been raised over whether Hill Dickinson would have the capacity to absorb its 58 trainees.
For additional information and comments, please see our breaking story from Friday 25th June.
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Readers' comments (15)
Boom and Bust | 28-Jun-2010 11:34 am
A sad but inevitable tale. Whilst senior personnel will parachute into Hill Dickinson, no doubt junior staff who had no part in the firm's demise will struggle to find employment elsewhere.
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It started with the Tower of Babel... | 28-Jun-2010 1:00 pm
If Halliwells are thus affected, and the prospects of a recovery is now looking to be akin to Japan in recent decades, e.g. 5-10 years at least post-crunch, just how many other firms in the "Legal 200" are going to have to do a Hogan Lovells, SNR Denton to stay alive?
The legal landscape is going to be mutilated by a failure to regulate our lending infrastructure since ders were popularised by Salomons in the 80s.
Let us hope that future lawyers are still encouraged to join the profession and not put off by the even stiffer competition they will now inevitably have to fight against.
The lawyer of tomorrow may be more of a US firm attorney, covering several areas, and contentious/non-contentious to boot, to allow them to flourish.
The niche firm/boutique or sloth are going, going...
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Mark Briegal | 28-Jun-2010 3:50 pm
On a personal level, we are sad for the people affected by this at Halliwells. It was a well established Manchester firm and we have worked closely with them over the years.
On a structural level, Halliwells’ demise throws up some interesting partnership issues. Firstly, it shows that the recession can affect the legal market as much as any other. It's too early to know exactly what happened at Halliwells, but it seems they took on too many costs without sufficient income to cover them. In any market over-expansion at the wrong stage of the cycle can be catastrophic. Partners in firms need to ensure that their business model is sound and that their drawings do not exceed their earnings. Some of the vitriolic comments posted on blogs following the announcement, coupled with some of the well publicised departures from Halliwells, may also point to issues surrounding the culture and values of the firm.
Hill Dickinson and BLG are rumoured to be interested in acquiring Halliwells' assets. The Spinningfields lease may be regarded as more of a liability than an asset. The TUPE costs of transferring staff, especially when corporate departments are not fully occupied, may also not appeal. That leaves Work in Progress, although Halliwells' clients may not be rushing to pay any outstanding bills.
The partners (or members as we should properly call them) will be pleased Halliwells is an LLP although we don't know whether RBS took any personal guarantees from members when they refinanced the business.
This is a sad story for Halliwells, the people who work there and Manchester’s legal sector, but it seems that Halliwells’ problems relate more to business strategy and management rather than anything to do with the legal sector. More will no doubt come to light in the next few months.
Mark Briegal
Partner and Partnership Law Expert
Ralli
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Anonymous | 28-Jun-2010 6:37 pm
The desire exhibited by many such firms to obtain very expensive corporate premises seems to me to be nothing more than empire building or possibly the worst kind of phalanx symbol. In my experience flash buildings & cars do not impress clients as much as some would like to think.
I feel desperately sad for those employees who's futures remain uncertain & who never brought about this firms demise
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Anonymous | 28-Jun-2010 7:46 pm
"It's too early to know exactly what happened at Halliwells, but it seems they took on too many costs without sufficient income to cover them."
Expert comment if ever I saw one - and FOC. Any more ?
"Partners in firms need to ensure that their business model is sound and that their drawings do not exceed their earnings."
This really is radical thinking for the legal sector. Personally I'm not sure it will catch on.
What next - "if you borrow money expect to have to repay it". Nah - have to draw the line somewhere.
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David Ufuoma Omamogho | 28-Jun-2010 8:00 pm
Is there no Lawyer with the midas touch that can turn things around for Halliwells?.
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Anonymous | 28-Jun-2010 10:52 pm
Very sad. A friendly and progressive firm, always ready to listen and lend a hand. Always placed client priorities above all and the senior partner and his colleagues always treated one with respect and friendship. Good luck to all at Halliwells!
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It started with the Tower of Babel... | 29-Jun-2010 3:12 pm
Time for stagnation and "emu-syndrome" is over.
The modernist lawyer must be holistic in approach and ability within their legal practice.
An appreciation of finance, HR, marketing, and legal ability, are going to become mandatory for each and every lean "six-sigma"-type lawyer/counsel/solicitor/barrister.
Shedding all unnecessaries is vital if any law-firm is to thrive. There is a lot of procrastination and not enough action in the attitude of lawyers today. Aiming for that pint at the end of the day may be the ambition of some, but they will be swiftly bled out.
What we are experiencing is Darwinian, and those that are savvy enough will make it through.
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Anonymous | 29-Jun-2010 4:09 pm
Just wondering whether Halliwells had negotiated any rent free period at all and if so why this had not mitigated any choppy patch? Good luck on the other side but let's hope they don't bring anyone else down with them.
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rent free | 29-Jun-2010 8:28 pm
a rent free period = smaller reverse premium.
Strategy
1. Negotiate a reverse premium of £21M
2. Ensure the money is paid to the equity partners rather than into the LLP and justify this by claiming it was the most tax efficient way to do it.
3. Borrow £18M from the RBS
4. Fail to tie in the equity partners who received between 200k and £1M from the "property windfall" despite them not being subject to any restrictive covenants
5. Watch the equity partners leave as the profits dwindle due to the costs and debts associated with the property/debt inducing windfall
6. Enter administration
Genius
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