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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.