Pennington for your thoughts

Are Manches’ partners celebrating merger more than Penningtons’? 

Penningtons Manches had its first partner conference last Friday (18 October), days after Penningtons bought Manches in a surprise pre-pack deal. From the outside it’s hard to imagine what went on in that conference room – was it the kind of event that warranted a post-couscous hand jive, or was the mood a little more tepid? 

The answer may be tucked away in Manches’ most recent LLP accounts (see table below). In the 16 months leading up to 30 April 2012 employee numbers dropped by 30, from 266 to 236, mostly due to exits of administrative and support staff. Meanwhile, the highest paid equity partner took home £1.2m at year-end. A year later, following family partner Helen Ward’s exit in November 2012, Manches reported its top of equity to be £396,000. Average profit per equity partner plummeted to a 10-year low of £135,000, compared with £275,000 at Penningtons. 

With that in mind, the Penningtons Manches partner conference must surely have been all backslaps and fist pumps. All Manches partners are now part of Penningtons all-equity remuneration structure, which includes an annual discretionary pool of profit. Manches will also keep its own offices (which, according to the firm’s latest LLP filings, cost £3.5m at year-end), so an extra high-five for that. 

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But what about Penningtons? The day after the acquisition was announced last Monday Penningtons chief executive David Raine spoke to The Lawyer between visits to Manches’ offices – a two-day “roadshow-style” welcoming, he says. It is unlikely that anyone expected this six months ago when the intention, at least on the Penningtons side, was a straight-up merger.

Beyond what is already in the public domain it is understood that Penningtons knew little about the extent of the financial pressure faced by Manches. Initially, this was intended to be a merger of equals – that is, one well-placed source says, until it became clear that an acquisition was “the only way forward”. That’s one way of putting it. In fact, Manches entered a pre-pack administration prior to its acquisition.

By the time Penningtons came to this realisation the two firms were already head over heels.

“This was more about the quality of Manches’ lawyers and its client base [than about financials],” Raine insists. “We thought of it in a longer term way. We want to double in size in London, for example, and we want to improve corporate client work and focus on specific sectors such as private wealth and technology.”

The firms are also angling to climb The Lawyer UK 200 Top 50 ranking, something Penningtons Manches would have narrowly missed out on for the 2012/13 year, with combined revenues of £58m, but that may be achievable next year.

So, let’s return to that partner meeting. Was it a hand jive affair or is this a sorry story of pasting over the cracks? 

Partners at Penningtons insist everyone is on board, thanks to weeks of tea meetings and glasses of wine with potential new colleagues. A Manches partner said a few weeks before the acquisition that he was “very positive” about the talks, but little has been heard from the Manches’ side since. 

“The critical thing is that both sides needed and wanted to do this – we had a lot of Manches umbrellas going into Penningtons and visa versa – we’re surprised you didn’t pap us,” jokes a Penningtons partner. “You can make the figures work, but the real success is the culture.”

If that is the case Friday’s partner conference must have been a jolly knees-up. With some having agreed conditions to stay, let’s at least hope they enjoyed the couscous.