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Lovells’ management has pushed through one of the biggest one-off redundancy programmes ever seen at a City law firm. As first revealed on www.thelawyer.com be-fore Christmas, the firm is to axe 25 partners in a bid to improve its flagging profitability.
Although it was not considered as part of the original review, Lovells is now likely to consider tinkering with its lockstep, according to well-placed sources at the firm.
This could involve either introducing a separate lockstep for less profitable overseas jurisdictions, such as that operated by Linklaters, or introducing a global superpoint system for outstanding revenue generators. The former solution would be more in keeping with Lovells’ collegiate culture.
The cull was designed not just to boost profitability in the short term, but also as part of a longer-term strategic plan. The firm does not envisage a dramatic upswing in M&A activity and therefore considers many parts of its corporate department to be overpartnered.
Although some well-performing corporate teams such as private equity have not been touched, the corporate department in Europe has been disproportionately affected by the cuts.
Aside from the 25 partners who will leave the partnership completely as a result of the review, yet more will be de-equitised or take early retirement.
Some of the 25 will be voluntary departures, but the overall review is expected to affect up to 35 partners globally. Other partners will be given warnings to improve their performances to remain in the partnership.
All areas of the Lovells network will be hit, and The Lawyer is aware of redundancies in London, Germany, France, Amsterdam and Asia.
Co-managing partner Lesley MacDonagh and department heads kicked off the review some months ago, but the details were finalised by MacDonagh, with her replacement David Harris and senior partner John Young, late last year. The partners were told on 17 December.
The cull is unlikely to feed through to the bottom line in this financial year, when Lovells is facing a drop in profits of up to 20 per cent. However, it is expected that it will have a significant impact in the next financial year.