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Underperformers to be axed from equity; Madrid merger talks reach final stage
Lovells is set to adopt a new hardline approach to tackle underperformance by instituting a programme of partner de-equitisation. The firm has already de-equitised one partner and The Lawyer understands that the demotion of a further nine across all areas is being considered.
In another step forward, the firm has resumed merger talks with Spanish friend Albiñana & Suarez De Lezo to plug a major hole in its international network.
The de-equitisation programme is understood to be a method of dealing with poorly-performing partners rather than just a cost-cutting measure. Linklaters implemented a similar decision to axe underperforming partners earlier this year, but unlike Lovells it has also managed out a significant number of associates.
Under Lovells' new governance regime, it is easier to get rid of underperforming partners. If a partner is to be 'retired early', or effectively thrown out, the international executive will initiate the process and the partnership council would effectively rubber stamp the decision. As the executive is now dominated by practice and regional heads, it is a more business-focused body.
Meanwhile, sources at Madrid corporate boutique Albiñana (formerly Melchor de las Heras) say that it will now go into the third and final phase of merger negotiations with Lovells. Sources in the Spanish market claim that the City firm gave Albiñana until the end of this year to decide whether or not to progress further than stage two.
Practice heads from Lovells have visited Melchor to discuss business integration and the two firms have cross-referred work from clients for the last six months. Sources at the Spanish firm said this week it had decided to go to the next stage, during which the firms must resolve potentially deal-breaking issues of remuneration and corporate governance.
The absence of a Spanish capacity has been a problem for Lovells and the firm has been in on-off talks with the Madrid firm for two years. Last summer talks fizzled out, and by April Albiñana was back on the market for a merger and reportedly talking to Shearman & Sterling, its US referral partner.
Should Lovells seal the merger, the City firm will pick up one of the few desirable bite-sized corporate firms in Spain.