Gateley profits jump after Halliwells integration reaches completion
10 February 2014 | By Kate Beioley
25 March 2013
14 February 2014
20 December 2013
3 February 2014
5 February 2014
Gateley has revealed an £8m jump in profit after fully integrating the Manchester office of failed firm Halliwells in May 2012.
The firm’s accounts, filed with Companies House last week, reveal for the first time how the firm put the 40-strong team into a separate legal entity due to the desperation to push the deal through quickly.
Gateley bought up a chunk of Halliwells in 2010 along with legacy Barlow Lyde & Gilbert (BLG) and Hill Dickinson (5 July 2010). Halliwells Manchester head Rod Waldie was appointed to head the Spinningfields office but Gateley (Manchester) remained a separate legal entity for two years, with Waldie only joining the Gateley LLP membership in August 2012.
Profit has shot up at the firm following the combination, almost doubling to £17.1m in 2012/13 from £9.1m in 2011/12. Turnover was also up from £44.9m to £50.7m over the same period.
Gateley paid all profits to its salaried partners and boosted drawings and distributions for partners from £10.6m in 2011/12 to £16.3m in 2012/13. The firm also paid back an increased chunk to members – up to £267,500 from £65,000 for the 2011/12 financial year.
But the firm received a healthy amount from new and old partners, who almost doubled capital injections to the firm for the last financial year. Contributions were hiked to £501,800 compared to £278,625 in the last financial year. The combined firm received a £4.4m cash injection from capital transferred from the formerly separate entity.
The highest-paid member of Gateley took home £566,177 in 2012/13 compared to £365,532 the previous year and average profit was up from £164,880 to £194,425.
It has not been an easy integration, however - Halliwell’s all-equity partnership had to be aligned with Gateley’s three-tier lockstep structure, which runs from salaried to fixed and then full-equity with a ten-point ladder.
Half of the Halliwells partners were fixed equity and the other half had fixed shares. Gateley managing partner Michael Ward said most partners had entered the Gateley equity at the same level. He said: “Two or three people left but not huge numbers but I suppose there was no blood on the walls.”
He continued: "We didn’t change anybody’s arrangements significantly. They will change over the three year period and probably going forward, some will be positive and some not. We dropped Manchester into a separate entity because we had about four weeks to do the deal and didn’t have the time to talk to partners.
“We didn’t try and do everything on day one, we did let it bed down."
The firm acquired Halliwells’ banking and finance, corporate, real estate, real estate litigation, corporate recovery, commercial litigation, intellectual property, employment, pensions and construction teams.
“We’ve been on the journey since 2010 to integrate the business and get it operating through the legal entity,” he said. “This is the first year you’ve seen a set of results where they are all in there together.”
He said: “Overall we were pleased with the year, it’s a tough trading environment and managed to move the headline turnover forward.
The firm hired a total of 40 partners in Manchester and three further partners in London, bringing its total number of hires from Halliwells, including fee-earners and support staff, to almost 200.
But the liquidation of Halliwells is still costing the firm. Amounts due within one year include £150,000 payable to the liqudiators of Halliwells LLP due on 20 July 2013.
A bank loan of £1m was also taken out of 29 July 2012, due for repayment in equal monthly instalments over a 12-month period.
The firm is also paying £300,000 payable in annual instalments of £150,000 until 20 July 2015.
Overall Gateley's net debt dropped by £166,000 thanks to increased cash flow. Cash in the bank dropped from £629,000 at the start of the financial year to £440,000 at the end of the year. The firm reduced its overdraft by £500,000.
Halliwells failed in 2010 and its liquidation has been a contentious process (23 January 2012). In the 2008/09 financial year the firm and its members had joint liabilities of as much as £40m - made up of an £18m bank loan, £6.2m non-property leases, £10m members’ capital liability and an estimated £6m tax bill, in addition to an annual rent bill of £8.8m - on a turnover of £78m.
The firm signalled its intention to appoint administrators on 25 June 2010 (25 June 2010).