Merged Ashurst to adopt UK’s managed lockstep system
26 September 2013 | By Yun Kriegler
26 September 2013
28 June 2013
30 September 2013
1 February 2013
24 September 2013
Ashurst and Ashurst Australia have been given the green light on the full financial integration, which will see the Australian partners migrating to Ashurst UK’s managed lockstep.
Ashurst partners from both firms have voted in favour of the full merger, which will take effect on 1 November 2013. The 1,800-lawyer firm, with a combined revenue of over £550m, will have a single profit pool allocated on a managed lock-step system and a single unified management structure operating globally as one firm under the Ashurst brand.
At their respective financial year-ends, Ashurst had 154 equity partners while Ashurst Australia had 123 equity partners. The Australian equity partners will migrate to the existing Ashurst UK profit-sharing system, dropping its current merit-based remuneration system.
The managed lock-step system for the merged firm has nine equity levels, running from 25 to 65 points. There are four main gateways at 33, 45, 50 and 57 points. It will see partners move up the ladder by five points every year, and their performance will be reviewed at each gateway, meaning they could be held or have their progression sped up or slowed down. Reviews will be overseen by a global board.It is said to be a hybrid structure that recognises both longevity and contributions.
The announcement of the full financial integration comes exactly two years after the partnerships of the two firms approved the initial tie-up in September 2011 (26 September 2011). The combination took effect on 1 March 2012 and saw Blake Dawson change its name to Ashurst Australia with the firms combining Asian operations.
Over the past two years, both sides have taken significant steps to move towards financial alignment with the goal to fully merge by 2014. In the words of Charlie Geffen, senior partner of Ashurst, “these things are not easy to put together”.
In September 2012, Ashurst asked its equity partners to pay capital into the firm for the first time in a bid to synchronise its UK and Australian capital structures (10 September 2012), a move Geffen described as not only for aligning with Australia but also to get along with the general global markets.
Under the new capital structure, partners are required to input an amount every autumn calculated based on the number of equity points they hold, meaning laterals will now have to invest in the firm when they join.
In May, Ashurst has moved six partners down from its so-called super-plateau (7 May 2013). It was the first time that the firm has removed members from the 65-point level since it was introduced in 2007.
In Australia, legacy Blake Dawson moved away from an all-equity partnership roughly three years prior to the Ashurst merger. As a result the firm had a decline in the number of equity partners and an increase in the number of fixed-income partners.
Earlier this year, an Australian national newspaper speculated that between 20 and 50 equity partners of Ashurst Australia were being asked to leave or de-equitised. But Ashurst’s Australia managing partner John Carrington told The Lawyer that the firm’s partner headcount would not change “in any substantial way” (1 February 2013). However, since the initial tie-up in September 2011, the number of equity partners has fallen gradually from 145 to 123.
At the time of the initial tie-up, legacy Blakes’ PEP was within 10 per cent of Ashurst’s s £723,000. However, the gap may have widened, due both to the market slowdown in Australia and the exchange rate fluctuations.
This year’s UK 200 research shows that Ashurst’s 2012/13 was steady at £323m, but PEP dropped by 9 per cent to £680,000 from £744,000 in 2011/12.
According to Australian Financial Review, Ashurst Australia’s revenue for 2011/12 was $398m (£235m), with top equity partners earning up to A$1.8m (£1.1m) and most equity partners taking home between A$800,000 (£470,000) and A$1m (£585,000).