At a particularly jolly lunch last week, three partners from a thriving mid-size City firm were hooting with laughter about the number of pointless takeover approaches they had had. “Mind you,” confided one of the lawyers wistfully, “it’d be great to get a big cheque from a load of Americans, and then wave goodbye. The problem is, you have to stick around.”
That is true at the moment. But in the wake of the Tenon takeover of Statham Gill Davies, and the even more intriguing news that Withers has opted for a limited liability partnership (LLP), it looks like that day may not be too far off.
Let us pause a while to contemplate the fact that it is Withers which is breaking ground here. Yes, Withers – the private client-led firm which has also managed to pull off a transatlantic merger. (It’s a tiny merger, but hey.) As its senior partner Diana Parker tells Fiona Callister on page 15, it was “too good an opportunity to miss”. She argues that LLP status benefits not just partners within the firm, but also clients, “because one is not so reluctant to take on risk”.
Withers is not the first firm to go for UK limited liability; that accolade goes to technology practice Kemp Little. As Richard Kemp happily admits, his firm found it relatively easy to do because of its small size. But despite Kemp’s pioneering approach, no major firm has followed suit – until now. (Clifford Chance is a US LLP.)
The fact that Withers pulled it off shows that it can be accomplished without too many tears. So why hasn’t there been a rush towards limited liability, especially in these days where risk management is on everyone’s lips? There are a number of possible reasons, including downright inertia – or what Parker describes as “the sheer exhaustion factor”. For larger firms with a partnership agreement already in place, the idea of having to renegotiate everything would be their worst nightmare. There is also the emotive question of full disclosure of financial information – something we journalists would like to see more of, which naturally contributes to firms’ reluctance in the first place .
Most importantly, limited liability partnerships are a halfway house to incorporation. It looks, therefore, as if it may not be too long before a partnership does become a separate vehicle with its own value. As one of those lawyers said over lunch: “I’d be happy to sell out anytime.” Wouldn’t we all?