Allen & Overy‘s (A&O) decision to publish its limited-liability partnership (LLP) accounts is a milestone in financial reporting in the legal profession. A&O isn’t the first firm to do this: Eversheds, Harbottle & Lewis, Mayer Brown Rowe & Maw, Withers, and Wragges (to name just a few) have all converted to LLP status. But A&O is the first magic circle firm to do so, and its accounts will be scrutinised by its peers.
It’s all pretty radical, but A&O is actually entirely conservative when it comes to its financials. For the past four years it has been been building up a war chest of nearly £60m, funded through retained profits, to help pay for its new offices in Spitalfields. At the same time, partners contribute an average of £368,000 in capital. To get a sense of how much each partner underwrites the business, compare that figure with the average profit take of £656,000.
One of the more tedious tasks of legal journalists is to persuade law firms to give us details on their figures. Things are a darn sight more transparent now; 10 years ago, City partners would tell us that we were being – and I quote – “impertinent” to ask. At that time, they would argue that the clients would disapprove of how much money their lawyers were making.
That is patently not the case. As we all now know, clients are more than happy to be associated with successful law firms. A law firm’s profit profile entirely underpins the brand. Equally, any law firm that decides to take the LLP route is making a statement about itself to clients. A&O senior partner Guy Beringer is right when he argues that to publish accounts, rather than a glossy yearly review, encourages “professional and businesslike” behaviour.
In fact, A&O has found an extra little sideline in advising other firms on LLP conversion. It’s hardly likely to rival any of its major practice areas, but it’s a neat way of converting its experience of a year’s hard work into a little bit of cash.
There has been one unexpected footnote. Home addresses of LLP partners would normally be stored at Companies House. But during the whole Glazer saga, when A&O found itself literally under siege by enraged Manchester United fans, the idea of making these publicly available became strangely unpalatable. So A&O sought – and got – special dispensation not to publish those details.
Even going LLP isn’t worth that sort of hassle.