LLPs reveal debts, costs and bonuses
Ah, the hidden world of partnership accounting. Or rather, not quite so hidden now, after The Lawyer revealed the first major set of limited-liability partnership (LLP) results in February. The LLP process may put a strain on the finance director, but all that transparency is arguably even more of a shock for managing partners.
Manches chief executive Alun Lamerton has had to deal with bank loans and overdrafts of £3.7m off a turnover of £23.5m, according to the firm’s LLP accounts. Manches operates on a calendar-year basis and it is unlikely that 2006 will see a great reduction in the firm’s level of debt, says Lamerton, who cites the firm’s new office in Oxford as a major factor.
Over at Lawrence Graham, there is a hefty £396,000 of merger costs to deal with. Well, less a merger, more a bolt-on: the Tite & Lewis team which came over in 2004 comprised a handful of partners.
Interestingly, in taking the hit in one year, Lawrence Graham partners saw a 3.5 per cent drop in profit per equity partner (PEP) to £401,000 that year. Now that must have been a tricky management decision when most of your direct rivals are shooting way over the £400,000 mark. However, senior partner Bill Richards parried that one neatly. He told The Lawyer: “The fact that we wrote the costs off in one year actually says more about how robust our firm is.”
However, management partners probably noted one LLP story more than most: the revelation that DLA Piper Rudnick Gray Cary UK chief executive Nigel Knowles received £1.1m last year. Because he’s worth it.
All change at the top for Crutes
It’s been all go in the regions. We were terribly intrigued as to the move by North East stalwart Crutes in shaking up its entire management. It is an end of an era in so many ways, not least because name partners are few and far between nowadays. Managing partner Stephen Crute had been at the helm since 1995 but is now stepping down along with chair Tim Wallis. In their places come litigation head Helen Ager, with fellow litigator David Drewe assuming the role of chair.
As a female managing partner in the North East, Ager is in a band of precisely one. The big question is whether a wholesale management change prefigures a strategic rethink. Ager claims not, but admitted to The Lawyer: “Inevitably there will be a change in our style.”
Down South, meanwhile, Blake Lapthorn Linnell has pulled off the first regional merger of the year with its decision to combine with White & Bowker. It is an encouraging start for Blake Lapthorn’s new senior partner Jonathan Lloyd-Jones, who started in December.
The mergers with Sherwin Oliver in 2002 and Oxford-based Linnells in 2004 never quite set the market alight. More pressingly, Blake Lapthorn is having to contend with increasingly aggressive firms to the west, such as Clarke Willmott, Bevan Brittan and Ashfords. No wonder Blake Lapthorn realised that it needed to consolidate its regional position. The creation of a £40m firm in the South of England may do the trick. (Once you’ve bedded down the merger, Jonathan, you’d better move fast on PEP, which is currently standing at £160,000.)
Another firm in the South with change on its mind in February was ASB Law, which parted company with former chief executive Christopher Honeyman Brown. ASB will now be run by senior partner Russell Bell and two other partners, Andy Taylor and Andrew Clinton, who will form the firm’s executive committee.
Freshfields grapples with partner issues
You cannot look at management developments and ignore the magic circle.
February belonged to Freshfields Bruckhaus Deringer. For a start, it admitted it was putting in place a buddy scheme for female associates – highly unusual in the City. But in a world where Barclays is scaring the bejesus out of law firms by demanding diversity statistics, it’s not quite so surprising.
Freshfields’ female representation at partnership level is pretty woeful; only 11.8 per cent of its partners are women. By way of comparison, Clifford Chance manages 15 per cent and Allen & Overy 14.7 per cent, while Linklaters pips Freshfields with a 12.3 per cent female partnership.
But hey, at least they’re all equity partners at Freshfields. Although not for long if the firm’s Asia initiative is anything to go by. Finance head Perry Noble wants to boost the China practice by introducing a local salaried layer.
It is a neat idea in terms of bringing in local partners and incentivising senior associates. It is, however, not new – Slaughter and May has been doing it for years in Hong Kong, for example.
However, the equity principle dies hard. It would be interesting to be a fly on the wall for Noble’s discussions with new senior partner Guy Morton, who declared his complete commitment to an all-equity partnership in an exclusive interview with The Lawyer earlier this year (30 January). It rather looks as if Freshfields is embracing an era of pragmatism.
DWS rewards departed partners
A rather stranger incentive scheme was in evidence at Denton Wilde Sapte (DWS), which is poised to distribute more than £1m this year to a number of former equity partners from the Denton Hall side of the merger.
Those lucky individuals have been getting up to £250,000 each since May 2003, although the DWS rumour mill has it that one lucky chap got a lump sum of £500,000.
The money was generated back in 1994 when the firm switched from a cash to an accruals basis, but it was agreed that that pot could only be touched 10 years after the event. As DWS chief – and legacy Denton Hall partner – Howard Morris told The Lawyer (13 February) last month: “At the time it was an unexpected windfall and we decided it would be a nice way to get partners to commit to the firm.” You can say that again.
Top dogs win firms’ praise
Two law firm bosses got their votes of confidence in February. Hill Dickinson senior partner Tony Wilson was re-elected unopposed for another term. Ditto Berwin Leighton Paisner (BLP) czar Neville Eisenberg, the architect of BLP’s growth over the past four years. Only someone irrepressibly foolhardy would have stood against him, we suspect. (It’s getting terribly like DLA Piper over there.)
Eisenberg and Wilson got a much easier ride than Dewey Ballantine chairman Mort Pierce, though, who is currently battling a claim filed by former partner Joe Dowley in the wake of a financial restructuring, a redundancy programme and a lock-in period. UK management partners probably relish a poorer, but quieter, life.