End to Eversheds‘ lockstep could herald growth
At The Lawyer, firms’ international strategies often vie with their equity structures for page space. Both are perennial issues for the UK’s largest firms and, with the end of the financial year in April, the latter was recently a particularly high priority for management teams across the country.
At Eversheds both issues collided last month (The Lawyer, 24 April) with the news that the national heavyweight was abolishing its lockstep system in favour of merit-based remuneration. The move flagged up, among other things, the international opportunities that a more flexible equity structure would offer the firm.
Eversheds is known to be keen to expand its international network, primarily through its alliance. Currently only Paris, Brussels and Copenhagen are fully fledged international Eversheds offices in terms of sharing revenues and profits.
Although Eversheds chair Alan Jenkins told The Lawyer this week (page 5) that there was “no timeline” for the financial integration of any of its 15 alliance firms into Eversheds proper, a more flexible lockstep would be a necessary step towards expanding internationally on a fully merged basis.
The current favourite destination for additional Eversheds alliance offices is Central and Eastern Europe – with the opportunities in projects mandates the region is proving a fertile ground for the firm.
One of the reasons given by Jenkins for the firm’s jettisoning of lockstep was the doubt over whether the system would remain lawful after the introduction of new age discrimination legislation later this year. The firm is replacing its modified six-tier lockstep with a scheme based wholly on performance criteria, including fee-income generation, profit and strategic value, client service and behaviour.
Jenkins said there was “real doubt” as to whether lockstep would continue to be lawful under the new law. Eversheds, he said, wanted a scheme that recognised partners’ contributions. “It’s inherent in the scheme that seniority is not a factor any more,” he added.
Freshfields keeps sole magic circle all-equity model
The equity structure was also on the agenda at magic circle firms Freshfields Bruckhaus Deringer and Clifford Chance this month. In truth, it has been an issue at the former for a lot longer than that.
Freshfields was the only member of the UK magic circle to retain an all-equity partnership model, the other three (Clifford Chance, Linklaters and Allen & Overy) having accepted long ago that a one-size-fits-all model fails to meet the needs of a global firm.
The firm’s senior management confirmed earlier this month (1 May) that it was considering a wide range of changes to its partnership model, including the creation of fixed-share partners across the firm.
Flexibility was the key, admitted co-senior partner Konstantin Mettenheimer. He said the firm was “thinking in all directions”, but confirmed that de-equitisations were a distinct possibility.
It is thought that a proposal on the changes to Freshfields’ equity structure will be put to partners later this year.
Meanwhile at Clifford Chance, radical plans to reintroduce an all-equity partnership model have been scrapped (15 May). Instead proposals have been put forward to give junior partners a vote in all issues and a place on the partnership board.
Simmons turns to technological advancement
The renaissance at Simmons & Simmons under Mark Dawkins was highlighted last month when the managing partner revealed his ambitious and radical plans for the firm.
Dawkins’ new business plan, endorsed by the global partnership recently, has the use of technology at its core. The firm is well known in the City for its progressive thinking on partnership models, with former senior partner Janet Gaymer having blazed a trail for an alternative partnership track for Simmons partners who are not expecting to achieve equity (The Lawyer, 16 May). Dawkins’ plan is an extention of this lateral thinking.
He told The Lawyer that technology “opens up a number of options”. For example, he outlined the possibility that a firm could move away from the traditional pyramid structure, with an equity partner heading a group of assistants, and instead develop new career paths for “knowledge management lawyers”.
“Taking that further down the line, lawyers would perform different functions and require a different skill set,” Dawkins said. “We want to look afresh at the way the law firm operates. I’m interested in seeing the result of a converging set of trends, which may mean a new model law firm can emerge.”
Olswang gives lessons in equity management
At Olswang, chief executive Jonathan Goldstein offered up a masterclass in the importance of not diluting the equity.
The partnership may be a tad more generous in sharing its profit than certain mid-market rivals (stand up Berwin Leighton Paisner and DLA Piper Rudnick Gray Cary), but Goldstein was keen not to let things get sloppy simply because he had pulled off another of his trademark acquisitions.
At the start of May, Olswang acquired the bulk of the former 11-partner property boutique Kanter Jules (1 May). By mid-May it had emerged that, not only did Goldstein manage to persuade the majority of the firm’s partners to join as associates, he also struck a deal that saw just one Kanter Jules partner enter the Olswang equity. Not bad for a deal bringing in an extra £4m in revenue.