When Bond Pearce and Dickinson Dees announced they were in merger talks a couple of weeks ago the synergies between the two firms were instantly interesting. Never mind the fact that geographically the firms are almost mirror-images – Bond Pearce in the South West and Dickinson Dees in the North East – when it comes to financials this is as close to a merger of equals as it is possible to get.
Bond Pearce’s net profit was £6.1m, equating to average profit per equity partner (PEP) of £235,000 for each of its 26 equity partners. Dickinson Dees produced £6.3m in net profit but with one more equity partner, so PEP was also £235,000.
The two firms’ profit margins were also similar, at 13.1 per cent for Bond Pearce and 13.7 per cent for Dickinson Dees.
Earnings per partner (EPP) show a slight divergence. Both firms reported that total remuneration to all partners was around £12m. But Bond Pearce’s larger partner count of 72, in contrast to Dickinson Dees’ 53, means that the Newcastle firm’s EPP was £228,000 compared to Bond Pearce’s £167,000.
There is less divergence between the earnings of Dickinson Dees’ equity and non-equity partners. Dickinson Dees’ EPP sits close to PEP and in the middle of the firm’s equity range, which goes from £100,000 at the bottom of equity to £272,000 at the top. In contrast, Bond Pearce’s equity range is £190,000 to £345,000. These differences could pose problems for the firms’ management in concluding the merger.
The firms’ practice area breakdown also shows some differences. Both obtain about a third of revenue from corporate work and about a quarter from property. But Dickinson Dees’ finance practice brings in 19 per cent of revenue over 6 per cent for Bond Pearce, and the South West firm’s litigation practice, accounting for 40 per cent of revenue, is more than twice the size of the Newcastle firm’s.
Despite this difference in contention work, which can often lead to longer lock-up, the firms have similar financial management practices. Work in progress at the year-end for 2011-12 was 51 days for Bond Pearce and 52 days for Dickinson Dees. Bond Pearce did better on debt collection, with 56 debtor days compared to 77 for its potential merger partner.
At present Bond Pearce’s five offices cover a total space of 193,000 square feet, more than twice as much as Dickinson Dees’ five – but Dickinson Dees is paying more for less space with costs of £4.5m. Both firms have offices in London. Bond Pearce said its 21-lawyer City base brought in revenue of £3.6m last year.
Debt can often be a deal-breaker in a merger situation, but Bond Pearce and Dickinson Dees come out fairly evenly on this metric. At the end of 2011-12 Bond Pearce reported borrowings of £3.5m, while Dickinson Dees had borrowings of £4.9m.
Bond Pearce’s LLP accounts for the year are already published. They show that the £3.5m was made up of £1.95m in bank overdrafts and £1.5m of bank loans. Just under £3m of the borrowings are due within a year. The firm actually reduced its borrowings by £1m between 2010-11 and 2011-12, cutting both loans and overdraft by £500,000.
Dickinson Dees’ 2010-11 LLP accounts showed bank loans of £3.3m, the bulk of which were long-term. Just £730,000 was due within a year. The firm took out £1m loans in June 2005, September 2005 and May 2010 and a £1.5m loan in April 2007, with repayments due over various periods up until 2020.