East Anglian firm Ashton KCJ is planning to overhaul its partnership structure, switching from a two-tier partnership to an all-equity partnership model with a modified lockstep system.
The move follows the first full financial year after the October 2011 merger between regional firms Ashton Graham and Kester Cunningham John (5 January 2011)
Ashton KCJ’s partnership currently consists of 17 fixed-share equity partners, whose remuneration includes only a small element of profits in addition to a fixed salary, and 20 full equity partners who each put in equal capital and take the same notional drawings.
The proposed new model will see the two tiers combined into a single modified lockstep. The current fixed-share partners will make a capital contribution, the amount which is yet to be finalised, and receive a larger share of the profits, while the current full equity partners’ contribution will remain the same.
CEO Edward O’Rourke said: “We’re reducing the notional salaries to all, and splitting the profits into two equal pools. One will be awarded as part of the merit-based system as a bonus, and the other half will be a profit share depending on the profits that are put in.”
He continued: “There’s no compulsion for fixed-share equity partners to take part. They can remain fixed-share partners, but we do hope to get most of them on board.”
The initiative will be formally put to partners next Tuesday (20 August), before a formal vote.
The firm will establish a remuneration committee and a new appraisal system in order to decide on the allocation of profits.
While it has been contemplating the remuneration changes, Ashton KCJ has also engaged estate agent Savills to conduct a “strategic review” of its premises. The firm currently has seven offices spread across East Anglia, including two in Bury St Edmunds and one in nearby Thetford.
“We have seven offices when we maybe merit four or five,” said O’Rourke. He said the firm’s Felixstowe office may relocate to Ipswich, concluding: “We’re waiting for the report to see what our strategic options are.”
Ashton KCJ has also posted its first full-year revenue of £16.4m – slightly less than the £16.8m it had hoped for. The 37-partner firm recorded a net profit of £3.4m, with an average profit per equity partner (PEP) of £156,000.
Since the 2011 merger Ashton KCJ has made a number of redundancies to deal with a “duplication of skills,” cutting approximately 15 to 20 support staff and about six fee-earning positions. The last of these took place in late 2012.
The firm has simultaneously been on a hiring spree to bulk up its major growth areas, which include corporate and commercial property, taking on partners and senior associates from national firms including Eversheds, and Pinsent Masons.