Withers has issued a cash call to its equity partners, with partners allegedly asked to pay out as much as £5,000 per point.
The firm has also held back partner profits for more than one year. According to information provided by the firm for The Lawyer UK200, it took over a year for the final profit distribution from the 2011/12 financial year to be paid to partners.
According to Withers’ 2011/12 LLP accounts, it was due to repay £18.1m in bank loans and overdrafts within one year – an amount equivalent to 16 per cent of the firm’s total turnover in 2011/12. It also had £1.6m of bank loans due over a longer term.
Meanwhile, the firm is also understood to have let go at least two litigation associates. This is thought to be partly due to over-resourcing after a number of Withers’ big-ticket litigation cases ended during the 2012/13 financial year.
Revenue generated by the firm’s litigation group diminished in 2012/13, accounting for £19.6m (or 16.7 per cent of the firm’s turnover), as opposed to £22.7m (19.3 per cent of turnover) in the previous year.
In an unrelated move, Withers’ global head of litigation and arbitration Chris Coffin is currently in discussions about stepping down from his management position, say sources.
A source close to the firm said: “The firm has talked about the need to replenish its big cases. The market is a bit quiet, so either they need to replenish their staff or they’ll be top heavy. It’s not surprising given the firm’s drop in profitability.”
Withers reported a global turnover of £117m for 2012/13, an increase of 4 per cent on last year’s revenue of £113.3m. That was a significant slow down compared to revenue growth of 12.4 per cent in 2011/12 and 8.7 per cent in 2010/11 (18 July 2013).
Both PEP and net profit figures dropped in 2012/13 after record highs last year. In 2012/13 PEP fell by 4.3 per cent to £370,000, after jumping up by 19.5 per cent to £386,000 in 2011/12. Net profit dropped by 7 per cent to £22.5m, after rocketing by almost a quarter to £24.2m last year.
The firm refused to comment on the cash call, associate downsizing, or Coffin’s proposed change in status.
Since January 2012, Withers has witnessed the exit of 10 partners including three heads of department and two US regional practice group heads (9 July 2013). During that time the firm came close to merging with fellow personal wealth specialists Speechly Bircham, before partners at both firms voted against the proposed £170m combination (23 May 2013).
Withers is not the only firm to have issued a cash call this year. In May 2013 Herbert Smith Freehills asked its equity partners to contribute £2,000 per equity point in an effort to boost its capital structure by £20m (13 May 2013).