Davenport Lyons and Howard Kennedy FSI are in top level discussions about a potential merger.
HKFsi confirmed the move. A spokesperson said: “We have been approached and are currently at the initial stages of talking to Davenport Lyons with a view to exploring the possibilities of a merger.
“We are at a very early stage in those discussions but we remain open minded as to what may come from looking at this in more detail.
”We remain committed to the vision of growing HKFsi, be it through bolt-ons, mergers or lateral hires and will look at all opportunities presented to us.”
Davenport Lyons, which has not responded to requests for comment, is thought to be urgently looking for a merger partner.
The £21.9m firm saw its profit per equity partner slip 12.5 per cent to £197,000 last year, representing a 20 per cent drop since 2011. In November it made the decision to close its film and TV group (13 November 2013) and trim its trainee cohort (29 November 2013).
Meanwhile Howard Kennedy FSI, the result of a merger between legacy Howard Kennedy and Finers Stephens Innocent in January 2013 (31 January 2013), recently hired its first chief operating officer (COO) in a bid to integrate the merged firm (29 January 2014). Accountant Ian Harvey joined the firm from Strutt & Parker last month following the shock exit of chief executive Mark Dembovsky in November (14 November 2013).
Equity partners were presented with a series of ideas drawn out by Harvey last month, though it is not clear if a further merger was part of that presentation.
Some of the issues at the merged HKFsi, spread across two London bases, are understood to include partner disunity and a lack of communication between the two sets of legacy lawyers and staff. Last year the firm changed banks to Barclays and set a “conservative” annual revenue growth rate of 3 per cent for the next three years.
The expansion of the equity partnership at HKFsi cut average profit per equity partner (PEP) at the combined firm by almost half to £128,092 last year (24 July 13).
Davenport Lyons did not respond to requests for comment.