Minster Law and Optima Legal have emerged as the two firms with the highest reported level of borrowings in this year’s The Lawyer UK200.
Last year Minster’s turnover was £104.1m. The Lawyer can reveal that at the end of the last financial year it had total borrowings of £69m.
At Optima the proportionate debt levels were even higher. At £36.2m, Optima’s borrowings in fact dwarfed its 2011-12 turnover of £22.85m.
As reported by The Lawyer in 2010, the high level of debt at Optima is primarily the result of a deal with outsourcing giant Capita to invest £35m in the firm to fund a series of acquisitions (16 August 2010).
Neither firm commented when contacted by The Lawyer.
The two firms’ debt levels were contained in data supplied for this year’s UK200, which for the first time asked firms to include on the annual questionnaire total borrowings at the end of the most recent financial year.
Other firms that revealed year-end debt levels include DWF, which had £9.8m, Watson Farley & Williams, which had £9.7m, and Shoosmiths, which had £6.5m.
Other firms where the proportion of debt to turnover was significantly higher than at these three included Linda Myers (£6.5m on a turnover of £15.9m), Colemans-ctts (£6m on £16.9m) and Manches (£5.9m on £30.2m).
At Olswang, which had £11.8m of working capital at year end, CEO David Stewart confirmed that he had made reducing the firm’s levels of debt a priority for the current financial year. Olswang’s lock-up exceeded its 100-day target by more than 20 days last year.
Stewart revealed that in a bid to address this Olswang had spent around £3m buying Elite’s 3E practice management system, a move aimed at improving efficiencies at the Holborn firm.
“The only real way of reducing debt is by being more efficient,” said Stewart.
Last week PwC released its annual Law Firms Survey, in which it analyses data from the majority of firms in the top 100, banding them on a non-attributed basis into the top 10, 11 to 25, 26 to 50 and 51 to 100.
PwC’s report included a call to top 10 firms in particular that they could “increase cash by between £13m and £23m by applying better lock-up management discipline”.
PwC’s report also added that around a quarter of firms in each of its bandings had made a capital call during the year, ranging from £7,000 to £69,000 per partner.
Some of them may want to take a leaf out of Olswang’s book.
The UK200 is published in October, several months ahead of the date many firms publish their LLP accounts, which includes information on debt.