The European arm of Dentons has made a capital call to raise an additional €6m to €7m in a move European chief executive Tomasz Dabrowski calls ‘good financial prudence’.
European partners, excluding the UK which operates as a separate legal entity, have been asked to contribute up to €100,000 extra over a two-year period.
The capital raise will impact partners across continental Europe, the legacy Salans practice, with partners set to contribute more cash over a staggered period beginning in 2017 and finishing in 2018. Partners across Dentons’ 22 offices in continental Europe will pump between €6m and €7m into the firm over the next two years.
Partners in the region will go from a €1,000 capital contribution for every equity point they hold in the business, an unusually low number by law firm standards, to €1,275 per point. The maximum the firm’s top partners in the region will be required to add is €100,000. The partnership voted in favour of the move in August, far surpassing a 75% approval threshold required to make the change.
The firm has historically relied heavily on a revolving credit facility to manage cash flow and the extra capital in the business will enable Dentons to slash its bank debt and reduce its interest. According to the European arm’s most recently available accounts on Companies House, the firm paid some €606,000 in interest on bank loans and overdrafts in 2014. The firm is currently renegotiating its lending facility with Barclays to obtain more favourable interest rates.
Dabrowski (pictured) and Richard Singer, Europe chief operating officer (COO), led the move in a bid to bring the European arm of Dentons in line with capital contributions at the rest of the firm. Singer, who joined Dentons just over two years ago from White & Case, where he was EMEA director of strategic projects, says the European arm of Dentons has historically required up to 50% lower capital contributions than some peers and 10% lower than other members of Dentons. The firm operates a Swiss verein business structure whereby profits and liability remain separate across different regions.
This capital raise is designed to plug that gap, while easing issues the firm has found in moving capital around different parts of its business, with Turkey and Kazakhstan two problematic jurisdictions as they operate as separate subsidiaries due to local regulations and tax rules.
The move is the biggest structural change in Dentons European business structure since partners voted to remove a 190-point cap on remuneration at the end of 2014. The firm has expanded rapidly in continental Europe over the past 12 months, with Dentons launching in Italy with offices in Milan and subsequently Rome, while the firm opened in Luxembourg with the addition of local firm OPF Partners in January.
The capital call affects no other regions.