Legal Business

Growing pains: ongoing investment sees PEP at Penningtons Manches tumble 16%

Growing pains: ongoing investment sees PEP at Penningtons Manches tumble 16%

Sustained investment and the costs of bedding down a merger impacted on profits at Penningtons Manches, which posted a lift in revenue but a tumble in profits per equity partner (PEP) for the financial year 2015/16.

Revenue at the firm stood at £61.6m, up 7% from £57.5m. This represents a slowing pace of growth compared with 2014/15 when revenues rose by 23%.

PEP fell by 16% from £319,000 to £269,394, which chief executive David Raine attributed to costs associated with consolidating offices and implementing a new IT system.

The firm had 35 equity partners at the end of the last financial year, up 9% from 32, while net income (profit available to equity partners) dipped slightly from £10.2m to £9.42m, an 8% drop from the year before.

Raine (pictured) said: ‘We budgeted to make less profit, strangely, last year, so we knew.The partners knew it was coming. It is an investment point.’

He added: ‘We are trying to build IT which actually helps us do our work rather than getting in the way at times. This is always going to take time and resource but is something that had to be done.’

Raine said the firm’s disputes team in particular had a strong showing in 2015/16: ‘Our litigation team has had a marvellous year, not just one particular case but the whole team.’

Penningtons Manches was formed after the high-profile takeover of Manches by Penningtons back in 2013. Since then the firm has opened an international office in San Francisco to provide English law advice on corporate, IP, immigration, and employment matters for US businesses undertaking corporate activity in the UK and Europe. That office opened in 2014.

Other LB100 firms to post results this week include Charles Russell Speechlys, which posted a 4% revenue bump, while Trowers & Hamlins saw turnover improve by 8% for the 2015/16 financial year.

kathryn.mcann@legalease.co.uk

Legal Business

Revolving Doors: clutch of firms including Ashurst, Penningtons Manches and White & Case make key hires

Revolving Doors: clutch of firms including Ashurst, Penningtons Manches and White & Case make key hires

A number of firms have made noteworthy appointments this month, including Ashurst, Squire Patton Boggs, Penningtons Manches, Dentons, White & Case and Eversheds who have all added to their teams.

Ashurst has strengthened its dispute resolution capability in Middle East by appointing Dyfan Owen to its Dubai office.

Managing partner of the Middle East, Joss Dare, said: ‘The disputes market in the Middle East has gone through a transformative period in the last few years. The level of mega-projects and infrastructure investments have been generating an increasing number of large, multi-jurisdictional disputes and we see this trend as continuing.’

White & Case has appointed Arlene Hahn as a partner in the firm’s global intellectual property practice, to work closely with the firm’s global mergers & acquisitions practice.

Meanwhile Eversheds has hired Nicholas Jew as a consultant in its employment team, from DLA Piper where he headed the Birmingham employment team.

Squire Patton Boggs has appointed Karim Maalioun as a partner in its Global Corporate Practice, to be based in Paris. Maalioun was the former general counsel (EMEA) for power business ContourGlobal. Christopher Wilde, managing partner of the Paris office said Maalioun adds major energy sector expertise to the firm’s established corporate team.

National firm Pennington Manches has added two new partners to its Cambridge office to strengthen its corporate and real estate teams. Ross McNaughton joins from Paul Hastings where he had been a partner since 2012 and Sarah Coates comes from Thomson Webb & Corfield where she had been a partner since 2013.

Herbert Smith Freehills has appointed former Secretary of State for Energy and Climate Change Ed Davey as a consultant to its top-tier global energy group. As of September, Davey will work closely with the co-heads of the firm’s Global Energy Group, John Balsdon, Anna Howell and Rob Merrick, advising on thought leadership development in the energy and climate change sectors, and providing a unique understanding of both past, present and future UK and EU energy policy.

Over at Dentons, new capital markets partner Nikolas Colbridge is being welcomed to the firm from Skadden Arps.

Jeremy Cohen, Dentons UKMEA chief executive officer, commented, ‘We are particularly impressed by the work Nik has done on complex listings in Europe, emerging and developing markets, and across the world. His exceptional skill and depth of knowledge will be a real asset to our global practice.’

Finally, US firm Quinn Emanuel Urquhart & Sullivan has added Jonathan Bunge to its ranks, to join the Chicago office as managing partner. Bunge is an experienced first chair trial lawyer who has tried more than 40 jury and bench trials who was a partner at Kirkland & Ellis.

victoria.young@legalease.co.uk

Legal Business

International ambitions: Penningtons Manches launches office in San Francisco

International ambitions: Penningtons Manches launches office in San Francisco

It’s been little over a year since the high profile takeover of Manches by Penningtons, and the combined firm now has its sights set on further expansion having today (10 December) announced the opening of an overseas office in San Francisco’s financial district.

The venture, led by corporate and technology partner James Klein and IP/IT partner Hamish Corner, will provide English law advice on corporate, IP, immigration, and employment matters for US businesses, in particular technology-focused companies, undertaking corporate activity in the UK and Europe.

The firm hopes to build upon its network of clients in San Francisco and Silicon Valley and said the ‘focus of the office will complement [its] key sector strengths in cloud-based IT services, data analytics/big data, internet/e-commerce, life sciences and renewable energy/clean tech.’

It added the move will ‘strengthen [its] position as a US/UK inward investment specialist as well as bolstering the existing cross-border M&A practice, as the firm continues to act for US investors and acquirers on transactions.’

Penningtons Manches chief executive David Raine said: ‘The launch of our San Francisco office is not only a clear statement of intent about our international aspirations but shows how much the team has achieved in a short period of time in terms of building relationships and winning West Coast clients. We are delighted to be able to help service the sector’s growing need for UK and EU advice as technology companies expand the scope of their operations outside the US.’

Klein added: ‘Since the formation of Penningtons Manches just over a year ago, the imperative to respond to a growing trend towards transatlantic investment by US enterprises has been strengthened by our enhanced capability not only in the technology sector as a whole but within the life sciences, clean tech, data privacy and outsourcing sub-sectors.

‘Last year the number of European buyouts with a US sponsor reached around €18 billion, double that of 2009 and we are now confident of both our West Coast relationships and our firm-wide ability to service clients in these sub-sectors.’

The ambitious move follows the highly publicised takeover by Penningtons of beleaguered Manches last October, which had previously been earmarked as a firm in need of a merger. In a deal brokered by PwC as administrators, a business transfer agreement saw 265 Manches employees, including 46 partners move over to Penningtons.

Others to make their mark on the West Coast includes Osborne Clarke which in March rolled out a strategy to provide European legal advice to digital businesses in the US from a base in San Francisco, a move which office head Steve Wilson said would help the firm engrain itself in the area’s budding digital business community.

sarah.downey@legalease.co.uk

Legal Business

Financials 2013/14: Penningtons Manches, Lewis Silkin and Farrer & Co post results

Financials 2013/14: Penningtons Manches, Lewis Silkin and Farrer & Co post results

A trio of LB 100 firms have posted financial results for the 2013/14 year, with newly combined Penningtons Manches revealing revenue of £46.6m while profit per equity partner (PEP) came in at £268,000.

For Penningtons, it’s been a year of significant change. In October the firm took over troubled private client firm Manches as the latter entered into administration. The agreement saw 265 Manches employees, including 46 partners officially move to Penningtons in a pre-pack deal brokered by PwC. However, the combined firm this year has only three additional equity partners compared to Penningtons total prior to the takeover in 2013.

Manches had been earmarked for a merger by the LB100 last summer, after falling 11 places to 93 with revenues down 13% to £26.3m and PEP by 43% to £134,000. Penningtons ranked higher at 82, bringing in £32.5 million with a PEP of £275,000.

Nearly ten months on since the takeover, and having acquired offices in Reading and Oxford, managing partner David Raine is feeling positive about the move so far and says: ‘Integration has gone really well with Manches. The previous life seems an age ago. Most of us are under one roof now but it feels longer than six months. The teams are working together in the same sectors – that’s been a great help and heartening to see people sharing assistance and cross selling.’

The firm’s business services division accounted for 40% of fee income, while real estate and private client generated 24% and 36% respectively. Raine adds: ‘We’re delighted with how various parts of the firm did better, particularly with all the disruption from the combination with Manches. There were office moves, changes with IT systems … there was a lot happening.’

Meanwhile, city firm Lewis Silkin posted disappointing results, and recorded broadly flat revenue that rose just 1% to £41.4m, while PEP significantly dropped 15% from £344,000 to £291,000. A breakdown of the firm’s financials saw its employment reward & immigration practice generate 40% in fee income while its media brands and technology practice accounted for 25%.

Lastly, private client-focused Farrer & Co recorded a slight decline in revenue to £50.7m from £50.8m, while profit per equity partner increased by 3% to £440,000.

Sarah.downey@legalease.co.uk

Legal Business

Revolving Doors: Key hires for Mishcon, Penningtons Manches, DWF and TLT as NRF loses head of planning

Revolving Doors: Key hires for Mishcon, Penningtons Manches, DWF and TLT as NRF loses head of planning

With the blurring between criminal and civil law becoming ever more prominent, Mishcon de Reya announced last week that Alison Levitt QC, the principal legal adviser to the Director of Public Prosecutions (DPP) of England and Wales, is to join the firm as a dispute resolution partner, as other firms to announce key hires over the past few days include TLT, DWF and BrookStreet des Roches.

Levitt, who oversaw Crown Prosecution Service’s decision-making and potential prosecutions in relation to the News of the World phone-hacking investigations, will join the LB100 top 40 firm in April, where she will concentrate on bribery and corruption, significant regulatory matters, private prosecutions and will offer high-level advocacy where necessary.

Head of dispute resolution, Kas Nouroozi said: ‘There are very few individuals in the English market who have worked at the highest level in public office and also have the experience of having operated in private practice. Alison’s depth and breadth of understanding of the working of the English criminal and regulatory system will prove invaluable to our clients. It is something that has worked to great effect in the United States and I believe will become more prevalent here in due course.’

Moving out of the City is Norton Rose Fulbright’s head of planning, Nigel Hewitson, who will leave the firm at the start of April for Oxfordshire-based commercial real estate boutique BrookStreet des Roches, which counts National Grid, MEPC, Lafarge Tarmac and Vodafone among its clients. Hewitson will establish and head up a new planning service at BrookStreet, which has long focused on the commercial real estate sector but, prior to Hewitson’s arrival, did not have a significant planning capability.

Before joining Norton Rose, Hewitson was head of planning at Howard Kennedy and served for several years as legal director at English Heritage. Recent notable cases of his include advising a consortium of Malaysian businesses on the acquisition and development of Battersea Power Station; advising on the planning aspects of Crest Nicholson’s 2013 Initial Public Offering on the Stock Exchange; and advising DP World on its development of the six berth London Gateway Port and its associated two square mile logistics park.

Managing partner at 20-partner BrookStreet des Roches, Hugh Blaza said: ‘Our clients have been telling us that they would like us to provide planning as well as our established services. We knew that, if we were to successfully establish such a planning service, we needed a highly-regarded individual with extensive experience across relevant sectors. Nigel ticks all the boxes. We are delighted he has decided to join us and we are very much looking forward to working with him.’

Hewitson said: ‘There is a very good business fit, which will enable me to compete effectively by bringing City quality at regional prices to a very price-sensitive market place. Equally importantly, there is a great personal fit. I share the view the firm holds that success is about more than doing good work: it’s also about enjoying working with your clients.’

Meanwhile, former Olswang restructuring and insolvency partner Séamas Gray has joined Penningtons Manches to develop the team following the firm’s merger of Penningtons and Manches last October.

Previously joint head of Pinsent Mason’s London restructuring practice, Gray has particular expertise in the healthcare, real estate, retail, leisure and pensions sectors, having set up the first dedicated pension restructuring team in the City in 2010.

Significant recent mandates include the restructurings of the Akari Group, a group of 39 care homes separating from the wider Bondcare Group; Ashpol Group, a property portfolio group with £130 million professional securities exchange listed debt; and Milton Keynes NHS Hospital Foundation Trust, a £285 million turnover, 3,000 employee hospital.

Franco Bosi, head of Penningtons Manches’ business services division, said: ‘His experience in complex restructurings as well as his considerable insolvency experience will fit perfectly and assist in the continued development of our established multi-disciplinary restructuring and insolvency team.’

Elsewhere, DWF has strengthened its financial services practice with banking partners Iain Shurwood and John Fox and real estate finance partner Simon Elphick, who join from Lawrence Graham.

Shurwood, who joined in February to head up DWF’s corporate banking team in London has experience in acquisition finance, corporate lending, restructuring and workouts, acting for major high street banks, borrowers and investors, while Elphick who also joined in February acts predominantly for lenders on financing and restructuring.

Fox, who is expected to join in April, has over 27 years’ experience acting for major banks and borrowers with a real estate focus.

Also in the City, TLT makes its fourth employment partner hire in six months with former head of employment at media and commercial law firm Michael Simkins, Mark McQuillan, whose practice focuses on retail & consumer goods and financial services, having

McQuillan, who was previously a partner at Addleshaw Goddard, advises listed companies, Fortune 500 companies and smaller owner-managed businesses on the full range of employment issues, with particular expertise in sensitive and high-value litigation, restructurings, outsourcings and employment change programmes.

Stuart McBride, partner and head of TLT’s employment, pensions & incentives group said: ‘Mark is a great fit for TLT. His arrival means we have true national coverage of employment expertise and a solid base in London. We’re very clear on our strategy to build on our market leading position in the south west, across the UK. Mark’s arrival is a significant step forward to achieving that.’

Francesca.fanshawe@legalease.co.uk

Legal Business

LLP latest: Penningtons and Addleshaws both see highest-paid member drawings fall during last financial year

LLP latest: Penningtons and Addleshaws both see highest-paid member drawings fall during last financial year

Penningtons Manches is the latest top-100 UK firm to file its limited liability partnership (LLP) accounts for 2012/13, which in keeping with a host of leading City firms, reveal that its highest paid member took more than a £52,000 cut, taking home £286,642 compared with £338,759 in 2012.

The firm posted a turnover figure of £32.1m, down very slightly from £32.3m in 2012, with the firm’s profits more or less flat at £11.53m compared to £11.50m.

Long-term loans at the firm, which acquired Manches from administrators PwC in October 2013, increased from £3.7m to £7.7m.

Penningtons employed a total of 283 members of staff in 2013, up from 260 the year before, of which administrative staff grew by 14 heads and client service staff increased by nine.

Elsewhere, Addleshaw Goddard’s LLP filing has revealed that the firm’s highest-paid partner took home £583,173 compared to £592,789 the year before.

Staff headcount at the firm is down to 978 this year from 1,016 last year, with its fee-earner and support staff count down by 23 and 15 heads respectively. As a result, salary costs reduced from £48.2m to £46.9m and social security costs were also down by around £1m. However, a rise in pension costs led to an overall increase in staff costs from £54.7m to £55.2m.

Nonetheless the firm reported no change in its average of 152 partners for the financial year ending 30 April 2013.

The firm posted a dip in turnover from £167.5m to £164.4m in 2013. Operating profit at the firm was also down from £57.7m to £54.3m, while partner profits fell from £55.5m to £52m.

The firm also increased its bank loans to £17m in 2013 with a 2.6% interest rate, compared to £13m in 2012 at 3.2%.

jaishree.kalia@legalease.co.uk

Legal Business

Administrators give behind-the-scenes insight into Manches takeover by Penningtons

Administrators give behind-the-scenes insight into Manches takeover by Penningtons

Penningtons’ takeover of troubled Manches last month says almost as much about the state of the legal market as it does of the firms involved, although, Manches’ administrators say, there are clear lessons to be learned.

On 15 October, 265 Manches employees, including 46 partners officially moved to Penningtons in a pre-pack deal brokered by PwC.

Manches had been earmarked for a merger by the LB100 this summer, after its revenues dropped by 13% to £26.3m – a drop of 11 places to 93 – and its profits per equity partner slid by 43% to £134,000.

The departure of family law star and high-billing partner Helen Ward to Stewarts Law with a team of four associates and two support staff last November was a serious blow, but administrators say that behind the scenes the firm was also struggling with cash flow issues and bank debt in the face of a still unforgiving economy.

PwC’s Zelf Hussain, a joint administrator in the deal who works with middle market business in financial distress, told Legal Business in October: ‘They started looking at the cash position about two to three months ago. They were aware they needed to address this issue. They were starting to put in some changes in terms of billing on a monthly basis… they had procedures in place which actually started allowing them to get cash in from their clients.’

However, before these tightened billing processes could bite, and with the deadline to secure professional indemnity cover combined with tax bills looming, it brought matters to a head in what Hussain calls a ‘perfect storm’.

With a strong underlying book of business and clients, Manches is a ‘bargain buy’ for 164-lawyer Penningtons, which has previously secured mergers with City practices Dawsons and Wedlake Saint.

Penningtons will take some of Manches’ liabilities but will not be expected to pay them in full. The firm is also expected to look at how it can strip out costs and make the business operate more efficiently.

The newly-merged firm should have a revenue of around £60m, which will elevate it into the LB100 third quartile.

However, PwC law firm restructuring specialist Glen Babcock (pictured) pointed out that over-saturation of the legal market will continue to cause many firms serious problems. ‘All the research shows there’s too many lawyers in this country and there will be further consolidation in the market, and we’re seeing that happen. Ultimately, what we would expect is consolidation and then a reduction of lawyers over the course of the next two to three years. The business isn’t there at the level of funding required,’ he said.

In a statement, Penningtons Manches said: ‘While we cannot comment specifically on the circumstances that led up to the administration, it should be made very clear that Manches’ underlying business was and remains robust and successful. The challenging economic environment that all firms have had to deal with since 2008 has exerted different pressures on different businesses and in the case of Manches this resulted in short-to-medium-term cashflow problems.

‘Penningtons and Manches were in negotiations about merging before the issue of administration arose. The appeal to Penningtons has always been the excellent strategic fit between our respective core practice areas, sectors and clients. We can confirm that our firm is extremely well managed and financially stable. We are well known for our excellent financial stewardship and this will continue over the year ahead.’


sarah.downey@legalease.co.uk

Legal Business

It’s a wrap – Penningtons acquires Manches after PWC brokers sale of business and assets

It’s a wrap – Penningtons acquires Manches after PWC brokers sale of business and assets

In what was initially billed as merger talks but has turned out to be far more of a takeover Penningtons yesterday acquired the trading operations of Manches in a deal brokered by PriceWaterhouseCoopers as administrators.

Under the business transfer agreement, 265 Manches employees, including 46 partners will now move to Penningtons. However, in a reflection of the fact that, despite their contrasting recent profitability the firms are close in lawyer size and revenues, the combined firm will be called Penningtons Manches.

Having been this year earmarked as a firm in need of a merger, Manches turned out one of the worst performances of this year’s LB100, despite operating in the burgeoning private client sector, with revenues down 13% to £26.3m. The decline shifted the firm down 11 places to 93 – its lowest ever rank in the table.

The firm’s profit per lawyer (PPL) was this year at a low of £15,000, amounting to a 67% drop from the first LB100 in 1993, when the firm’s PPL was £44,900. Profit per equity partner (PEP) at the 139-lawyer firm also dropped to £134,000 during the last financial year, compared to £235,000 in 2011/12, a drop of 43%.

In contrast, Penningtons’ revenues increased by a marginal 1% this financial year to £32.5m – a 14% increase over five years – and its PPL is almost three times Manches at £42,000 with PEP more than double Manches at £275,000. However, those profit figures have dropped considerably over the past year, with PEP down by 9%.

The newly-merged firm should now rank ahead of private client firm Speechly Bircham, which generated £57.5m revenue this year coming in 52nd place, and enter the third quartile of the LB100.

Chief executive David Raine, who will continue to head Penningtons Manches, said: ‘This agreement fits with our strategic aims and responds to the ever-changing legal environment in which we now operate.

‘The synergy between Penningtons and Manches was evident early on in our discussions and by joining forces we will be able to offer an enhanced level of expertise to all our clients. The strong reputation and combined experience of our people will enable us to maximise our potential in our core practice areas and in the key sectors in which we operate.

‘The acquisition is the culmination of sustained growth for Penningtons over the last five years.’

Penningtons merged with City practices Dawsons and Wedlake Saint and opened offices in Cambridge and Guildford in spring last year.

sarah.downey@legalease.co.uk

Legal Business

Consolidation in the second 50 – Manches and Penningtons confirm talks

Consolidation in the second 50 – Manches and Penningtons confirm talks

From within the over-crowded space that is the lower of half of the LB100, beleaguered 139-lawyer Manches has emerged as being engaged in advanced merger talks with private client firm Penningtons to create a £60m firm with over 300 lawyers.

Manches was earmarked as a firm in need of a merger in this year’s LB100 analysis, after turning out one of the worst performances of the group – in notable contrast with other firms focussed on the burgeoning private client sector – with revenues down by 13% to £26.3m, shifting the firm down 11 places to 93, its lowest rank ever in the table.

The firm’s profit per lawyer (PPL) was this year at a low of £15,000, a 67% drop from the first LB100 in 1993, when the firm’s PPL was £44,900. Profit per equity partner (PEP) at the 47-partner firm also dropped to £134,000 during the last financial year, compared to £235,000 in 2011/12, a drop of 43%.

Factors blamed by the firm for its financial decline include the loss of star family partner Helen Ward and a team of seven family lawyers, together with a flat market for mid-size transactions and the impact of the recession, particularly on the property team, where a number of projects were put on hold or postponed.

Conversely at Penningtons, where 2012/13 revenues increased by 1% to £32.5m – a 14% increase over five years – chief executive David Raine described his firm’s performance as a ‘good year in a tough market.’

Confirming the talks Richard Smith, managing partner of Manches, said: ‘I can confirm on behalf of all the Manches offices that we are in discussions with the management team at Penningtons LLP concerning the possibility of a merger between our two practices. It has been agreed by both firms that these talks are being undertaken on a confidential basis. We are therefore not currently in a position to make any further public comment on their likely outcome.’

If the merger does go through the combined firm will remain in the bottom 50 of the LB100.

david.stevenson@legalease.co.uk

For more on the challenges facing firms in the second 50 of the Legal Business 100, click here.