By Jennifer Smith
Following the example set in 2008 by their U.S. counterparts at DLA Piper, partners at DLA Piper International plan to switch to an all-equity partnership in on May 1, according to the Legal Week and The Lawyer.
As salaried partners in the global firm’s offices in the U.K., Europe, Asia and the Middle East purchase stakes in the partnership, they will trade in the security of a fixed paycheck for the benefits—and risks—of profit-sharing.
A DLA Piper spokeswoman confirmed the move and start date.
Here’s what Nigel Knowles, DLA’s joint chief, told British legal publications on Wednesday:
We are pleased to announce that the firm’s partners have approved the one class of partner proposal. This change to a single class of partnership will come into effect on 1 May 2012 and will further align the interests of all our partners as we move to the next stage of the firm’s development.
The move offers the firm an opportunity to raise capital without turning to banks or other lenders, and to pare back some payroll costs. But some warn that the shift, depending on how it was structured, could lower DLA Piper’s profits per equity partner, the benchmark often equated to the “share price” for law firms.
Currently partners at DLA Piper International fall into three categories: equity partners, and two different bands of so-called “fixed share” partners. Only about one-third of its 700 partners have equity status, according to the firm.
Legal Week had this breakdown of the financials (which the DLA spokeswoman did not address):
It will bring the transatlantic firm’s international partnership in line with partners in the US, who moved to an all equity structure in 2008 when 275 partners contributed up to $ 150,000 (£94,700) each to join the equity.
Assuming a minimum contribution of £50,000 from salaried and fixed share partners in the international partnership, DLA stands to generate around £20m from the move…
It has not yet been decided how much partners will have to pay in, though the figure is expected to be at least £50,000, with the firm guaranteeing salaries for the first three years to ensure that junior partners do not see a dip in their take home pay.