The politics of law firms owning subsidiary businesses have always
been complex, as partnerships are far from ideal structures within which to
hold valuable capital assets. It came as
no great surprise, therefore, to see Walkers selling its trust company business
to Intertrust.
What has come as something of a bigger surprise is the fall-out
for the remaining firm. 7 partners and 3
associates from Walkers’ legal practice have this week jumped ship and joined
fierce rival, Maples and Calder.
Walkers partners Julian Ashworth, Heidi De Vries, Sheryl Dean,
David Marshall, Philip Millward and Gwyneth Rees, and senior associates Philip
Dickinson, Patrick Head and Lucy Nicklas will all be joining Maples' Cayman
Islands office as soon as their existing contracts allow them to do so and the
necessary immigration approvals have been obtained. Partner Tim Clipstone will
be joining the firm's BVI office. In a relatively small jurisdiction, a move of
9 lawyers in one go will have a significant impact, particularly given that
they are all funds lawyers. It will
leave the Walkers fund team very badly depleted.
Reading between the lines of the carefully worded statements put
out by both firms involved, it seems that the partners who have left are all
salaried rather than equity partners. As
such, they are unlikely to have benefited materially, if at all, from the sale
proceeds and will doubtless be unhappy that any expectation of income in the
future from trust company business will have disappeared (at least until any
restrictive covenants have expired and the firm is free to set up a new
fiduciary business). It does not take a
rocket scientist to work out that there will always be winners and losers when
a partnership asset is sold, and the most likely ones to feel aggrieved are
those who failed to make it to equity partnership in time. However, other firms have managed the
transition in the past without such significant protest and Walkers might have
expected to be able to weather any period of unhappiness without such a major
loss of manpower. Walkers must now be
reflecting on why their experience has been so different.
The whole situation does demonstrate the need for very careful
handling of these situations. Walkers is
not the first offshore law firm to sell its fiduciary business and nor will it
be the last. There are many reasons why
law firms do tend to arrive at a point where strategically it makes sense to
sell a subsidiary business and it is a tricky balancing act to achieve this
without destabilising the parent law firm.
In some cases this may involve sharing sale proceeds outside of the
equity partner group, so that there is not such a stark contrast between the
winners and losers. In others it may involve a restructuring of the remaining
law partnership, as some firms take the view that it is easier to relax the
rules on equity participation or other forms of profit sharing if that does not entail giving away an interest in a large
capital asset. And in other cases it is
simply a question of excellent communication to explain why, strategically, a
sale is the right thing to do, and why the future still looks exciting for
those working in the legal practice. It
can be achieved, and has on many occasions.
But it is far from easy, as Walkers’ experience this week has so ably
demonstrated.
No comments:
Post a Comment