Beyond the Bubble: More mid-tier firms shake up their equity structures

We’ll never forget the Elephant

London: Big changes are afoot at South London firm Anthony Gold, which turns 60 this year. The firm has moved into a new headquarters – though only a couple of minutes’ walk away from its old HQ on Tooley Street it represents a significant upgrade. It retains a link to its high street origins through premises on the Streatham High Road, but the longstanding Elephant & Castle office has been shuttered with its staff moving over to the London Bridge HQ. More London and national work and group action. Anthony Gold remains very committed to social housing, says managing partner David Marshall, but with the firm doing more national work and the social housing around the Elephant gradually being knocked down, it no longer made sense to be based there.

An equally significant change – for those at the top of the firm at least – is that Anthony Gold has transitioned to an all-equity partnership as of 1 May. Previously 12 equity partners had been augmented by around 20 fixed-share partners.

“We had always been able to attract good lawyers and had a good bonus system for the non-equity partners, but there is always a slight disconnect between those who own the business and those who don’t and it was beginning to affect us as we got bigger,” says Marshall. “We were doing so much contingent work and our WIP had gone up so much that it was becoming harder to bring people into the lockstep in a fair way. On top of that cash was going to have to go out to people on retirement.”

The equity partners engaged the accountants Price Bailey to survey the market and consider all options, from sales to aggregators to private equity investment, but “ultimately we felt our view of the business was optimistic and shared by the non-equity partners and came up with a mechanism to enable to them to come into full ownership,” says Marshall. The firm had retained an amount of profit in the past and, supported by NatWest, has worked out a way of distributing that money over a 10-year period as new partners gradually put capital in. The new structure is points-based, sitting alongside a bonus system that is now open to all the partners, not just the fixed-share ones.

There are relatively few all-equity partnerships in the top 200, but mid-tier firms are increasingly looking at different models as they face questions of how to attract and retain quality partners. Expect plenty more tweaking, at the very least, at firms of a similar size to Anthony Gold in the coming years.

Financials watch

Nottingham: Browne Jacobson is another firm that has significantly expanded its equity partnership is this year. “We had, in my view, an overly complex partnership structure with a range of different levels including a middle ground between fixed share and full equity,” said managing partner Richard Medd. While the firm hasn’t gone all-equity like Anthony Gold, a “simplification” at the start of the 2022/23 financial year has lowered the entry point for equity, and the firm now has 46 equity partners – up from just 23 the previous year and 18 the year before. This move has lowered the average profit per equity partner to £351,500.

As for the rest of the firm’s financials, Browne Jacobson is pretty happy, with growth of nearly 12 per cent, with revenue passing £100m for the first time to reach £105m. Medd said that good growth came across the board but was particularly notable in the education and corporate practice, and well as work for the government.

The consolidation game

West Midlands: Talbots is on the move. You might not of heard of this Birmingham and Black Country firm but it has made two acquisitions this year and turnover, which stood at £13.5m in 2019/20, is set to hit £26m for 2022/23. It’s also one of the UK’s few employee-owned firms, and is now home to more than 400 people.

Talbots launched in Coventry through a merger with Sarginsons Law in May, and has now purchased Wright Solicitors, a 104-year-old Dudley firm that was turning over around £1m. Management is making all sorts of noises about further growth – keep an eye on them.

Floating bubbles: the latest moves in the mid-tier

Bubble and squeak: tales from outside the Square Mile

Escape to the country

Bury St Edmunds: Finding an office that ticks all the boxes in a city is hard enough, but the property hunt is even more taxing if you’re based in a historic market town. There are fewer high-spec options, but rent is still expensive. Plus, management still needs to find a site with parking options as public transport is less reliable.

Ashtons Legal had this experience when it was looking for its new home in Bury St Edmunds a few years ago. The firm had two offices in Bury and one in Thetford – the result of various mergers over the years. Management wanted to bring everyone together under one roof, but finding a solution proved difficult – until the team learned of a development plan proposed by one of its clients. A farmer based on the outskirts of town wanted to renovate some old barns and metal sheds into a business park and Ashtons Legal immediately snapped up two of the units.

Today, the office houses around 130 people in a modern barn and shed conversion that overlooks the hazy plains of Suffolk. There is now a popular on-site café – also enjoyed by the Go Ape! staff next door – and 150 parking spaces to choose from. Staff were initially worried that they would lose a lot of walk-in trade by relocating to the countryside and that clients wouldn’t be able to find the office, but the current managing partner James Tarling says that “none of this came to pass”. In fact, it’s an easier drive than navigating the city centre, and Ashtons is trying to target better quality clientele than walk-ins these days anyway.

Securing quirky real estate has become a trend for this regional firm. It has been upgrading all of its offices (Cambridge being the first, then Bury and Norwich) and Ipswich was the last to complete. Indeed, last month the team moved to Portman House – a triangular-shaped building originally constructed 100 years ago as a bonded warehouse for Churchman’s, the cigar makers that were major historical employers in Ipswich.