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Tuesday, 29 June 2010

Law firms feeling the heat?

Halliwells LLP faces administration: Hill Dickinson poised to take over its assets from BDO's Dermot Power as administrator. It is likely that there will be office closures and significant job losses.

Manchester based law firm Halliwells fails and faces administration owing RBS circa £20m.

I spoke at a R3 Conference series last autumn which examined Partnership insolvency. KSA was one of the first turnaround firms to propose a CVA for a Limited Liability Partnership law firm based in the south east.

That case was interesting for many of the same reasons as above: high secured debt to Barclays in this instance, property problems with too many expensive offices, too many people and falling sales.

See a case study here for a CVA for a LLP firm of solicitors

1 comment :

  1. On a personal level, we are sad for the people affected by this at Halliwells. It was a well established Manchester firm and we have worked closely with them over the years.

    On a structural level, Halliwells’ demise throws up some interesting partnership issues. Firstly, it shows that the recession can affect the legal market as much as any other. It's too early to know exactly what happened at Halliwells, but it seems they took on too many costs without sufficient income to cover them. In any market over-expansion at the wrong stage of the cycle can be catastrophic. Partners in firms need to ensure that their business model is sound and that their drawings do not exceed their earnings. Some of the vitriolic comments posted on blogs following the announcement, coupled with some of the well publicised departures from Halliwells, may also point to issues surrounding the culture and values of the firm.

    Hill Dickinson and BLG are rumoured to be interested in acquiring Halliwells' assets. The Spinningfields lease may be regarded as more of a liability than an asset. The TUPE costs of transferring staff, especially when corporate departments are not fully occupied, may also not appeal. That leaves Work in Progress, although Halliwells' clients may not be rushing to pay any outstanding bills.

    The partners (or members as we should properly call them) will be pleased Halliwells is an LLP although we don't know whether RBS took any personal guarantees from members when they refinanced the business.

    This is a sad story for Halliwells, the people who work there and Manchester’s legal sector, but it seems that Halliwells’ problems relate more to business strategy and management rather than anything to do with the legal sector. More will no doubt come to light in the next few months.

    Mark Briegal
    Partner and Partnership Law Expert


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