Management at Dewey & LeBoeuf has reacted defensively to widespread partner exits in 2012, contending the firm’s position is ‘strong’ and that it will ‘meet its financial targets for the year’.
Dewey has already seen a mass exodus of partners from its business since the start of the year, with almost 70 partners having departed – one of the highest number of partner departures in such a short timeframe.
The firm’s five-member management team – which includes new London-based executive partner Stephen Horvath and was pulled together with other practice heads in March – has devised a number of measures to discourage partners from leaving the firm. These include deferring full partner compensation for as long as ten years as opposed to a UK-style partner lock-in.
A sizeable chunk of the firm’s 33-partner London office is also expected to leave following the departure of up to ten partners since January. Insurance partners Nicholas Bugler and Joseph Ferraro were part of a 12-partner international team which joined Willkie Farr & Gallagher last month. Fellow insurance partner Prakash Paran is set to join DLA Piper, while litigation partner Nicholas Rock will move to Reed Smith.
Dewey’s management declined to comment beyond a prepared statement, part of which read: ‘Although the new direction that the firm is taking was approved and is supported by the overwhelming majority of the firm’s partners, some didn’t like the change.
‘We envisaged there would be a number of firms collapsing in the wake of the financial crisis.’
Giles Murphy, Smith & Williamson
‘The number who have left to date, including firm-initiated reductions, is consistent with the reduced headcount contemplated by our plan, which calls for limited further attrition over the next several months.’
However, one partner at a rival practice said: ‘This is a bit of a run on the firm. It feels as though the partners have lost faith. If people keep leaving like this, Dewey & LeBoeuf will have to cease trading.’
‘The more people leaving, the higher the impact on the business,’ said Giles Murphy, national head of the assurance and business services division at Smith & Williamson. He added that when partners leave, income falls but costs remain as partners will still be taking cash out of the business in the short term.
But Dewey’s management is adamant that the firm is in good financial health, even though a $125m bond it issued in 2010 to help pay for the firm’s expansion reaches maturity next year and it is also negotiating a $100m revolving credit facility with its banks, which include Citi.
The firm is thought to still be dealing with the hangover from the 2007 merger between Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae, and this, coupled with taking on big name lateral hires on guaranteed packages, has brought the financial stability of the firm into question.
‘What we envisaged was that there would be a number of firms collapsing in the wake of the financial crisis,’ said Murphy.
But in the statement Dewey said that ‘trailing 12-month revenues and earnings were among the firm’s strongest’ and that it expected ‘the current year will be a very profitable one’.