Partners asked for between €6m and €7m to cut debt.
The European arm of Dentons has made a capital call on partners to raise an additional €6m to €7m in a move to cut bank debt, described by European chief executive Tomasz Dabrowski as ‘good financial prudence’.
European partners – excluding the UK which operates as a separate legal entity – have each been asked to contribute up to €100,000 extra over a two-year period.
The capital raising will affect partners across continental Europe (the legacy Salans practice), with partners set to contribute more cash over a staggered period beginning in 2017 and finishing in 2018. Partners in Dentons’ 22 offices in continental Europe will invest the extra money into the firm over the next two years.
Partners in the region will go from a €1,000 capital contribution for every equity point they hold in the business – an unusually low number by law firm standards – to €1,275 per point. The maximum the firm’s top partners in the region will be required to add is €100,000. The partnership voted in favour of the move in August, far surpassing the 75% approval threshold required to make the change.
The firm has historically relied heavily on a revolving credit facility to manage cashflow, and the extra cash in the business will enable Dentons to cut its bank debt and reduce interest. According to the European arm’s most recently available accounts at Companies House, the firm paid €606,000 in interest on bank loans and overdrafts in 2014. The firm is currently renegotiating its lending facility with Barclays to obtain more favourable interest rates.
Dabrowski and Richard Singer, European chief operating officer, led the move in a bid to bring the European arm of Dentons in line with capital contributions across the rest of the firm. Singer, who joined Dentons just over two years ago from White & Case, where he was EMEA director of strategic projects, says the European arm of Dentons has historically required up to 50% lower capital contributions than some peers and 10% lower than other vereins under the Dentons umbrella.
The capital raise is designed to plug that gap, while easing issues the firm has found in moving capital around different parts of its business. Turkey and Kazakhstan are two problematic jurisdictions, as they operate as separate subsidiaries due to local regulations and tax rules.
The move is the biggest structural change in Dentons’ European business structure since partners voted to remove a 190-point cap on remuneration at the end of 2014. The firm has expanded rapidly in continental Europe over the past 12 months, with Dentons launching in Italy with offices in Milan and Rome, while it opened in Luxembourg with the addition of local firm OPF Partners in January.
The capital call affects no other regions.
tom.moore@legalease.co.uk, matthew.field@legalease.co.uk