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    November 24th, 2008

    ♬ But its gonna take money
    A whole lotta spending money
    Its gonna take plenty of money
    To do it right…♬

    Words and Music by Rudy Clark, recorded by George Harrison.

    The FP Legal Post on Nov.21, 2008 in an article by Julius Melnitzer entitled: “DLA Piper seeks millions in capital from partners” reported that the largest law firm in the USA has asked 275 income partners to contribute up to $150,000 US each (which could top out at $41, 250,000) to bolster the firm’s finances.

    The ABA Journal in a similar article on Nov. 19, 2008 by Martha Neil entitled: “DLA Piper asks 275 Non-Equity Partner to Ante Up, Goes to 1-Tier Structure” quoted Crain’s Chicago Business in stating:

    “By raising funds from a new crop of equity partners and compensating them with a share of the profits, DLA would eliminate income partner salaries and trim payroll costs and borrowing needs,” the business publication explains. It would also likely put more pressure on the new equity partners to bring in business, and put associates into an “up or out” model that requires them to generate clients or find another job as they become seasoned attorneys, legal recruiters say.”

    It seems that by eliminating non-equity partners, the firm ensures that all partners ‘have some skin in the game’.  Furthermore, it ensures that the firm does not have to go to banks looking for debt to finance their business.  Such a move also ensures that all partners become strongly focused on client and business development.

    I rather suspect that this will not be an isolated incident as firms seek to reduce their debt/equity ratio.  So long as this infusion of capital is subsequently used to finance operating activities that lead to greater income generation, the entire firm should be better off.  However, as we all know, its gonna take a whole lotta spending money to do it right…

    This entry was posted on Monday, November 24th, 2008 at 12:03 am and is filed under Budgeting, Firm Governance, Issues facing Law Firms, Law Firm Strategy, Trends. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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