National giant clears path for City assault as tougher cash targets erase firm’s £11m debt burden
Addleshaw Goddard has paid off more than £10m in debt in a year as the national giant clears its decks for a post-merger assault on the City legal market.
Managing partner Mark Jones said that the firm, which this time last year was operating with an overdraft of around £11m, was now working in the black after a concerted push to sort out billing and cash collection.
Addleshaws partners have highlighted a shift in policy two years ago which resulted in withheld drawings for partners who failed to get bills paid on time.
“We are now operating in what accountants call a net nil overdraft,” Jones told Legal Week. “We have done it by improving our cash flow. Partner capital has not increased, the current account has not been changed, and drawings have not been reduced.”
Jones’ comments rebut widespread claims from rivals last year that Addle-shaws’ debt was spiralling out of control.
The majority of business law firms operate in overdraft, with banks now happy to allow firms an overdraft limit of up to half of the value of their work in progress.
The unusual move will also increase Addleshaws’ investing power as the firm moves to capitalise on the high-profile merger in May 2003 between Addleshaw Booth & Co and Theodore Goddard.
Commenting on Addleshaws’ stance one law firm adviser said: “It is the bluechip law firms that tend not to have an overdraft. It tends to be a sign of a well-managed firm.”
Improved billing is backed up by an increase in profits for the firm, with profits per equity partner increasing 21% from £266,000 last year to £321,000.
Jones added that minds had been concentrated by Addleshaws’ plans to move to a flagship City office in two years. The move, which will coincide with the expiry of one of its current leases in 2006, is budgeted for £10m in relocation and development costs.