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Non-equity Partners Asked to Pony Up

The National Law Journal reports today that DLA Piper may be asking non-equity partners to make a capital contribution to the firm. In return says Frank Burch, DLA Joint Chief Executive Officer, they will get a limited stake in the firm's profits.

Traditionally, non-equity partners are paid a salary and don't get to share in the profits. This move, which is yet another sign that things are changing quickly in the legal profession, is an effort to reduce the firm's reliance on bank financing. Keeping debt low through larger capital contributions is nothing new. There are a number of AmLaw firms that already manage themselves with this philosophy. What is new here is trying to spread the burden to a lower tier of partner. While DLA says the move is preemptive (i.e. they still enjoy relatively favorable interest terms in the credit markets) I suspect other firms will follow if credit remains tight for the next year.

Full post as published by Counsel to Counsel on November 20, 2008 (boomark / email).