Newton: Government should embrace employee ownership
The latest law firm to embrace employee ownership – also one of the largest – did so after turning down private equity offers worth “millions of pounds”, its chief executive has revealed.
Carl Newton of Myerson Solicitors also predicted that the number of employee-owned law firms could more than double to over 50 in the next two years.
Myerson, which has 150 staff, is the first law firm in Manchester to be 100% employee-owned and one of the biggest to become an employee ownership trust (EOT), alongside Yorkshire firm Ison Harrison, West Midlands firm Talbots Law and Hudgell Solicitors in Hull.
Mr Newton said he backed the Employee Ownership Association’s call for Chancellor Rachel Reeves to increase the maximum size for tax-free bonus payments to staff working for employee ownership trusts (EOTs) from £3,600 to £4,400.
He said Myerson was planning to pay its staff “equal or above” the current maximum for bonus payments when its financial year ended on 31 August next year.
“All the evidence suggests that EOTs grow faster and retain staff longer. If the government has a growth agenda it should be embracing employee ownership.
“If you generate more profit, you pay more corporation tax. EOTs are an engine for growth in the economy.”
He said the firm was currently advising two other law firms outside the city on becoming employee-owned and had been approached this week by others interested in it. With around 20 firms now employee owned, he saw plenty more following suit in the next two years.
Mr Newton said Myerson had grown its revenue organically, without making any acquisitions, by an average of 15% per annum over the last decade. Revenue for the last financial year was £17.5m.
“We want to keep growing in the same way. We’re not planning on changing our model.”
To become an EOT, Myerson switched from an LLP to a limited company and applied to the Solicitors Regulation Authority for an alternative business structure license, effective from 1 September.
The 24 partners sold their shares in the limited company to the EOT last week. Mr Newton said they would be repaid over the next five to eight years, but they would be “flexible” about it, since it depended on the firm’s profits.
A new board of trustees has been created, tasked with ensuring the organisation is managed in the best interests of all its employees, while the existing management board, led by Mr Newton, would continue to run the firm.
He said that, against a background of law firm mergers and acquisitions, Myerson had received “lots of offers from people offering millions of pounds”.
He went on: “We have no interest whatsoever in selling out to private equity. It would change the culture completely. We just couldn’t do it. It would lead to loss of our independence.”
Mr Newton said offers to buy the firm, not just from private equity but from large regional law firms wanting to establish a base in Manchester, had “really grown in momentum” since the end of the pandemic.
However, he did not believe that private equity ownership would “work in the long-term” because it was “not in the interest of clients or the profession”.
Mr Newton said that, given that Manchester was the country’s second legal centre after London, he was surprised that none of the city’s law firms had already become 100% employee-owned.
We will be discussing employee ownership at next week’s PI Futures conference.
Good luck to them. Such debates would have been impossible when I started my articles in the 1960s!