Merger costs plunge major firm into chart-topping debt

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A recent study of firm debt levels has revealed one of the consequences of merging, with a top-tier firm sitting uncomfortably on top of a list of net firm debt.    

Data compiled by British publication The Lawyer ranking UK firms according to their levels of debt has revealed that the Australian and British firm Herbert Smith Freehills came out on top of the  list.
It was revealed that the firm reported a net debt of £124.9 million (A$222m) in its global LLP accounts, more than any other firm that filed accounts in the UK market for the 2012/13 period.

The firm’s closing net debt figure as of 30 April last year of £124.984 million represents 26.6% of HSF’s seven-month turnover of £469.4 million.

When approached for a response, a spokesperson for Herbert Smith Freehills said that the main reason was obvious – in doubling a firm’s size through merging, debt levels are also increased, Australasian Lawyer was told.

The firm also re-iterated its statement from joint CEO David Willis.

"Our debt levels are in line with the operations of a firm which following our October 2012 merger is nearly twice the size of legacy Herbert Smith and in a period of significant investment including a range of integration projects, and expansion focused on our new offices in New York, Seoul, Frankfurt and Berlin,” Willis said.

“They are structured to meet our requirements over a number of years and are consistent with what we would expect at this point in our trading and investment cycle," Willis added. 

The report’s examination of total debt across 153 UK firms also showed that overall firm debt was up, with a 2% increase in net debt from £805 million in 2012, to £820 million in 2013.  

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