Profit distributions mean that law firms don’t often have huge capital reserves on their balance sheets. If you are a partner during a boom period, it’s unlikely you’d plan on leaving a nice big inheritance for your successors when you leave.

Equally, once that money is out, managing partners in firms burning cash during a financial crisis are going to have a hard time convincing partners to stick it back in. Particularly if the brand is anything less than rock solid or there are tempting job offers from other firms.

The downturn took a serious toll on law firm balance sheets through 2009. Cash-calls to partners were made right up and down the legal spectrum (with varying degrees of success – they may have contributed partner exits at one or two firms) and partner drawings were frozen at many firms in an attempt to keep red ink off the books.

However, not all firms managed to acheive that goal and some were left swimming in pools of the stuff after tapping the banks for cash.

According to Grant Thornton’s figures, the firms with the most debt were:

Clifford Chance £96.8m
DLA Piper £87.9m
Herbert Smith £75m
Halliwells £27.1m
Bird & Bird £23.7m
Berwin Leighton Paisner £23.7m
Eversheds £23.3m

As things improve, those large debt piles could act as a deadweight that hampers growth. Firms that managed to stay firmly in the black on the other hand included:

Linklaters
Allen & Overy
Macfarlanes
Burges Salmon
Dundas & Wilson

Source: Grant Thornton via The Times