The new law will allow investors to buy shares in law firms, merge with companies and sell shares on the stock exchange under the 2007 Legal Services Act. The changes will allow the investors to invest in Britain's 19 billion-pound ($39 billion) legal-services industry for the first time and follows similar changes already legal in Australia.

Funds such as Fleming Family & Partners, Phoenix Equity Partners and Lyceum Capital Partners are considering investing in UK law firms. Fleming Family, a money management firm, is in talks to buy law firm stakes of as much as 20 per cent, reports Bloomberg.

Lyceum Capital, a London-based leveraged buyout firm, may also invest in other legal services models, managing partner, Jeremy Hand, said.

The funds have begun raising money to prepare for when law firms can accept outside investments in two year, industry consultants say. Phoenix Equity, another leveraged buyout firm based in London, has similar plans, according to reports.

“Law firms are pretty attractive investments as they have stable cash flows, long track records of business operations and increasingly are much better run,” said John Llewellyn-Lloyd, executive director of Noble Group, a London-based investment bank. “You would expect them, like any professional services business, to provide a pretty good return.”

Alan Hodgart, a law firm consultant at H-4 Partners in London, said investors are expecting “fairly high returns, in excess of 15 per cent.”

Mid-sized UK firms are considering accepting investments as the credit crisis limits the amount they can borrow to open overseas offices, develop new practices or acquire competitors. The UK’s largest and most profitable law firms, the “Magic Circle,” have said they don’t want outside investors because they don’t need the money.

“With the downturn, the bank debt markets have obviously tightened up,” said Simon Johnston, senior partner at 550-lawyer firm Nabarro in London.

“For some firms it’s harder and more expensive now, so people will certainly be thinking about their options.”

Melbourne firm Slater & Gordon, became the world’s first law firm to sell shares on a stock exchange two years ago after a similar bill was passed here. The personal-injury firm raised $35 million from the listing and acquired two law firms.