HE CAN’T say which ones, but the Legal Services Commissioner Steve Mark said “a couple” of the major firms are considering listing on the ASX.
His office has been in discussion with firms, both mid-size and large, who are considering listing.
“The firms that are considering listing who I am presently talking to are big firms. They tend to be ones where they actually have a brand — a very established brand in the marketplace — where they are known and they can trade on that brand,” Mark said.
Only three firms have actually listed all, or part of, their practice since amendments to the Legal Profession Act were made in 2001. March 2004 saw Noyce Legal, a Sydney-based firm list its banking and finance division on the ASX after incorporating the division into National Lending Services Ltd. All its shares were sold to consumer finance website Infochoice.
Three years later, in May this year, Slater & Gordon became the first law firm in the world to list its whole firm on a stock exchange. The listing was a great success — shares were issued at $1 and closed at $1.40 on the first day of trading. Since then, shares have hovered around $1.80.
Integrated Legal Holdings (ILH) followed suit on 17 August this year, but unlike Slater & Gordon its initial listing was unspectacular — the 50 cent shares fell to 38 cents on the first day which also happened to be a day after the biggest loss suffered by the ASX in seven years.
Mark suspects few firms will adopt the same model as ILH, where their business plan involves acquiring and operating a number of smaller firms under one business structure, and for which goodwill accounts for a large portion of the firms assets.
“The value proposition of investing in such a firm (as ILH) must be questionable so I don’t know how many of those there will be. The question of goodwill in a law firm is very hazy — we aren’t sure how much there is, if there is any at all, and there are very different philosophies in thinking about that. Is the goodwill based on the firm’s name, the individual partners or the client base that the firm presently has? All of that can change fairly rapidly.
“So you have to really say that firms that have a brand tend to be more likely to go to the marketplace to say invest in us — even if they are going to private equity or whatever. There appears to be a better value proposition with firms that are able to be branded,” Mark said.
The UK is soon to follow Australia’s lead and will allow outside/foreign investment in law firms. While the US has so far refused to go down this path, Mark said the profession in the US is worried about the implications of UK firms listing.
“In the UK the legislation that is about to come in that will allow outside investment in law firms. So private equity could come in and invest in Clifford Chance and take it over and they might then go to America and buy some New York firms. So you could have major international conglomerates of law firms and America is quite worried about that,” Mark said.