LONDON FIRMShave been watching Australian firms closely as they consider whether or not to seek a float or an injection of external capital once the Legal Services Bill becomes law in the UK.
Last week, UK firm Lovells weighed up eventual stock market listings for London firms. The firm’s senior partner John Young said: “I’m very much in favour of there being an increased range of funding possibilities for law firms available, but it’s a big leap from there to say we might look at doing it ourselves.”
One of the country’s largest regional law firms also considered opportunities for listing part of its business, as Australia’s own Slater & Gordon made legal history and became a publicly traded company.
The Newcastle firm, Dickinson Dees, prepared to spin-off what it calls its volume banking advisory business in preparation for the new Legal Services Bill, which is expected to be law by the start of next year.
When Slater & Gordon listed, it opened at a premium of $1.32. The initial signs were very encouraging for Australia’s first listed law firm, with a share price 32 per cent above the initial public offer. A total of 35 million shares were initially offered at $1.00 before the offer closed on 5 May, ahead of the 21 May listing on ASX.
According to The Times newspaper, the flotation of Slater & Gordon is being seen by UK firms as a blueprint for what may happen to UK law firms once the Legal Services Bill becomes law. The new rules will allow firms to take on external investors for the first time. This includes listing on the stock market.
The UK’s The Lawyer magazine reported this week that while last year barely a single firm in the top 100 said it was in favour of floating, according to its own research, the proportion of firms that would now consider a float has now increased to 30 per cent.
Lovells’ argument that while it is a good thing to have the opportunity, that doesn’t mean the firm wants to do it, may become the predominant one for many firms. But at this point all discussions are purely hypothetical, and most are talking about the ability to do it, rather than the likelihood that they will.
Another firm in favour, according to The Lawyer, is LG. Senior partner Bill Richards said the firm has had approaches from “fewer than 10, but a lot more than one”, organisations.
“We’re interested to see if raising external capital would give us the opportunity to improve our business in a way that our current model doesn’t give us,” he said. He added that the opportunity to incentivise people, staff as well as lawyers, is interesting.
Floating affords larger firms access to outside capital that could be used to buy out underperforming partners. This leaves more profits in the hands of better-performing partners and new investors.
Jeremy Black, director in Deloitte’s professional practices group, told The Times that floatations, and raising money from private equity, cuts both ways. “Funds go out of the business so the attraction for working to become an equity partner is not as large, but junior lawyers are paid so well they may not feel they need to reach that level. Giving them bonuses or shares may be a way of recruiting and retaining juniors,” he said.
See our supplement “The London Report” this week.