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Sharp rise in Top 100 UK law firms who would consider listing to raise funds

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Figures show

There has been a sharp rise in the number of Top 100 UK law firms who would consider listing on the stock market in order to raise funds.

The results from Thomson Reuters’ 10th annual research among Finance Directors (FDs) of the UK’s Top 100 law firms show that there has been a rise of two-thirds in the number of FDs who would consider listing on the stock market to 20%, up from 12% the previous year. This figure has been increasing year-on-year, up from just 4% in 2013/14 (see graph).

The growing interest in listing on the stock market follows a broader trend of law firms seeking external forms of finance. The research shows that the percentage of FDs who would consider private equity investment as a source of funding tripled last year to 24%, up from 8% in 2015/16.

Law firm Rosenblatt listed on the London Stock Exchange in May 2018, which was the largest UK law firm Initial Public Offering (IPO) to date. Other law firms that have listed on the London Stock Exchange include:

  • Gordon Dadds in 2017
  • Keystone Law in 2017
  • Gateley in 2015

IPOs have become an increasingly attractive option for law firms as they can:

  • Allow the founding partners to extract cash from the firm or to put a value on their equity stakes 
  • Give an injection of capital or paper currency to use for expansion plans, such as the acquisition of rival firms, teams and fee-earners – this allows them to build economies of scale through increasing the size of operations
  • Enable firms to open new service lines; for example, the funding of client litigation
  • Provide extra funds which can be used to upgrade IT systems and invest in new technologies

 

Please see below some expert commentary from Thomson Reuters Legal business:

Samantha Steer, Director Large Law Strategy, at Thomson Reuters, says: “Listing on the stock market is increasingly on the radar for UK law firms as they look for external financing.”

“We may see more firms turn to capital markets in order to obtain the funding needed to expand and break away from the competition.”

“Bringing in outside capital can give law firms the opportunity to achieve growth without requiring partners to use more debt.”

“Big international law firms that have already achieved significant economies of scale and a broad service offering may be less likely to list as the partnership model still works for them.”

“Despite recent successes in law firms IPOs, we are yet to see how a serious share price dip affects a listed law firm – a dip may cause others to think twice.”




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