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Scotland's largest independent law firm Maclay Murray & Spens has taken equity in lieu of fees for the first time
The move comes at a time when most firms have given up on an idea that began to come into vogue during the dotcom boom, before the value of equity in dotcoms came crashing down. Maclays has taken a stake in biotechnology start-up Glycologic in return for advising the company on its £250,000 first round funding. Glycologic was established by Glasgow Caledonian University, with the first round funding provided by a mixture of private investors. No private equity houses were involved in the deal.
"We're not playing a management role in the company, as this could lead to potential conflicts" Fiona Nicolson, Maclays
"Taking equity in the business is a first for us, following a trend established in the United States," said head of Maclays' intellectual property and IT department Fiona Nicolson. In the US, the enthusiasm for taking equity in lieu of fees began to wane in the autumn of 2000. In October 2000, Jones Day Reavis & Pogue said that its new Silicon Valley office would not take shares from start-up clients (The Lawyer, 16 October 2000). Many City firms rejected the idea of equity arrangements around the same time, but the concept is still proving popular in Scotland. Scottish firm Dundas & Wilson took equity in lieu of fees for the first time in July 2001 (The Lawyer, 2 July 2001). The Maclays partnership voted to take equity in lieu of fees last year, and Glycologic is the first client to have taken advantage of the new system. But according to Nicolson, the firm's approach is different to that taken by those firms champing at the bit during the dotcom rush. "We're not planning to get into the situation where we take full equity in lieu of fees for lots of clients," stated Nicholson. "We're looking at individual situations. We're only taking a small percentage of the shares and we've agreed not to vote on the shares. And we're not playing a management role in the company, as this could lead to potential conflicts." Nicolson said that the firm only took equity in lieu of 25 per cent of Glycologic's legal fees. She added that the firm is considering a few more equity deals in the coming months.