Flotation appeal broadens as Clementi possibilities dawn

It is Friday afternoon at The Lawyer and Irwin Mitchell is kindly offering some direct experience of what the world may be like after the introduction of the Legal Services Act: “Thank you for dialling zero, call centre assistance. Press ‘one’ to speak with the next available adviser.”

Several minutes later and still on hold, The Lawyer rings off.

Today (18 June), as revealed by The Lawyer in last week’s (11 June) lead story, Russell Jones & Walker (RJW) is launching a £5m television, radio and newspaper advertising campaign aimed at repositioning itself for the post-Clementi era.

Although the Legal Services Bill is still making its way through Parliament, RJW’s campaign will have the effect of making the new post-Clementi world edge that bit closer. Hopefully the experience of clients at all those ranks of new super-commercial outfits will be better than The Lawyer’s with Irwin Mitchell.

One of Clementi’s key proposals is the allowance of external equity into law firms. Until now the indications have been that it would be primarily volume firms such as RJW that will be the most likely to seek a float or some other form of external investment.

So far the only firm in the world to list on a stock exchange is the volume personal injury Australian outfit Slater & Gordon, which floated on the Australian Stock Exchange last month.

But the number and range of firms that are checking out the possibilities of flotation is growing. Taylor Wessing was the first City firm to tell The Lawyer that it was seeking advice on external funding. It is a reflection of a growing sense of anticipation that the changes heralded by the Legal Services Bill really will be transformational. It is also confirmation that the changes will not just affect volume firms.

Paul Ellaby, head of corporate finance at the Manchester office of Hill Dickinson, admits that a number of small firms will float to raise funds to acquire others so as to gain critical mass and address the threat posed by the likes of Tesco, the RAC and the Co-op, in the way that Slater & Gordon has already done.

But he also says that a mid-tier firm may go public to generate funds to acquire a rival or move up the size rankings.

“It would be a brave firm that jumps first, but if others see that it’s worked, they may be forced to follow suit,” says Ellaby.

A float or the injection of external capital could be potentially transformational for a segment of the legal market. And those firms struggling to differentiate themselves in the mid-market may look to a float to fund significant overseas coverage and boost their profiles.

Firms are already becoming far more corporate in their outlook, a fact illustrated by the move to LLP status, the adoption of management boards and the appointment of finance directors. This process will only continue as the Clementi reforms allow non-lawyers, such as finance directors, HR heads and IT specialists, to become part-owners of the business.

Over the coming months and years the importance of a firm’s brand will also grow exponentially, an issue highlighted last week by The Lawyer’s ‘Branding for Law Firms’ conference in London.

A host of branding experts, including Clifford Chance‘s global head of business development Charles Doyle and Robin Shuker of Brands in Action, outlined the increasing importance of a strong and consistent message.

It is a lesson RJW already appears to have learnt. Others are going to have to catch up, and quickly.