DLA Piper, SJ Berwin and Wragge & Co are due to close an unheralded £40m deal, which could have far-reaching repercussions for the legal industry.
DLA Piper is advising property agency GVA Grimley on the sale of a minority stake of £40m to Wragges client Lloyds TSB Development Capital. SJ Berwin is advising Barclays and Royal Bank of Scotland on the financing. Sounds pretty run-of-the-mill?But pay attention, the plot thickens. Grimley is an LLP that will convert to a limited company and it plans to splash its newly found cash on acquisitions.
Geddit? With the Legal Services Act in the pipeline, as SJ Berwin partner Stuart Brinkworth declares: “This could end up being a blueprint for the legal sector.”
Grimley has 71 equity partners and a turnover of £130m. Transpose that to the legal market and the nearest equivalent is Hammonds, which last year had a turnover of £127.6m and 74 equity partners.
Next in the UK 200 is Irwin Mitchell, which has long been the bookies’ favourite for a post-Legal Services Act shake-up. Indeed, those firms with volume businesses have been the first to speak out about their ambitions. As seen on the front page, Dickinson Dees is the latest to be targeting this market, despite its local difficulty with Northern Rock-related redundancies.
But to view this purely as an opportunity for firms such as these is misleading. Volume businesses tend to be process-driven rather than people-driven. As with the majority of law firms in the UK 200, Grimley is a people business.
Grimley plans to open up its 71-strong equity partnership to its 165 non-equity partners and a number of other senior employees, who will all become shareholders.
This is about incentivising and retaining staff. As equity partnerships have shrunk, this has been a major problem for law firms, and herein lies a solution.
And so to the eternal question: which firm is going to be first to float?If you apply the Grimley model (and nobody is likely to write huge cheques early on), a £20m or £30m injection could make a big difference to ambitious firms looking to expand by acquisition such as Halliwells or Olswang. I’m sure Lloyds TSB will happily take their calls.
Banking Law
Is it really wise to sell stakes in large law firms to banks? There must be scope for a conflict of interest here. If Lloyds TSB owned 40% of a firm, would that firm then seriously take on Lloyds TSB at all or to the best of its ability. Would not law firms become the toys of the banks and used in their arsenal even more now as it will surely be cheaper…..