Government plans fall on stony ground as partners claim to value culture over access to new capital

There is little appetite among leading City firms to go public, despite Lord Falconer’s proposals last week that pave the way for law firms to become corporate entities – a move that would, in theory, allow them to launch initial public offerings (IPO).
A survey by The Lawyer of the City’s top firms found that only one, DLA, said it would even consider issuing shares.
Andrew Darwin, head of DLA’s transactions division, said that an IPO would be attractive as a way of raising capital. He said that it would also allow stock options to be offered to staff and would raise a firm’s profile. “Listed companies generally have an aura of solidity, durabil
ity and financial stability, the kind of companies large corporates like to deal with. But you wouldn’t want to do it for its own sake,” he said.
Darwin was responding to the Government’s plans for the most radical reform of the legal profession in recent history. The plans, outlined in the consultation paper ‘In the Public Interest’, follow on from 2001’s Office of Fair Trading report ‘Competition in the Professions’ which challenged restrictive practices in the legal market.
An independent review by David Clementi, Prudential chairman and former deputy governor of the Bank of England, is scheduled to report on this by the end of next year.
Several leading firms immediately discounted an IPO. Herbert Smith partner Iain Rothnie said: “The simple answer to ‘would we float?’ is ‘no’. The primary reason would be the change in culture.”
KLegal managing partner Nick Holt said that the current model of financing law firms via retained capital, loans, and cash collected from clients, was ripe for change.
“The idea of a firm being able to attract out
side investment should not be that radical,” he said, adding that the proposals (which included plans to allow professional services combinations) were a welcome shot in the arm for MDPs. “We’re pleased that the government is moving forward with this,” said Holt.
Marke Lane, relationship director in Barclays’ professional practices group, said that accessing the debt capital markets, as in Clifford Chance‘s £150m bond issue, was currently a more attractive option. “The global firms are definitely talking about this method of raising funds,” he said. “The beauty of this approach is it’s not equity, so partners are not having to give up their stakes in their business.”