On your marks – race for first law firm IPO begins

The news that an investment banker is talking to some of the largest firms about an AIM listing brings what is surely an inevitability one step closer.

Once the white paper proposals on law firm ownership are passed, quite possibly later this year, the barriers to firms floating will have been removed. And the kudos of being the first may be irresistible – to some at least.

But what a shock to the cosy, private financial world lawyers have always enjoyed that would be – should it come to pass. Any firm thinking about a launch is first going to have to get its corporate structure sorted out. A series of firms have already gone a long way down this road, of course, by converting to limited-liability partnership (LLP) status.

But the next step – at the moment still theoretical – is where the pain will first be felt by publicity-shy lawyers. Any firm floating is going to have to issue a prospectus saying: “Come and have a look at us.” As one UK managing partner puts it: “You’d have outside people crawling all over you, checking what colour your toilet paper was. If you have any warts, they’ll find them.” Few firms are going to hurry to invite that sort of financial scrutiny.

There’s another stumbling block: the treatment of multijurisdictional firms. What might work fine in the UK within a year or so is unlikely to pass muster in the US or on the Continent. That would appear to limit the candidates to UK-only operations.

Another possibility, of course, is the outright sale to Tesco. Well, it doesn’t have to be the grocer, but the mouth does water at the prospect. Just think of it: if the supermarket merges with Virgin and – international hurdles somehow overcome in a Nigel Knowles-inspired stroke of world-domination genius – DLA Piper, the world will, at last, be all but taken over. You could do your shopping, buy a mobile and file a complaint to the OFT all in the same place.

More seriously, offering up a minority stake for sale to a venture capital might be a more attractive proposition for capital-hungry firms. Certainly, some mid-market firms are likely to look seriously at selling a share of the equity in return for the capital to, say, buy their premises.

The insurance litigators with commoditised work and predictable income streams may be the most likely candidates for this new dawn. Don’t scoff, and don’t rule anything out. It may happen a lot sooner than you think.