What’s going on here?
National law firm, DWF, is planning to float on the stock market next month.
What does this mean?
Floatation is when a company is listed on the stock market and can then sell shares to the public, and is also known as an initial public offering (IPO). DWF has announced that it expects to raise a minimum of £75 million from its listing on the London Stock Exchange. The firm intends to put up 25% of its business for sale, while partners, who hold shares, will be subject to a lock up for five years. This means they cannot sell their shares during this time. DWF has stated they wish to use capital raised to fund working capital, invest in infrastructure and fund potential future acquisitions.
Why should law firms care?
This is a new trend in the legal world. Traditionally, law firms are structured as limited liability partnerships (LLPs). Since the Legal Services Act 2007, law firms are now able to become public companies (PLC) and list on the stock exchange. This highlights a new transformation in the legal industry.
Only smaller and medium sized firms, who need an injection of funding, have used the stock market to increase capital. Floatation also suggests financial stability, attractive to investors, especially when coupled with favourable press coverage. DWF is the sixth UK law firm to float, following the likes of Gateley, Gordon Dadds and Knights Law. Hoping to raise at least £75 million, DWF would become the largest listed law firm, outdoing Knight’s £50 million last year.
However, the new reforms also allow non-legal companies, such as the Big Four, to offer legal services. Thus creating new competition for law firms. Perhaps the capital acquired from this floatation can be used to compete against these new rivals, fighting back against the competitive market opened up by deregulation. This evolution of the legal industry is something law firms will have to address in the future, to maintain their competitive advantage.
Report written by Elizabeth M.
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