Investors line up ahead of law firm IPOs

INVESTORS are queuing up to buy stakes in City law firms ahead of a series of planned flotations in the sector next year.

Lyceum Capital and Investec are among a handful of businesses already interested in the legal sector once the government’s Legal Services Act comes into operation.

City A.M. understands that Lloyds Development Capital is also interested in investing in the legal sector.

The Act, which is expected to be operational by 2011, will open the traditionally closed partnership model to external investors, such as private equity houses.

Under the new Act, law firms will also have the ability to raise additional finance through an initial public offering (IPO).

“Any law firm that thinks life will remain the same is deluded. What they should be thinking of is how they can take advantage of this,” said Tim Stocks, financial institutions head at law firm Taylor Wessing.

Research conducted by Smith & Williamson found that 20 per cent of the top 100 UK law firms would consider raising additional capital through an IPO with some expecting to bring in more than £20m into their businesses. Over half would use the funds for long term planning.

“The days when law firms relied solely on partners to fund development are fading. While the general view has been that only a few legal practices will seek external finance, our research suggests a core element of law firms are thinking seriously about [it],” said Giles Murphy, a director at Smith & Williamson.


• The Act will make it possible for law firms to merge with businesses outside the legal sector.
• The Act will allow professionals, including patent agents and accountants to join a law firm as a partner.