The AIM IPO of Gateley, the first UK law firm to float on the public markets, will be closely watched by a profession that has been slow to take on external investment to fund growth.  Research by Thomson Reuters amongst Finance Directors at Top 100 law firms found that only four of law firms consider a stock market flotation to be a suitable means of finance, while eight per cent would consider private equity investment to be suitable.  However, interest in long-term forms of finance such as bonds is higher, with 39 per cent  of law firm Finance Directors considering this to be a suitable form of finance for a law firm.

Acquisitions

Thomson Reuters points out that until Gateley’s announcement, no UK law firms had followed the example of Australian law firm Slater & Gordon, which went public in 2007.  Other Australian law firms to list include personal injury law firm Shine Lawyers in 2013, and IPH Ltd, a holding company for intellectual property specialists Spruson & Ferguson in 2014.  Slater & Gordon’s shares have performed strongly since its IPO. Gateley has indicated that it intends to use shares as a currency to acquire other firms both in the legal sector and related industries, and to attract new staff.   It says that acquisition targets may include HR consultancies, environmental consultancies and town and country planners. 

Lessons to be learned

Law firms contemplating an IPO are likely to want to learn lessons from the collapse of RSM Tenon, the first accountancy firm to list on the London Stock Exchange. Its insolvency followed from several other high profile failures of listed professional services firms such as Numerica and Vantis.