This article was first featured in The Times.
Growing numbers of law firms are considering spinning off parts of their business under new rules that allow practices to sell shares to outside investors, according to new research.
A third of commercial law firms surveyed in a report by Jures, a legal consultancy, said they were looking at hiving off practices to take advantage of the reforms, which have been described as the legal sector’s equivalent of the “big bang” in financial services in the 1980s.
The creation of a new corporate entity with outside investors owning shares, is most law firms’ choice for taking advantage of the changes, the research showed.
Other options include floating the entire business on the Stock Exchange or merging with accountants or insurers. Only 29 per cent of the firms surveyed said they had ruled out any form of restructuring.
In May partners at Berwin Leighton Paisner, a City law firm, voted to spin off its Lawyers On Demand unit, which provides outsourcing to corporate clients. Analysts said it was the first step to tapping external investors. Irwin Mitchell is also considering its options, including and IPO.
Despite initial resistance from many partners, the report suggests that the squeeze on the market since the financial crisis has made many think again. More than half of 100 respondents said the prospect of selling to private equity investors was now “compelling” or “very compelling” Jures said.
However, there is still concern that selling shares to outsiders will erode partners’ control, the report said. Two thirds of firms have contemplated overhauling their partnerships in response to the reforms, Jures said.
Tina Williams, a partnership specialist at Fox Williams, said: “It is very early days and we can expect a lot more innovation in the coming months and years.”
The relaxed ownership rules were introduced under the Legal Services Act 2007 but came into force only this year.
For further information on the ABS report please click here.