Risky Business

The world’s first law firm IPO has taken place in Australia, and regulatory reform underway in the United Kingdom ensures that more firms will follow. Here’s a look at the steps law firms must take and the risks they must address to prepare for this brave new world.

The first law firm in the world to float shares is Australian firm Slater & Gordon. The 400-person personal injury and class action firm took advantage of recent legislative reform and made its shares available on the Australian Stock Exchange on May 21. The shares rose 40% on the first day of trading and generated $35 million for the firm before the end of the month. The legal profession will never be the same.

Slater & Gordon went public in order to finance an ambitious growth scheme by acquiring other practices, as well as to create a greater marketing and advertising presence. A week after the IPO was declared, Slater & Gordon acquired D’Arcy Solicitors of Brisbane for $2. 8 million — the firm’s sixth acquisition in the previous two years.

It is unlikely that publicly traded law firms will stop at the Australian coast. In the United Kingdom, the recommendations of the watershed Clementi Report are being implemented through the Legal Services Act, which will similarly allow non-lawyer investment in and control of UK law firms. If London- based global law firms can access that kind of capital, their rivals in New York will quickly demand to compete on that playing field too.

In short, the Slater & Gordon prospectus heralds the dawn of a new age for law firms. But that same prospectus also offers an intriguing glimpse of what law firms must demand of themselves — and what they must openly admit to the marketplace — in terms of how they operate now and how they must change in the era of publicly-traded law corporations.