When the UK’s Legal Services Act comes into force next year, law firms will be able to adopt a range of alternative business structures in place of traditional partnerships, with non-lawyers in professional, management or ownership roles. From an American perspective, perhaps the most radical implication of the Act is that UK law firms will be able to raise (presumably) millions of pounds from external investors. Today, the Times (London) takes a look at an industry gearing up for major change:
“It’s going to change the way firms look at the provision of legal services. Nobody will be untouched by these changes,” [according to a Deloitte partner]
[E]xternal funding is likely to be embraced most enthusiastically by small and mid-tier firms. The prospect of flotation is particularly attractive to those that carry out a lot of straightforward work, such as personal injury cases, that can be standardised through investment in technology and processes.
According to the article, up to 60 firms (none are named) may be planning to raise outside capital through an IPO, from private equity, or “family funding.” Three of these firms are planning to raise a “war chest for acquisitions” of more than £20 million.
The Times notes that the new rules are “expected to transform the legal sector, as deregulation did financial services in the 1980s.” So what could possibly go wrong?
In the United States, Professor Larry Ribstein is among the foremost advocates of reforming law firm ownership structures. Ribstein’s research paper “The Death of Big Law” is probably the definitive argument for non-lawyer financing for law firms. See also Bruce MacEwen’s interview with the managing partner of the world’s first publicy-traded law firm, Australia’s Slater & Gordon.
- posted by brian
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