When Law Firms Go Public – A World of Change

Article written by Melania Wenstrup

Nel suo nuovo articolo Melania Wenstrup affronta l’argomento delle quotazioni in borsa degli studi legali, un tema diventato attuale da quando nel maggio 2007 si è assistito ad un evento senza precedenti, la quotazione dello studio legale australiano Slater & Gordon.
Melania ci spiegherà pro e contro di tali operazioni, che da una parte offrono agli studi legali una maggiore capacità di investimento, dall’altra creano possibili conflitti e contraddizioni tra logiche di mercato e tutela degli interessi del cliente. A. Di Tommaso

The legal landscape is rapidly changing and many aspects of the way law firms operate are fast-evolving. When Slater & Gordon, an Australian firm, became the first law firm in the world to trade shares on a stock exchange in May, it turned up the heat on lawyers worldwide. Slater & Gordon raised $29 million in its May 21 IPO, raising capital to finance new lawyers and offices. Interest across law firms has spread like wildfire. Another Australian firm, Integrated Legal Holdings Inc. has filed to go public and the United Kingdom is clearing the way for firms to go public with the Legal Services Bill. The bill is expected to pass later this year and may enable British law firms to sell shares as early as 2010. The advantages of new public capital are many. Stock sales would enable firms to raise funds needed to acquire competitors, hire the best talent, and expand.

As publicly traded entities, many aspects of law firm business models will change. It will push law firms to think and operate more like corporations and break away from traditional law firm mentality. We could start to see law firms become more top-down driven, with structured decision making, and partnerships could cease to exist. With new public capital, law firms could offer marketers the chance to do cutting-edge work, initiate risk-taking strategies, value growth, and work more with extensive advertising and marketing programs to build brand awareness.

The biggest challenges to U.S. lawyers are the different bar rules in the 50 states, and legal association ethics rules that prohibit non-lawyers from owning a stake in a law firm. As a publicly traded law firm, lawyers may be forced to put shareholders above clients and unintentionally create conflicts between the attorney-client privilege and Securities and Exchange Commission disclosure requirements. This could be problematic. With non-lawyers controlling a law firm there could be perpetual conflicts between increasing shareholder value and a lawyer’s primary duty to the courts and clients. Lawyers may be required to act contrary to their corporate responsibility and against the interest of shareholders. These uncertainties may be seen as unattractive to U.S. investors.

Going public may become unavoidable for law firms competing with firms that have millions of dollars raised by an IPO. Yet, many U.S. firms are waiting to see if going public gives their rivals an advantage. Competitive pressures could force firms to consolidate or consider testing the capital markets. We could start to see a push in the U.S. for regulators to permit law firms to begin going public. For law firms to begin embracing the public markets, we need to establish a new framework for the regulation of legal services that would facilitate alternative business structures, which would enable lawyers and non-lawyers to work together to deliver legal services.

Article written by Melania Wenstrup, Wenstrup@BlankRome.com. Ms. Wenstrup graduated from Pennsylvania State University with a Bachelor of Science degree in International Business Management and Business Law. She has also attended the University of Maastricht, Netherlands, where she focused her studies on relationship marketing.