By Rachel Rothwell


Several well-known law firms are already poised to float on the stock market as soon as external investment becomes possible, a top industry insider claimed this week.



William Arthur, a consultant at Fremont Consulting, said he was 'aware of a number of firms that have already made the decision, and there are some names that everybody would recognise.'



However, Arthur warned that firms needed to make significant organisational changes before they would be attractive to investors, including recruiting high-calibre finance directors.



He claimed too many law firm finance directors were 'meek' characters of 'variable' quality, who made little strategic contribution to the business.



Arthur said it was 'inevitable' that firms would seek to float on the stock market when the Legal Services Act 2007 makes it possible to tap external investment, probably in 2012 - particularly those which were looking to grow by consolidation. But he added: 'Investors are not crazy with anticipation. It is still several years off. And when the opportunity does come, it won't necessarily be the easiest sell.'



Arthur told delegates at the Law Society's Law Management Section conference that the low status of finance directors in the legal sector could deter potential investors.



He said too few finance directors were on their firm's management board: 'That reflects the poor estimation and poor value attached to finance directors. The problem is that the quality of finance directors in the legal profession is too variable. Many have never had a role outside the professional firm. Many are too meek.'



Arthur added: 'Many firms have wanted a finance director who will do as they are told. In the new world, they cannot afford to be anonymous. But they will have great difficulty changing the relationship they have with their colleagues.'



Claire Hafner, finance director at national firm Eversheds who has previously held roles at BT and Barclays, said law firms that are 'resistant to change' are choosing individuals who would not challenge them. But she added: 'The Legal Services Act will have a massive impact on the choice of finance directors.



'Firms will need to pick the finance directors who will help them drive [a] new commerciality. The clever firms are currently recruiting finance directors who will get them prepared for that time, which will be within the next few years.'



Stephen Purse, finance director at magic circle firm Clifford Chance, said there was 'a different relationship in law firms, because you are working alongside the people who own the business, whereas shareholders are several steps removed'.