Lawyers provide best value to companies floating on London Stock Exchange

ROLLS-ROYCE SERVICE: solicitors fare well despite overall dissatisfaction with flotation costs

Lawyers provide the best value for money of any advisers to companies floating on the London Stock Exchange, new research has found.

A survey of recently floated companies by the exchange and City law firm Eversheds found that 42% were very satisfied that the fees charged by their lawyers represented value for money.

This compared with 11% for financial advisers and reporting accountants, and 7% for brokers.

Slightly more than a quarter were quite satisfied with their lawyers' value for money, while 11% were neutral and 11% not very satisfied.

The survey of companies that floated on the main market and Alternative Investment Market between July 2001 and November 2002 found that 58% were dissatisfied with the overall cost of their float, which on the main market was more than 1 million.

Some did express concern about the level of lawyers' fees.

One chairman of a leisure company told researchers: 'The only real criticism was that [the law firm] did a "Rolls-Royce" job, particularly with regard to verification.

I felt that this was unnecessary and resulted in higher than necessary costs and excessive demand on the directors' time.'

The chief operating officer of a pharmaceuticals company said: 'While nothing about [the law firm's] service let the company down, I felt they had played an excessive role and had therefore run up enormous costs.'

The survey discovered that 61% used their existing lawyers to advise on their flotation, which rose to 83% for larger companies listing on the main market.

A recommendation from a third party was the next most common method to identify lawyers (18%), followed by a firm already known to the directors (16%) and a recommendation from an investor or shareholder (8%).

Overall, four out of five of the companies said their original objectives for floating were met.

Eversheds corporate partner Neil Matthews said that given the costs of going to market, law firms need to be transparent over fees.

'It is important to budget carefully and negotiate up front,' he said.

Neil Rose