More than three-quarters of finance directors at leading commercial law firms believe private equity investment is inappropriate.
In a survey of directors at 25 of the top 100 firms, 77% were unhappy with law firms attracting capital through private equity investors. An even greater number - 88% - felt listing on the stock exchange was inappropriate.
Both options are available to law practices under the terms of the Legal Services Act, but as yet the profession has shown little interest in pursuing them. Parabis is the so far only firm to have announced backing from private equity investors, having secured around £200m from Duke Street as part of its conversion to an alternative business structure (ABS).
No domestic firms are listed on the stock exchange, although personal injury specialist Russell Jones & Walker has been acquired by listed Australian firm Slater & Gordon.
Teri Hawksworth, managing director of Thomson Reuters Sweet & Maxwell, which conducted the poll, said private equity financiers were keen to explore an uncharted investment opportunity.
‘They think that the management processes they will bring to the law firm will make them more profitable,’ she said.
‘However, some partners feel that pressure from shareholders to deliver short-term returns would radically alter the culture at their firms.’
Senior managers at law firms expressed concern that inviting external investment would demotivate lawyers by allowing partners an easy exit route. Partners are also wary of opening their business up to the level of public scrutiny that goes with external investment.
But legal businesses are not completely averse to change – the poll also found that 20% of the leading firms are considering setting up an ABS.