Commercial outfit Gateley will make legal business history today when it becomes the first UK law firm to float on the London Stock Exchange.
Sector analysts expect competitors to follow its fortunes closely as they review growth strategies and consider whether to follow suit. It has even been suggested that the Anglo-Scottish firm could be the subject of a ‘reverse takeover’ within five years by a bigger firm that wants to ‘join the party’.
In a stock exchange filing last week, Gateley disclosed that seven partners are set to split £20m of shares when the national commercial firm’s initial public offering comes to the Alternative Investment Market this morning.
Gateley is admitting 105.2 million ordinary shares of 10 pence each at 95p. The IPO represents a 30% stake in the firm.
Institutional investors Schroder Investment Management and Miton Asset Management are subscribing for 8% and 5.6% stakes respectively.
Legal market guru Alan Hodgart, of Hodgart Associates, predicted that up to half a dozen top-200 law firms outside the top 25 could follow Gateley’s lead in the next two years. ‘Flotation could appeal to firms who do not want to borrow too much or put in too much capital, but still want to expand by acquiring new firms,’ he said.
The very biggest firms are unlikely to see the appeal of new capital, he suggested. ‘Another key issue that partners worry about is “what happens to my profit share if we sell, say 49% of the firm?”.’
Peter Noyce, head of professional services at Menzies LLP, expects Gateley’s rivals to ‘look at the earnings multiple and start bashing calculators to work out their own firms’ valuation – and of course their potential windfall’.
He added: ‘Will a successful Gateley IPO create a stampede? Definitely not. But there will be a few interested parties. My guess would be for Gateley to be the subject of a “reverse takeover” within five years, when and if a large law firm is satisfied it works and decides to join Gateley’s party.’