Over in the UK, they’re one
step closer to the inevitable: Whole
or partial public ownership of a law firm. (An
investment bank is talking with "some of the largest
firms" about IPO-ing them.) Regular readers
know that I’ve been following the progress of the "Clementi
Commission" reforms in the UK, the most notable
of which is removing the prohibition on law firm ownership
by non-lawyer-partners. In other words,
IPO’s for law firms.
Now, I would be the first to tell you that being public
is not necessary, desirable, or attractive for most
law firms as we know them today. Law—certainly
among the AmLaw 200 or the UK 100—is not capital-intensive,
and to the extent firms need a minimal level of working
capital, it’s far easier and cheaper to generate it
through partners’ contributions to capital or bank
debt than to take on the enormous overhead of public-company
audits and filings.
Then, of course, there’s the simple issue of confidentiality:
"Any firm floating is going to have to issue
a prospectus saying: “Come and have a look at us.” As
one UK managing partner puts it: “You’d have outside
people crawling all over you, checking what colour
your toilet paper was.""
But the Clementi reforms will accelerate one trend,
which I can only applaud:
The increasing professionalization of the managerial and business side
of large firms. This will be a salubrious unintended consequence of the
disclosures attendant upon being a publicly traded entity: The non-negotiable
demand of the marketplace that your firm strive for best-of-breed in your
category.
