Lawyer Monthly Magazine - May 2019 Edition

MAY 2019 86 Completing The Deal www. lawyer-monthly .com About John and The Firm Arden are a dedicated cor- porate adviser and multiserv- ice stockbroker. I head our professional services team who are one of the leading advisers on mergers, acquisi- tions and fundraising for the professional firms and busi- nesses. We have developed a particular specialisation in the legal space where our Research team has become a market leader and has cov- erage of the majority of newly listed firms. Contact John Llewellyn-Lloyd Director, Corporate Finance Head of Professional Services www.arden-partners.com W: www.studiolegaledelre.it Key Points on Fundraising Strategy able and incentivised to simply manage the business. The key to this is a decisive governance structure where business needs can be addressed swiftly and the rapid pace of change incumbent in modern legal businesses accommodated. Differentiation an important guide to success The legal services market is very fragmented but at the same time there is often inadequate differentiation with many “me too” propositions. There are over ten thousand law firms in the UK, and of these, even the larger firms are not particularly separated and often lumped together into groups. External investors want firms that stand out in the crowd. They look for market leaders, sector specialists, high operating profit margins, a “roll out” story. Articulate precisely the use of funds Often overlooked, but all investors need to be told how the funds will be used. Acquisitions, lateral hires and technology investment are common themes. Money for partners’ exit is not attractive. Give yourself enough time To take partners on a journey from one “hundred percent draw” to corporatised shareholdings and salary with profit shares, can be a long The key points to consider when firms are completing a fundraising strategy: Is there an “internal investor” culture? Many partnerships are idiosyncratic and bespoke groups of individuals. To attract external investors, they must see partners keen to be shareholders. Partner lock ins on equity received and significant internal investment in the shares are attractive to investors. Do they have a clear and evident strategy for growth? Financial investors will want to see a clear growth plan articulated. Firms must highlight clear financial key performance indicators (KPI’s) that demonstrate how and why a businesses growth targets will be met. Profits growth is key. Track record and management expertise also underpin investor confidence that the team have “earned their share”. Is there effective corporate governance and proof that managers manage? One of the strengths of the corporate listed model is the freedom it gives to lawyers to focus on quality and delivering top quality client service. When linked to a specialist management team who are journey. As a rule of thumb, a fully consensual partnership will take approximately two years to convert to a model that is attractive to external shareholders. It is also a complicated story to investors. DWF have been planning their IPO with advisers / stockbrokers for over twelve months. A growing historic financial track record is vital as well as a stable management team with clear experience in the business. The marketing of a fundraising strategy will draw on the historic financial record (last 3 years). Any significant downturn in this track record will require explanation and may impact success. At the same time the key management team must have a demonstratable track record in the business. They must also be planning to remain with the firm for the foreseeable future. Premature departures post flotation, especially in the first year, will negatively affect share price. LM Legal assets have become increasingly attractive to London fund managers since Gateley’s flotation in 2015. Over £850 million has now been invested in public UK legal equities. The implementation of the legal services Act 2007 and the creation of alternative business structures have seen a rapid deployment of external capital in to legal firms. There are now eight listed law firms and that could more than double in the next twelve months. DWF has focused on the opportunity in the Global Legal Market estimated to be over $700 billion. The legal services market is very fragmented but at the same time there is often inadequate differentiation with many “me too” propositions.