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DWF is the latest UK firm to float on the London Stock Exchange © Getty Images/iStockphoto
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When DWF debuted on the main market of the London Stock Exchange in March, it was a landmark moment more than a decade in the making.

Twelve years earlier, Australia’s Slater & Gordon had become the first law firm to float on a stock exchange. That move, as the UK was preparing to liberalise its ownership rules to allow legal-service professionals — “non-lawyers” — to hold stakes in firms for the first time, was seen as a potential blueprint for others.

Like DWF more recently, Slater & Gordon was a fast-growing firm with a focus on tech and innovation. But eight years after its listing, Slater & Gordon’s experiment on the public markets was derailed by its purchase of the professional services arm of UK-based Quindell, now known as Watchstone Group. Others have since proved reluctant to stray from the traditional equity partnership model.

That is starting to change.

“There are some firms that are very profitable and function very well as they are. But there are others for which [an initial public offering makes] more sense,” says Robin Mann, head of investment banking at Stifel Europe, which brought DWF to market.

£366m

Valuation of DWF initial public offering

DWF’s initial public offering, from which it raised £95m at a valuation of £366m, made it the biggest UK law firm to list over the past two years. As pressure builds to cut fees on low-value work, legal technology needs unprecedented levels of investment, and consolidation among mid-market firms has shaken up the hierarchy, some firms are starting to experiment seriously with different business models.

Experimentation does not always mean an IPO. Some firms have been trialling consultancy services. In the Netherlands, NautaDutilh has developed a “legal maturity model” to advise clients how to get the most out of their legal function, while Kennedy Van der Laan has launched a legal tech consultancy. That has helped in-house counsel use technology better, but the firm says it has also differentiated it from its peers.

Polish firm SSW Pragmatic Solutions has shifted from a traditional law firm model towards becoming a business adviser. It has started offering non-legal services, including financial advice, accounting and project management.

Other firms have followed the precedent set by Slater & Gordon and floated over the past two years. Finland’s Fondia listed on Nasdaq Helsinki in April 2017, while in the UK firms such as Gordon Dadds (renamed The Ince Group), Keystone Law, Rosenblatt and Knights have joined the LSE’s junior market, Aim. Listings are unlikely among the top 10 UK firms, according to analysts, but are a more realistic option in the mid-market.

Mike Allen, head of research at Zeus Capital, which advised on DWF’s flotation, says if the firm performs well, others could join the public markets. “The debate is, does someone bigger than DWF list or are the top 20 unlistable? Maybe it is just more manageable with some of the smaller regional firms.”

DWF’s IPO was partly a product of unusual circumstances. Founded in 1977 with its roots in north-west England, DWF has been on a striking growth spurt over the past 13 years under managing partner, now chief executive, Andrew Leaitherland. It has expanded its focus from insurance litigation to real estate and corporate and commercial work.

In that time the firm has completed 14 acquisitions and expanded from a UK-only entity to one with a presence in 14 jurisdictions. It has opened 25 new offices and revenues have soared from £32m in 2006 to £272m this year.

Plans for further international expansion were one reason DWF turned to the public markets to raise capital. Another factor was one many firms are grappling with: how to make expensive, long-term investments when the majority of profits are paid out each year to a firm’s partnership.

Mr Mann says while firms have fairly consistent revenues, cash management can be hard. “Over time, clients have required more fees to be contingent. Billable hours are harder to get clients to cough up for. Flows of working capital can be quite tricky [to manage].”

That has become more difficult as the nature of firms’ costs has changed. While law historically has been a relatively capital-light business, legal technology is changing that. Clients increasingly expect firms to automate more of the grunt work and focus their fee-earners on higher-value services, but that can require significant upfront spending. Similarly, expansion into new types of services can mean extra investment.

“In a partnership model your funding comes from profits in the business, capital injected by partners or bank debt,” says Matt Doughty, the partner who led DWF’s IPO.

“In the current market environment, we are seeing a lot of innovation and demand to invest in tech, and a lot of demand to invest in [connected] services.”

A listing also gives a firm the ability to use shares to fund future acquisitions and incentivise junior fee-earners such as associates, as well as partners, though most of the shares are still held by the partners. “It gives us a real competitive advantage in hiring people,” says Mr Doughty.

‘You’ve got to get partners to really want to do something to get it through’

Despite the attractions, analysts do not anticipate a rush of firms to float. Listing can be expensive — DWF’s IPO cost nearly £13m — while companies are under pressure to satisfy investors’ demands for growth. A firm’s partners become employees, with lower basic pay topped up by dividends.

The 18-month process for DWF to reach the market was also complex. Although the UK allows ‘non-lawyers’ to own law firms, that is not the case in all the countries where DWF has a presence. That required a complex dual structure, devised by Allen & Overy, which advised on the deal, and extensive engagement with regulators in the different jurisdictions.

“Law firm regulation has traditionally been seen as too complex, restrictive and not open to fresh or innovative approaches,” says Gillian Holgate, the A&O partner who led the team advising on DWF’s IPO. That perception, along with the complexity of dealing with multiple jurisdictions and regulatory regimes, puts off many firms from going public or seeking external investment, she adds.

DWF’s listing could help change that, says Rob Leach, head of Emea equity capital markets at Jefferies, the investment bank that acted as global co-ordinator and bookrunner alongside Stifel on the deal. “Legal firms will look at it in closer detail, now we have a few listed and trading successfully,” he says. “We’ve certainly had discussions with other legal services firms, some of which are closer than others [to deciding to list].”

But Stifel’s Robin Mann adds that firms considering listing will take their time. “This is an industry that prides itself on thinking things through. You’ve got to get partners to really want to do something to get it through.”


The tables below rank law firms for the FT Innovative Lawyers Europe awards.

New Business and Service Delivery Models
RankLaw firmDescriptionOriginalityLeadershipImpactTotal
STANDOUTDWFIn March 2019, DWF became the first law firm to list on the London Stock Exchange’s main market. The firm underwent an overhaul of its partnership, compensation and governance models to prepare for the £95m initial public offering. The funds raised allow the firm to invest in technology, expand its managed services platform and pursue further acquisitions. New governance boards have brought in a greater range and depth of expertise, and more than 2,000 employees are now also shareholders in the business.89825
HIGHLY COMMENDEDHerbert Smith FreehillsA specialist team of litigators, who are also skilled mathematicians and statisticians, model the potential outcomes of contentious cases, providing company boards with decision-tree analysis to help them make better decisions. Visualisation software built in-house underpins the service, grouping potential outcomes such as the likelihood a judge will prefer certain arguments or that certain parties will settle. In one instance, the data helped give a client confidence to turn down a $100m settlement offer with the knowledge that it could surpass the figure in 84 per cent of potential outcomes.88824
HIGHLY COMMENDEDPwC Tax & Legal ServicesSpanish bank Bankia used to instruct 11 panel firms to handle its legal matters. Now all the legal work is done through PwC, enabling it to process 12,000 litigation claims a year and reduce its legal spend by 45 per cent. PwC lawyers implemented new processes and technology with the in-house team and continue to provide advice as external counsel when necessary.79824
HIGHLY COMMENDEDSSW Pragmatic SolutionsThe Polish firm underwent a substantial reorganisation and overhaul of its operations to extend its service portfolio to tax, financial advisory, accounting and legal process management services. This includes a new digital transformation practice, expanding the headcount and bringing in a new remuneration structure for partners with bonuses based on the firm’s financial performance. The new model has improved collaboration and cross-selling, and has increased revenue by 15 per cent.89724
HIGHLY COMMENDEDKennedysKase, a new internal legal process automation system designed and developed in-house, transforms the way lawyers manage insurance claims litigation. The system increases data capture quality and accuracy, reducing error rates and saving clients 20 per cent in time and costs. Kase captures 1,250 data points for each new matter, with larger clients using the system for up to 3,000 matters each month. The firm is advising the UK Ministry of Justice on how to improve its systems to make data capture and dissemination simpler and more efficient.88723
COMMENDEDArthur CoxWorking with the Central Bank of Ireland, lawyers designed and developed a platform for the first paperless public inquiry in Ireland. Multiple stakeholders and more than 120,000 documents are now managed through the system, overcoming the privacy, data protection and security concerns of physically sharing the documents as well as expediting the inquiry process, a statutory requirement for the bank. Lawyers expanded the functionality of ediscovery software Relativity to manage the documents, email communications related to the inquiry and to enhance efficiencies.78722
COMMENDEDCuatrecasasExpanded Cuatrecasas Ventures, the firm’s investment model for legal technology start-ups, to consider investments in and knowledge transfer with businesses outside the legal tech sector. One such investment with FuVeX, a civilian drone business, has seen lawyers engage directly with regulators to help establish the market framework and validate the start-up’s business model.78722
COMMENDEDGómez-Acebo & PomboEstablished the Customised Alliance service, designed to offer an alternative to both single-firm and multi-firm co-ordination for multinational corporate clients. Modelled on the Nike Alliance, of which the firm is a founding member, consortium members selected by clients agree on a shared set of rules and processes for each instruction. The alliance operates with a centralised project management team, which oversees the joint budget and reporting for the 25 member firms across 19 jurisdictions.87722
COMMENDEDHerbert Smith FreehillsThe firm’s legal operations team provides strategic technical and process improvement advice to clients. With a team of 50 legal operations professionals working across London, Hong Kong, Sydney and Melbourne, the firm is helping in-house legal departments to rethink how they work and enhance the value they deliver to business.68822
COMMENDEDWomble Bond DickinsonThrough WBD Advance, the firm advises clients on operational and process-design improvements to help them manage large-scale projects. A 100-strong multidisciplinary team of lawyers, project managers, technologists and knowledge managers work flexibly across the firm’s network.78722
COMMENDEDMathesonDeployed an online system to manage 100,000 documents and share and present evidence for the first fully paperless trial in Ireland. The team worked closely with the court and opposing counsel, William Fry, to make sure parties across multiple jurisdictions were comfortable with the digital presentation of evidence. The system enables secure access globally and evidence to be presented at multiple venues simultaneously.77721
COMMENDEDGawroński & PiecuchEstablished in 2017, the Polish firm specialises in GDPR (General Data Protection Regulation) and cyber security, with a combined offering of software and legal services. Lawyers created a guidebook and online tool to help clients through the first stages of becoming compliant with the new data protection rules. Some 13,000 copies of the guide have been sold and more than 50 subscribers have signed up for the online compliance tool.77620
COMMENDEDHogan LovellsThe firm’s financial services regulatory services consulting group augments traditional legal services, providing clients with consulting on regulatory matters for which they would otherwise have engaged an accounting firm. In one case, the firm advised Goldman Sachs on the launch of Marcus, a consumer online bank. The combined team managed all legal and UK Financial Conduct Authority work for the investment bank at a cost almost 50 per cent lower than the market standard.77620
New Business and Service Delivery Models (In-house)
RankIn-house legal teamDescriptionOriginalityLeadershipImpactTotal
STANDOUTVodafoneA wide-ranging process, technology and training programme to digitise and improve the way Vodafone’s legal team works with the business. The legal team has changed the way legal support is requested, speeded up the process of contracting by simplifying contractual terms and reducing the number of contract templates used, and allowed business colleagues to create and manage their own contracts online. Vodafone’s sales team has access to a single site for legal resources and can generate standard mobile and public-sector agreements without lawyers.88824
HIGHLY COMMENDEDAtosCreated a collaborative contract review tool that improved how contracts are assessed and analysed, and how contractual risk is managed.78722
COMMENDEDVeonFollowing a big shareholder restructuring, the legal team redesigned all aspects of the group’s governance across 12 jurisdictions and 10 operating companies. To aid the process, the firm collaborated with law firm Simmons & Simmons and stock transfer company Computershare to modify existing tools for internal governance requests as well as a centralised repository for group policies and procedures.77620
COMMENDEDThe Crown EstateDeveloped a methodology to differentiate between “silver box” problems, which are repeatable and measurable and can be addressed with process and technology, and “gold box” problems, which are complex and unpredictable. The model has been used to guide how internal and external legal resources are allocated to different types of matters.76518

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