Research from Sweet & Maxwell shows that, on the back of the Legal Services Act, law firms would be reluctant to take on investment from private equity firms.
Some 77 per cent of those surveyed do not consider private equity investment as ‘appropriate’ while 88 per cent would not consider listing on the stock exchange (see table below).
The Legal Services Act, which has been dubbed Tesco Law, came into force in January 2012 and now means that law firms can seek external investment, or share ownership, by converting to an Alternative Business Structure (ABS).
Sweet & Maxwell points towards what it describes as a ‘chequered’ history of stock market listings in the professional services sector, such as those involving accountancy firms Vantis and Numerica, as reasons behind the surveyed reluctance.
| Appropriate | Inappropriate | |
|---|---|---|
| Private equity investment | 23% | 77% |
| Listing on the stock market | 12% | 88% |
| Bank lending | 85% | 15% |
| Alternative finance, such as asset finance or invoice discounting | 50% | 50% |
| Other long-term debt such as bonds | 23% | 77% |
The survey also reveals that, so far, only 20 firms have converted to an ABS while just the one has taken on investment from a private equity firm.
