The timing would have rarely go wrong. A few weeks before launching a roadshow to convince potential investors to support the long-awaited levitation, city law firm Mishcon de Reya agreed to record fines related to a series of money laundering breaches. Did.
The second sanctions in recent months, accompanied by a number of regulatory investigations into the company, spanned the four years to 2019.
Mishcon is preparing to launch a formal pitch to investors this month, so they were previously such to gain support for what would be the largest initial public offering of a UK law firm. We hope we can overcome our mistakes and see the benefits of the future. London stock market.
Mishcon hopes to transform its traditional partnership structure into an agile listed business that can more easily raise cash and expand into Asia to fund acquisitions and investments in areas such as legal services and technology. is.
After a fraudulent IPO process, a partner was forced to postpone the move to 2020 after a rebellion, with recent fines £ 2.9 million proceedings From a real estate investment company — the company is being pressured to prove that it can eventually pull out the float.
“Jumbo jets have already begun to descend the runway and will be very difficult to stop right now,” said a managing partner at a rival UK law firm.
Founded in 1937 by future Labor politician Victor Mishcon in a studio office in Brixton, London, Mishcon will be by far the most valuable listed law firm on the London Stock Exchange. According to people close to the process, it is aiming for a market value of around £ 750m. It’s almost twice as valuable as its closest UK public rival, DWF, and one broker describes it as “really ambitious.” ..
The company declined to comment on the article, but people close to it said it plans to go public in the first quarter of this year, officially with the intention of announcing the announcement soon this month.
Mishcon is not part of the “magic circle” of the law firm, but has always been dominated by large figures, such as Anthony Julius, who represented Princess Diana, who divorced Prince Charles in 1996. He recently addressed the Brexit case of Gina Miller, advising some of the world’s wealthiest families on issues from immigration to reputation.
Under the executive chair of Kevin Gold, a South African trading lawyer who took up a top position in 1997, refined with a roster of clients from the city’s acclaimed litigation and family law, Microsoft, Sky and more. Moved to a corporate operator. And Prada.
The company increased its revenue from £ 130m to £ 188m over the five years to April 2020, with 177 partners receiving an average of over £ 1m each last year.
But Mishcon has long sought more dramatic growth. We don’t have an urgent need for cash, but we hope that the funding generated by the listing will be much larger than expected in the partnership model, making it difficult to raise money.
The company wants future investors to move further away from the traditional law firm model and become a broader professional services company that invests in consulting and early-stage legal technology. The company already has a “brand management” business and a technology incubator, and according to the latest information released last April, not only will it use its IPO revenue for small acquisitions, but more lawyers in Asia and elsewhere. I plan to hire.
Switching is not easy.
“you [private law firm] It’s all very easy, you calculate the profits and distribute them to your partners. However, becoming a publicly traded company needs to benefit not only its partners but also external investors. .. .. This is a more complex model, “said Tony Williams, founder of consultancy Jomati.
The IPO should be in favor of senior management, including Gold and managing partner James Ribson. James Ribson owns a potentially valuable stake, but it can have its downsides, especially for more junior members.
As a listed company, Mishcon’s partners take a fixed draw that is likely to be lower than their previous profit share, which is replenished with dividends and capital gains on their shares. They may also be lined up for bonuses and long-term incentives.
“If I’m a partner in my mid-40s, I might think of mortgages, but I’m not excited about the fact that my income is low and the rest depends on the stock market,” Williams said. increase.
Subordinate lawyers, on the other hand, are generally motivated by partnership promises and risk seeing the company’s equity pool diluted by new shareholders before they gain market share.
Mishcon said he would give shares to all employees by preventing partners from leaving the business for seven years and, in theory, giving rights to lawyers early on.
A senior partner at the company said there were “many partner meetings and lots of jump-ups” to vote for the September IPO plan. “We have come to the conclusion that there are more positives than negatives,” he said. The IPO proposal was approved with over 90% support.
“Not tested on the stock market”
Still, some potential investors have already announced their reservations.
Anthony Cross, manager of Liontrust Asset Management, said he has invested in several UK-listed law firms but has not considered Mishcon’s float. “People are wary of the business of classic people you have potentially loose, talented individuals.
“The problem for law firms is that they haven’t been tested on the stock market yet,” he added. “They don’t have the characteristics of a very attractive software company, for example, with a lot of IP and recurring income.”
Another fund manager said he was wary of law firms with “a greater keyman risk that very strong lawyers could pay a lot of money to move around.”
However, some analysts and brokers have stated that Mishcon could be a very attractive investment opportunity due to the fact that its strong brand and its business are separated from the business cycle. rice field.
Gareth Hunt, Managing Director of Legal Services at Broker Stiffel, said: “Covid was amazing in that sense — profits went to the moon for many companies .. But the devil is always in detail and some companies are migrating better than others. “
Market liberalization in 2007 paved the way for law firms to be listed on the London market, with six companies listed, but with mixed performance.
Two listed companies, Gateley and Keystone, have performed well, with Keystone’s share price rising by more than 300% in the last 12 months. But the DWF listed in 2019 Valuation is £ 366m, Was bruised in 2020 and expelled the former CEO. The stock is trading 8% below the listing price.
Michael Chisick, managing partner of London-based Fieldfisher, said the company considered floating three years ago but decided to oppose it. “Our clients like the fact that we are not listed and the stock price does not change whether we win or lose the proceedings,” he said. “And some of the younger partners [going public] It means selling family silver. “
One broker said he hopes Mishcon will make the IPO “really difficult.” “But if the market thinks the price is too high, it will just spit it back,” he warned.
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