So you want to go for an IPO? Planning and preparation are fundamental factors for its success

11 December 2018

In my first blog in this two-part series, I looked at law firms’ growing interests in alternative sources of finance, a trend highlighted by PwC’s latest Law Firms’ Survey. I also set out a few of the main options for today’s firms – including IPO, private equity investment and corporate mergers – and the considerations involved in choosing between them.

In this follow-up blog, I am going to focus on the IPO option.  So, what should you be thinking about now? And what will be the key stages on your IPO journey?

As one of the first steps, you should look at current investor sentiment towards law firms in the public markets. The good news is it’s quite positive: law firm IPOs are gaining momentum, with generally strong investor demand and support from some high-profile investors. And while the after-market performance of legal sector IPOs has been mixed, there are still plenty of “buy” recommendations on listed law firm stocks.

So the stock market may be offering a warm welcome to law firms in general – but what specific attributes are investors looking for? As in others sectors, they’re really seeking firms with the strongest positioning and future prospects.

That means those who are market leaders in their chosen areas, and protected by relatively high barriers to entry. Investors are also seeking a high quality of growth and profitability, which bring resilience – especially valuable amid the current political and economic uncertainty. Perhaps most importantly, they’re looking for experienced management that has a clear and compelling strategy and strong grasp of the marketplace, and that they believe can deliver the business plan.  

A further factor is the timing of your IPO. As well as the market conditions and investors’ appetite, which can change almost overnight, it’s important that the timing of the IPO is right for your partners and your firm. It’s also vital to be able to demonstrate your financial performance in a clear and credible way, with strong numbers that evidence your strategic growth drivers and ongoing development of your track record.

Another aspect is the market you choose on which to issue your IPO. This could be your home market or an international exchange – a choice that may partly reflect the listing location of your peers. As well as affecting your likely valuation, the choice of market may raise issues around tax and structuring, as well as operational considerations. You’ll also need to take into account the legal and corporate governance requirements and financial reporting standards in each market.

Looking at different markets, London has the advantage of offering a choice for companies at different stages of their growth cycle, together with other benefits including a high profile and proven investor base. As I noted in my first blog, AIM has been an especially popular IPO venue for law firms to date. As with any market, however, it’s important to be aware of – and able to comply with – the requirements in areas like corporate governance, due diligence and continuing regulatory obligations.

These obligations feed into a further question: is the business fully prepared – and ready  to deal with the additional demands and scrutiny that being a public company brings? It’s vital to dedicate sufficient time and resource to managing the IPO process, while also operating business as usual. To help assess your level of readiness, it’s a good idea to undertake a “fit-for-listing” exercise, and set about fixing any gaps that emerge well in advance of executing any transaction.

With these preparations in hand, you’re ready to proceed towards your IPO. As you do so, I would highlight four key points. First, start preparing early. Second, define a robust equity story that’s aligned with your business’s strategy and future objectives. Third, ensure you have a strong and credible management team who can lead the business forward to deliver shareholder value. And fourth, engage with the right banking, legal and accounting advisers to help you deliver a successful IPO.

An IPO is now a proven route to growth and value realisation, as a number of law firms have recently demonstrated. With the right approach and advice, your firm could join them.

Lucy Tarleton

Lucy Tarleton | Director
Profile | Email |  +44 (0)7701 295718

Twitter
LinkedIn
Facebook
Google+

Comments

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Comments are moderated and will not appear until the author has approved them.