An IPO is the process in which a company goes from being privately owned to issuing shares on a public stock exchange that members of the public can freely buy and sell. For most “normal” companies, the IPO is a right of way and an indicator that a company has “achieved” and can now list on the stock market. However, law firms have generally refused to conform to this tradition. Publicly traded law firms are still a long way off in the United States.
The rules on whether non-lawyers can own law firms are regulated by the state judiciary, in most cases, the supreme court of each state, and there are no states considering changes that would come close to allowing a law firm to go public. It is the only jurisdiction that even allows non-lawyers to co-own a law firm. That exception was established decades ago because many firms in Washington also lobby, and many lobbyists are not lawyers, but they have roles of responsibility and participation in the capital of their firms. When a company goes public, it initially receives all the money raised through the IPO.
When stocks are listed on a stock exchange after the IPO, the company receives none of that money. It is the money that is exchanged between investors through the purchase and sale of shares on the stock exchange. LAWYER MONTHLY - Lawyer Monthly is a legal news publication that features the latest offers, quotes and expert opinions from legal professionals around the world. But even if its execution was uneven, Slater & Gordon's acquisition strategy demonstrates a possible justification for a law firm to enter the capital markets.
The problem would be even more serious in the context of law firms than in finance, given that partners in junior law firms are highly mobile in the lateral market. The practice has become more common since the recession, which forced law firms to find new ways to grow amid flat demand for legal services and pressure to offer discounted rates. Global law firm Clifford Chance has a specialized and captive LPO established in Gurgaon to take care of this type of work (and other things as well). When foreign affiliates participate, or if a company is listed on a foreign stock exchange, law firms also provide support in establishing liaisons with foreign advisors and regulatory authorities.
In addition to the unique employment and ownership traditions of law firms, there are also myriad ways in which law firms often refuse to behave like a normal company. Molot argues that the current structure of law firms' equity partners who put in capital and then withdraw it when they retire or go to another firm discourages long-term growth, and that law firms would benefit from being structured as publicly traded companies. Law firms never have CEOs, like a corporation would, with a partnership system in which those at the top receive a direct payment of the firm's profits, rather than receiving a fixed salary. Law firms that need a more modest injection of capital have easy access to obtain it through other channels.
Throughout the history of the legal sector, it has always been clear that law firms are not like “normal companies”. Law firms can then draw up an elaborate plan of action that requires further legal support for its implementation. Last year, Akin Gump joined the growing number of law firms asking their partners to bring in more capital, an increasingly popular strategy among firms to increase cash reserves without borrowing from banks. .
