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Large law firms focus on external funding

16 March 2010

More than 40 per cent of large law firms are considering external funding through venture capital or private equity, a survey of 121 firms by accountants Smith & Williamson has found.

Only 15 per cent of firms said they were considering external funding in a similar survey published last year.

This year’s survey also found that the number of firms considering selling shares in themselves through an IPO has almost doubled, with 20 per cent of firms saying they would consider the idea compared to only 11 per cent the previous year.

Three quarters of the firms taking part in the latest research had over 25 partners. Ten of the top 20 firms took part, along with 59 of the top 100.

“While the general view has been that only a few legal practices will seek external finance as result of the Legal Services Act, our research suggests a core element of the top 100 law firms are thinking seriously about raising finance through an IPO, private equity or venture capital,” Giles Murphy, director at Smith & Williamson, said.

Almost half the firms said they were considering the appointment of non-solicitors as partners. One in ten had already taken the step and a further 13 per cent were proposing to appoint non-solicitors within the next year.

“This trend represents a significant shift in attitude towards the management of law firms, with some senior positions being opened up to non-solicitors for the first time,” Murphy said.

“This trend is likely to gather pace and will ultimately put law firms in a better position to attract the most professional and able individuals to run their firms and allow them to diversify away from their core provision of legal services.

“The growing acceptance of the role of external capital for law firms, combined with the inclusion of non-solicitors as partners or members, represents nothing less than a revolution in the provision of legal services over the next few years.”

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