Posted Oct 18, 2007 08:35 pm CDT
In a groundbreaking move envisioning a not-so-distant time when non-attorneys can invest in law firms, a group has taken on the task of assigning a monetary value to the world’s 200 biggest law firm brand names.
In six months or so, the Managing Partners Forum will set valuations serving both as a basis for determining a potential purchase price and a benchmark to use in comparing one firm’s performance against another’s, according to Legal Week. Although non-attorneys in the United Kingdom, like non-attorneys here, can’t have an ownership interest in a law firm, Australian law firms can issue shares of stock to investors. And this may soon be permitted in the UK, too.
The law firm valuation plan follows “increasingly serious tactical discussions between leading UK law firms and investment houses ahead of the Legal Services Bill, which will, for the first time, allow outside investment in law firms,” the article states.
Standards that MPF and a consultant, Brand Finance, will use to determine value aren’t finalized, but are “likely to take into account projected future earnings and profit margins relative to peers as well as client quality and loyalty and the strength of the management and people,” the article continues.
As earlier ABAJournal.com posts discuss, Slater & Gordon, a personal injury firm based in Melbourne, Australia, became the world’s first publicly owned law firm in May. This sparked increased interest in going public on the part of law firms in Britain, where the Legal Services Bill is expected to allow them to do so by 2010. Meanwhile, partners at U.S. law firms are thinking about the issue, since they may be at a disadvantage if competitors can access investor funding and they can’t.
However, London’s BigLaw elite, known as “Magic Circle” law firms, aren’t likely to go public, the Evening Standard predicts in an article earlier this week.
Whether to allow private investment in U.S. law firms is a controversial issue, and it probably would be much more difficult to do revise rules prohibiting non-attorney ownership here than in the UK or Australia, the ABA Journal notes in a July article. However, “throughout the history of the law, the rules have changed when economic pressure is applied,” says Ronald Rotunda, a constitutional law professor at George Mason University.