The only thing that surprises me about an albeit limited survey of 25 top law firm finance directors by Thomson Sweet & Maxwell reported in the Law Society’s Gazette is that 23% of them (6, by my count) seem to think that private equity investment in law firms might be a good thing. A further 12% (3) apparently wouldn’t rule out a stock market flotation for their firm.
I can only imagine or hope that the three brave souls who might consider a float are those with a nice, consumer-facing chunk of the business that doesn’t depend on petulant, flighty or simply frightened name-partners skipping off with an armful of clients in tow.
Speaking to one law firm chief executive recently, I was struck by the point that law firms do not seem to be flavour of the month with banks, which may lie behind a seeming trend to recapitalise using internal sources (ie partners). I wonder if what lies behind the optimistic hopes of some FDs and lawyers as to the possibilities of private equity is a frustration at both finding bank finance and then submitting to what seems like onerous and invasive monitoring by the banks. One banker recently told me they have monitors in 50 – yes, 50 – ‘top’ (he wasn’t any more specific than that) law firms who are struggling with their finances.
While dumping the stuffy, ultra-cautious banks for the potentially more open and creative private equity investors might seem superficially attractive, it is worth remembering that all that glisters is not gold; private equity investors are no less likely to be demanding and intrusive than banks when their exit might look to be in jeopardy.