The next GameStop? (In a good way!)
Mishcon de Reya's partners have voted to explore floating the firm on the London Stock Exchange later this year, with all staff set to receive shares in the business if the plan comes to fruition.
It is predicted that Mishcon will become the most valuable listed law firm in the UK and reach as much as £750m if it does float, more than double the valuations of listed UK firms like DWF (circa £275m), RollOnFriday Firm of the Year 2021 Keystone Law (£210m), and almost-Golden Turd Knights (£350m).
Mishcon partners voted last week to explore an initial public offering and have instructed JP Morgan to advise on the IPO.
When other firms have floated, the spoils have allowed them to invest in expansion, but have also brought untold bounty to senior partners in management, sometimes to the chagrin of other staff left without a stake in the firm's stock market fortune. However, all versions of Mishcon's plan to float include doling out shares to "every member of staff".
Mishcon wouldn't be drawn on the details of who would get how much, noting that planning was at an early stage, and emphasised instead that the income would "raise funds to invest in retaining and attracting new talent, core businesses, allied services, technology and further expansion in Asia".
The firm has noted one issue, though it doesn't expect it to be an obstacle to floating. It confirmed that it "continues to engage with the Solicitors Regulation Authority on historic matters" it reported to the SRA, which includes the bizarre claim that one of its partners offered the police a £1 million bribe to set up a conman.
"I am delighted that the leadership team is mandated to explore a public listing as we look to further develop our offering to clients", said Kevin Gold, Mishcon's Executive Chairperson. "I am also proud that my partners have decided to award shares to all staff. It means every single one of our people will have a meaningful stake in our business".
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Mischcon deserve a lot of credit for committing to share the love with staff - not many firms would do so.
Having said that, I wonder how easy it will be for them to retain their reputation for being pretty cool and edgy (as law firms go) as a listed company. What would the Brexit / Gina Miller litigation have done to the share price and will they still take on those types of mandate in light of that sort of future consideration?
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I really don’t understand why anyone would stay at a law firm that IPOs.
There are only two reasons to list (I) to raise capital for the business - I doubt Mishcon needs this (I can’t imagine they are planning a huge expansion spree) and (II) to allow existing equity holders to realise some of their investment.
The social contract with law firms has always been that partners are not equivalent to shareholders. They have a right to share in the profits of the firm only so long as they are practicing at the firm. When they leave / retire, they are required to sell back their shares usually for the same price they paid for them (maybe with some inflation adjustment).
In an IPO, the existing partners are instead selling part of those equity interests, presumably for a big profit. That profit comes directly out of the pocket of future partners and the token gesture of issuing a few shares to staff does not counteract that. It makes the business permanently less profitable for future partners because profits will have to be shared with external shareholders.
In short, the current partners are eating the future partners’ lunch. Why would anyone sensible continue to labour away for the promise of a partnership that has been permanently devalued?
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Let's be clear - this is about the equity partners wanting to cash out.
They may well be perfectly entitled to do that, but let's not get confused by any flannel about needing cash to fund expansion or invest in technology.
Time will tell as to whether future partners will want to stick around to split their earnings with shareholders, or will move to ply their trade elsewhere.
Given the robust market for lateral partner recruitment, surely Mishcon partners (once any initial lock in period ends) will be easy pickings for recruiters.
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Despicable - the current generation gets to cash in the work of many generations of partners. The share thing is just a very standard "incentive" for plc staff. This is not about lawyering and it will end badly for investors.
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@ Don’t Understand 30 April 21 09:20
Presumably you wouldn't go there if you wanted equity. In the future the legal business of the firm will be run by well paid salaried partners.
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Agree completely with Don't Understand.
Yes, sure there are benefits of being a listed company at the more junior end, potential for stock options and some wedge earlier on, but as you say, you're then becoming a salaried employee (who happens to be invested in the company you work for) - there's only so much profit law firms can make and I don't see why you'd want to share it. Quite frankly at this stage the only thing that has kept me at my current firm is despite its very slim partnership prospects is that, even if it takes a couple more years to get into the equity than it might do at a lesser firm, even at the bottom end of the equity is well over PEP at the vast majority of places I could move too! If the firm were to list (fortunately I can't see it ever happening) I'd be off without giving it a moments thought.
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This is a move driven purely by the greed of an ageing senior management desperate to cling onto the golden goose. Any senior associate (or frankly anyone with ambition at Mishcon) will surely be looking to the exit as they face the prospect of being in a permanent underclass who missed out on the initial event. Look for an exodus of talent after the seven year lock-in period has ended.
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I’m fairly certain Mischcon can issue shares to employees through workplace schemes - so it is hardly the generous move it is being positioned as.
I can see the argument for IPOs in legal services where there are potential benefits to having more flexible capital structures. Document management, disclosure, AI tools etc - all of these functionalities lend themselves well to IPOs.
It is difficult to see how the core business of Mischcon’s will be enhanced by an IPO, unless the plan is to replicate what Richard Caring has done with The Ivy (and Ayesha Vardag’s has done with Vardags) - by replicating the ‘master’ with spin off restaurants/branches.
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Judging by the horror stories coming out of one listed firm, life after an IPO is horrific. The ever revolving door, the enforced pay cuts, the constant “redundancies”, hourly rate rises to try and hide what’s really going on.
Best to steer clear and if you are unfortunate enough to find yourself in a firm that has, or wants to list, move on quickly.
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Completely agree. This is 100% a cash grab by the senior equity partners and nothing more. Any senior associates should be looking for the exit.
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Agree it’s bad for th junior lawyers, but it’ll be great for investors for at least some time.
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@ 11:15
"Any senior associates should be looking for the exit"
even the ones that wouldn't make equity anyway or you saying that equity's there for all senior associates?
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Once you have external shareholders, it's all about the money. Obviously, that's important, but not at the expense of everything else.
Look at the way most banks are run. Is that where we are heading?
I'm not sure to what extent it is a useful comparison but there were 6,400 complaints to the Legal Ombudsman in 2019/20 versus 271,000 to the Financial Ombudsman service.
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To offer a contrary view: what this shows is that UK law firms are under more strategic pressure than their financials might suggest. At one end they are increasingly facing talent and pay wars with US / global elite firms that can easily outmuscle them (this will have the added effect of making access to equity partnership ever-tighter bordering on unattainable for SAs in any event) . At the other, larger firms are offering a more comprehensive range of services (both in terms of practice area and geographic spread, enabled increasingly by technology and process improvement to maintain profitability) than MDR does. Competing at either end of the market requires significant investment just to keep pace. Talk of today’s partners eating tomorrow’s partners lunch misses the broader point: does MDR still want to exist in some recognisable format in 30, 40, 50 years time? Clearly management takes the view that, if so, the only way to do that is to raise a larger investment war chest via the external market than current partners would be willing to contribute via lower PEP. How different things might have been for, say, Olswang had they gone down this route.
The issue, as ever, to look out for are details in the prospectus on where exactly the money will go...
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No pay rises for many of us at our listed shop because it’s all about the investors and Bosso.
I don’t know anybody here who isn’t looking for a new job.
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Why anyone would stay at a listed shop is beyond me.
Part of the deal is that one day partnership might be an option. The partners hand the firm on to the next generation. That is why, in theory, associates show loyalty to them and the firm.
PE and shareholder structures are never going to understand that. It also violates the idea of law as a learned profession rather than any other sort of job.
bad move. Hope it isn’t more widely replicated.
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Listed. Not listed. Partnership. Clients don’t care. Strikes me that the bluster in these comments totally ignores the external factors at play.
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The external factors? They need money for long term IT projects - that's about it. That's all a law firm really needs money for. What else is there?
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Now future lawyers at Mischon can join me in what we call in the US a "PINO" (Partner in name only). Enjoy non-equity purgatory while getting killed by the taxman. Get out now while you can. I am heading for the exit myself this summer! Good luck.
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You are not a real partner if you are merely a salaried employee with no say in the running of the business. Partner in name yes (to maximize fees operating on a platform GCs understand) but in reality you’re nothing more than an associate.
It may suit some but not all.
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@10:47 - sounds like that furniture store.
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Anonymous 20:35
I was thinking more along the lines of King Arthur and a Round Table myself!