By Brian Baxter, From The Am Law Daily
A month after Gateley announced that it would become the first law firm in the U.K. to tap into public markets, the 350-lawyer regional midmarket shop raised more than $45 million in an initial public offering on London’s Alternative Investment Market.
Michael Ward, Gateley’s Birmingham, England-based senior partner, told The Am Law Daily that there was no ringing of the bell on Monday to signal the law firm’s landmark IPO.
Instead, an automated electronic scoreboard ushered in another day of trading on the AIM—a submarket of the London Stock Exchange that caters to small-cap companies—as Gateley partners sold 31.6 million shares (or roughly 30 percent) of their firm to institutional investors led by Schroder Investment Management and Miton Asset Management.
Schroder and Miton will see their stakes in Gateley valued at $12.3 million and $8.6 million, respectively, says Ward. Gateley clients will own another 3.8 percent stake in the firm, he adds, and Gateley’s partners are poised to receive $38.3 million from the IPO, while the firm itself took in $7.7 million to use as working capital. (All U.S. dollar valuations have been converted from pounds sterling at current exchange rates.)
Ward says Gateley partners can use the proceeds from its public listing however they see fit, but he notes that they will be held to the firm for a five-year lockup period that will affect their access to IPO cash and shares. Ward says Gateley has 104 total partners broken out into three tiers, although only 81 sold shares in the firm’s IPO.
Public filings related to the listing show that Ward, a corporate restructuring and shareholder disputes expert, is one of four senior partners who will each own a 3.12 percent stake in the firm, now valued at roughly $153.3 million after its Monday float. Another three Gateley partners own stakes of between 2.4 percent and 2.75 percent in the firm, formed through a 2006 merger between Scotland’s Henderson Boyd Jackson and Birmingham-based Gateley Wareing.
The combined firm, which absorbed a London shipping boutique in 2007, adopted the Gateley moniker through a 2011 rebranding, the same year England and Wales ushered in new laws allowing nonlawyers to invest in law firms through alternative business structures (ABS). Gateley is the first U.K. firm to take advantage of the ABS change, but Ward says he didn’t set out to be a trailblazer.
“I guess we have somewhat of a competitive advantage in being first, and we’ve always been an entrepreneurial firm, but the IPO process is not ideal for everyone,” says Ward. “We had three partnership votes [on whether to go public] … and there were significant regulatory and tax hurdles to overcome.”
Advising Gateley during its pursuit of an IPO was a firm that Ward calls the best one possible: his own. Gateley handled the going-public process internally, but allowed Field Fisher Waterhouse, a fellow British firm counseling its financial adviser Cantor Fitzgerald, a wider degree of latitude in order to alleviate potential investor concerns about conflicts.
“If there’s one thing I’ve learned through this process, it’s that I don’t like paying professional fees, but I do like receiving them,” says Ward, half-jokingly.
The $45 million raised by Gateley through its IPO surpasses the $30 million that Australia’s Slater & Gordon brought in back in 2007 when it became the first major law firm to go public. Since then Slater & Gordon—whose managing director was honored by The American Lawyer as an industry innovator in 2013—has gone on an acquisition spree, expanding into the U.K. and earlier this year paying $947 million to acquire the legal services arm of insurance claims processor Quindell.
Gateley, which has nine offices in the U.K. and an outpost in Dubai, isn’t planning on entering a bunch of new markets around the world. Ward says Gateley will be “acquisitive” and wants to “diversify our offerings,” but will do so in areas that play to the firm’s strengths, potentially looking at human resource consultancies or real estate outfits to bring into the fold.
Ward says that about 25 percent of Gateley’s annual gross revenue—the firm took in more than $80 million during its most recent fiscal year—comes from commercial, corporate and M&A work. Gateley also does a fair amount of banking and commercial real estate work, Ward says, and is strong in pensions, employment litigation and corporate recovery and insolvency.
Gateley, whose shares rose in early trading Monday, isn’t the only firm in the U.K. to go the ABS route in recent weeks.
The Am Law Daily reported in April on Cahill Gordon & Reindel’s decision to utilize ABS to better administratively manage its new London office, while sibling publication The Asian Lawyer recently explored a domestic Chinese firm’s adoption of ABS to launch its own operations in the U.K.
IMAGE: Birmingham, England. Photo by Chris Ratcliffe/Getty Images
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