Professional firms: preparing for an IPO

Despite the uncertainties around Brexit, the regulatory environment and the economy in general, the majority of professional firms who took part in our annual Law Firm Benchmarking surprised us all in the last two years by demonstrating revenue growth, with a large proportion of firms also enjoying improved profits.

Six firms have now completed their admissions to London’s capital markets.

Why consider an IPO

Going public offers professional firms a route to raise equity capital rather than relying on partners’ capital or bank debt. This allows firms to be flexible for growth by acquisition and retain partners. In a market where staff like to retain fluidity with their career prospects, the importance of being associated with a well-regarded firm is strong.

A successful flotation offers benefits for professional firms, although there are a number of factors to consider when undergoing an IPO. Our team can help develop a step by step plan to ensure you are ready to list at the right moment.

Why perform an IPO readiness review?

If executed well, an IPO can be one of the most transformative and rewarding events, but the level of work required to complete one is frequently underestimated.

In the current financial climate, timing the execution of an IPO is fundamental to its success. However it is often the case that deficiencies and stumbling blocks are identified well into an IPO process bringing stress and costly delays.

An IPO readiness review aims to identify potential issues before the process commences. This enables the path ahead to be cleared in an efficient and timely manner and therefore significantly shortening the IPO timeline when it is decided that the time is right.

Our approach to your IPO readiness review

With a focus on both the financial and commercial aspects of your firm, our primary goal is to understand what makes your business tick and your vision for the future. We aim to do this in an efficient manner whilst seeking to minimise the impact on senior management. Once this has been completed, we will issue a brief report containing practical advice and recommendations, highlighting and prioritising areas of concern.

Our IPO readiness reviews are performed by experienced members of our Capital Markets team in conjunction with specialist support from our professional practices team.

Areas we consider

Clear story		Does the firm have a clear strategy and realistic business plan? Is this reflected in its historical financial performance? Is there a clear vision for the future as a public company? What is the likely investment appetite?
Market		Which market would be most appropriate (Main, AIM, NEX)? Will the company have a dual listing? What is the anticipated free float? Is there positive market sentiment in the sector?
Management team		Is the board and management structure suitable for a listed company? Will additional non-executive directors be required? What will the impact of the Corporate Governance Code be? Are key finance roles filled appropriately and is there sufficient resource to cope with the demands of the IPO process?
Corporate structuring and taxation		Is the corporate structure and jurisdiction appropriate? Have you considered the type of corporate vehicle you will IPO? Is it designed to be tax efficient, while ensuring adequate distributable reserves? Are there non-core activities that need to be disposed of? Is there a potential tax exposure which needs to be addressed before IPO? Are there any other considerations?
Historical financial information		Does the company have three years’ audited financial information? Will a new opinion from the reporting accountants be required? Which financial reporting framework does the company follow and will conversion (e.g. to IFRS) be required?
Financial reporting procedures		Are these appropriate for a listed company? Are financial processes, controls and the IT environment established? How are these controls currently documented?
Due diligence preparation		What financial and legal information will be required? Has work commenced on gathering this documentation?
Timetable to IPO		What is feasible? When would be optimum for fundraising?
Debt structure		Have you evaluated the optimal debt structure pre and post IPO? Are the existing facilities suitable to support an IPO?