Sell, sell, sell – what In-Deed tells us about law firm flotation

Posted by Neil Rose, Editor, Legal Futures

Market listing: hurdles for law firms to overcome

I don’t know much about the financial markets – that’s one of the many reasons I became a solicitor donkey’s years ago. So I don’t quite get how a company like online conveyancing business In-Deed, which with the best will in the world is currently little more than an idea, can , have a market capitalisation of £8.6m and within a couple of days see its share price rise a third, from 42p to 56p. The service only actually launched last month.

To my uneducated eye, it looks like a considerable gamble to invest in an untested business model, however pukka the people behind it may be. This is a fact the AIM admission document recognises. Chief among the risk factors is that the company has no history and so there is “no basis on which to evaluate [its] ability to achieve its business objective, implement its investment policy and provide a satisfactory investment return”.

Thus: “Whilst the directors believe there exists a viable market for the company’s service, there can be no assurance that the technology or the website will prove to be either attractive to consumers or successful.”

I suspect that people are investing in the personalities behind In-Deed, who have a strong track record in both the property and conveyancing markets.

So what does this tell us? Aside from confirming that I am an innocent abroad in the world of finance (so feel free to tell me this is nonsense), it shows me that raising capital is actually not that difficult. You don’t need several years of trading behind you. You don’t need to actually produce something (were this personal injury, In-Deed would be called a claims management company).

What you do need is a good idea, some good people, a few signs that you’re serious (such as In-Deed’s deal to advertise on what, collectively, are the most viewed property websites in the land), maybe a TV personality to front your ads, and off you go.

And so, when alternative business structures finally happen, the idea that law firms could go public might not be as far off (or as far-fetched) as some think. They could raise a substantial amount of money, and quickly, to fund new ventures. Investors do put money in “people businesses” and legal ones too – Scottish patent and trade mark attorneys Murgitroyd seem to have done pretty well out of being on AIM for the past decade to judge by the huge growth delivered in that time.

You don’t even have to be big. In-Deed employs seven people, although it is dramatically increasingly its headcount in the autumn. To nine.

Law firms face other hurdles with listing, such as the partnership structure, the discipline of having external investors around the table, public scrutiny and having your share price buffeted by forces well beyond your control.

Conflicts may not be as bad a problem as might be imagined, however. The global pioneer of law firm listings, Australia’s Slater & Gordon, has reported no problems with explicitly putting its duty to the court and to its clients ahead of its duty to shareholders, so that should not unduly hold lawyers back.

So overall it’s not unfeasible – and to prove how quickly your horizons can stretch once you’ve done it, look no further than Slater & Gordon once more. As we reported last year, the firm is eyeing the UK market.

“Are we looking with interest at what’s happening in England and Wales? Of course we are,” said managing director Andrew Grech. “We have no immediate short-term plans, but if the right opportunity arose, we would consider it – it would be careless of us not to.”


    Readers Comments

  • RGBSenex says:

    Two thoughts here:

    It’s going a bit South Sea Bubble with a prospectus like that.

    Talk to a surveyor who works for a listed “Big Agent” and see what motiviates them to get out of bed in the morning.

  • Paul says:

    I’m not in the legal trade at all, apart from some litigation funding projects but the same thesis from my point of view applies. Only two groups of people benefit for sure from any IPO- the shareholders ant the bankers. Doesn’t matter how diverse the companies are from Facebook to Glencore the buyers today will be happier than the buyers at issue. Of course the lawyers associated with the deal walk away smiling as well. P

  • It is actually quite hard to raise capital – especially taking the Aim route. It’s very high calorie, and usually better for the advisers than the PBI. Exhausting, with round after round of pitching to cynical suits – the raising is just the start too – it gets worse every quarter.

    InDeed are a simple pitch – asking to raise £1.2m to have a go at the (fairly commoditised now) Rightmove market with the appropriate worthies supplying nous. Not much here in the way of latent markets or first moving advantages. £1.2m is not much, but it also doesn’t need to be much – it no longer takes millions to scale the heights of the legal information services citadels.

    The financial story here is – is this all the AIM market can come up with in the mega billion legal services deregulation bubble? Most VCs wouldn’t get out of bed for this amount in fees, let alone capital raised.

    Good luck to them.

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