Stock exchange: Largest listed law firm on horizon
DWF will raise around £75m from listing on the London Stock Exchange, the firm said today as it announced its plan to float in March.
Confirming that it had received a positive reaction from investors to last month’s notice of intention to list [1], the global practice said at least 25% of its shares would be in free float – the minimum required.
This will be made up of both new shares and shares sold by partners. The firm is expected to be valued at £400-600m.
The proceeds will be used for three main purposes: to repay a portion of the members’ capital contribution, to invest in operations and infrastructure, and to fund working capital for general corporate purposes as well as potential funding for future acquisitions.
It will also cover the costs of the float and reorganisation that goes with it.
This will all make DWF the first law firm to list on the main exchange and by far the biggest on the market to date.
Equity partners will be expected to sell only a minority of their shares on admission and will be subject to a “lock-up” expiring on the announcement of DWF’s results for the financial year ending 30 April 2024.
They will be released from the lock-up in equal tranches following announcement of the results each year starting from 2020, and being phased at 10% of each individual’s holding for each period, and a further 10% of each individual’s holding released for each period subject to individual performance.
Locked-up equity will also be released in the event a partner is a ‘good leaver’, but it will be clawed back if they are a ‘bad leaver’ during the lock-up period, and in relation to the performance tranches, if they do not meet their targets.
All of the 320 or so DWF partners will move onto a fixed profit share after the listing, with equity partners receiving 40% of their previous year’s income, and fixed-share partners 90%.
Dividends will make up some of the shortfall for equity partners, but chief executive Andrew Leaitherland told Legal Futures recently [2] that they would not make as much, although this did not take account of the “capital opportunity”.
“It will be a haircut for people but we’re not doing this with a view to making more money,” he said.
Some 10% of shares will go into an employee benefit trust that can award shares based on performance and promotion, and also to help recruitment, while 2.5% of the equity will be allocated to employees – subject to a certain length of service – on admission, and there will also be ongoing opportunities, such as buy as you earn schemes.
Today’s announcement also said DWF’s dividend policy would aim to retain sufficient capital to fund ongoing operating requirements and invest in its long-term growth, meaning a dividend payout ratio of up to 70% of profit after tax.