Legal Business Blogs

DWF valued at £366m ahead of £95m IPO this week

DWF will be valued at about £366m when it lists on the main market of the London Stock Exchange this week, making it the largest law firm float to date.

The firm said today (11 March) the total offer size is £95m, at 122 pence a share, representing 26% of the company’s issued share capital. Of that, £19m will be used to repay a portion of members’ capital contribution to DWF, up to £10m will be used to invest in IT and the development of its managed services platform, with the remainder for general corporate purposes, working capital and to fund any future potential acquisitions.

DWF expects to be fully admitted to the stock exchange on Friday morning, and is the sixth UK law firm to list. The £95m capital raise is ahead of the £75m it said it intended to raise in February. A £366m market capitalisation is, however, slightly below the widely touted expected range of £400-£600m.

Legal Business’ analysis last year had suggested a valuation of closer to £250m-£300m, based on DWF’s relatively low profitability and an analysis of previous law firm floats. DWF’s equity partners face an upfront equity reduction of 60% – profit per equity partner was £327,000 last year – while the profit share reduction of non-equity partners’ is 10%. That equity partner reduction is further than previous floats.

DWF chief executive Andrew Leaitherland told Legal Business in February this balance would be similar to current equity partner remuneration: ‘They won’t be ahead of what they were but they’re not going to be a million miles apart. The difference is they will have a capital opportunity rather than just an income opportunity.’

Partners will also be locked in for five years, with shares released in tranches of 10% each year following the firm’s financial results in 2020 and a further 10% based on performance. Locked up equity can be released for those considered a ‘good leaver’ while there are provisions to claw back equity for those considered a ‘bad leaver’.

Leaitherland said today: ‘DWF and its partner group see this as the start of the next phase of DWF’s evolution and we are very pleased by the support shown by our new investors. We see substantial, long-term opportunity, to build on our strong track record and further develop and grow our Complex, Managed and Connected Services capabilities, while attracting and retaining the best talent, investing in technology and carrying out targeted M&A.’

He added: ‘The IPO is only the start and I am confident in DWF’s strong fundamentals and continued growth prospects as a listed company.’

Leaitherland will be entitled to a basic annual salary of £530,000 with an IPO, with share incentive plans and other perks. Chief financial officer Christopher Stefani’s base salary will be £320,000.

DWF has put considerable investment into the IPO, working with US investment bank Stifel on the planned listing since October 2017. Investment bank Jefferies was joint global coordinator on the deal, which is the first UK IPO of 2019. Jefferies said the deal attracted strong interest from UK long-only investors and income funds, mid-cap specialists and selective interest from US-based investors.

In December, the firm hired former Lucozade Ribena Suntory GC Mollie Stoker to join its executive board and act as counsel to senior management on the firm’s M&A activity. She will also become company secretary with the listing.

Stoker follows DWF securing in October an exclusive relationship with $81m-revenue US firm Wood Smith Henning & Berman, as well as the hire of one of the architects behind Freshfields Bruckhaus Deringer’s Manchester legal services hub, Anup Kollanethu. DWF also turned heads with the 2017 appointment of former DLA Piper leader Sir Nigel Knowles as its chairman.

(£) For an in-depth assessment of law firm IPOs see last year’s cover feature, ‘No free lunch’