Legal Business Blogs

Hope floats: DWF seeks £75m from expected March IPO

DWF is planning to raise around £75m in an expected listing on the London Stock Exchange next month.

The firm said today (8 February) it expects to have a free float of at least 25% of its issued share capital following the initial public offering (IPO), with a final offer price announced following a marketing and book-building process.

Raising £75m would make it the largest law firm listing to date, ahead of the £50m Knights rose in June last year. The firm says it is targeting a dividend of up to 70% of profit after tax.

DWF said the money will be used to repay a portion of members’ capital contributions, to invest in operations and infrastructure, provide working capital for general corporate purposes and to fund potential acquisitions, as well as paying costs related to the float.

Partners who have received shares in the company for the capital they have paid into the business will also be expected to sell shares in the listing, and are expected to hold a majority of shares after admission.

The upfront equity reduction for equity partners is 60% – profit per equity partner was £327,000 last year – while the profit share of non-equity partners’ is 10%.  Each will continue to be self-employed members, effectively a partnership owned by a plc, but instead of being compensated on a variable equity share, each partner will be on a fixed annual share. They will also receive dividend income and participate in an annual partner bonus pool, expected to be 5% of the group’s pre-tax profits.

Chief executive Andrew Leaitherland told Legal Business last week 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.’

DWF’s registration document says 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.

The partners will 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’.

DWF has put considerable investment into the IPO, which would be the sixth UK law firm float to date. It has been working with US investment bank Stifel on the planned listing since October 2017. 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 if DWF proceeds with its LSE 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’