Legal Business

Revolving doors: Freshfields hire to leave DWF managed services role after less than a year

Revolving doors: Freshfields hire to leave DWF managed services role after less than a year

DWF’s New Law credentials have been dealt a blow as its managed services chief executive is set to leave the firm less than a year after his arrival in the first major exit since the firm completed its IPO in March.

Anup Kollanethu was initially hired from Freshfields Bruckhaus Deringer, where he led the Magic Circle firm’s Manchester office for over three years and established himself as a well-regarded chief of business operations.

But Kollanethu is now set to be replaced by Mark St John Qualter, who will assume the role of chief executive of DWF’s managed services division after joining from RBS. At RBS St John Qualter headed the artificial intelligence arm of the bank’s commercial and private banking business. Kollanethu will remain at DWF throughout the transition period.

Kollanethu arrived at DWF with a strong reputation, having overseen Freshfields’ combined legal and business services centre in Manchester. The hub opened as part of the firm’s 2015 shake-up which saw the mass relocation of support roles to the north of the country.

In March DWF completed its much-anticipated listing with a £95m IPO, becoming the UK’s largest listed law firm. Subsequently the firm made its first post-IPO splash with a £3m Warsaw office acquisition in May, bringing K&L Gates’ 11-partner team into the fold. The managed services division at DWF remains one of the fastest-growing areas of the firm’s business.

In a statement, DWF said: ‘Anup Kollanethu, the current CEO of managed services, has been instrumental in establishing DWF’s managed services offering. Anup has decided to leave DWF and we wish him every success with his future.’

thomas.alan@legalbusiness.co.uk

Legal Business

Australia pull continues as Dentons, DWF and LOD announce expansion

Australia pull continues as Dentons, DWF and LOD announce expansion

Described in some quarters as an overlawyered market for a country with a population of 25 million, Australia continues to attract investment from the international legal industry in all its shapes and forms. Global giant Dentons, recently-listed DWF and New Law outfit Lawyers On Demand (LOD) have all expanded their presence in the country.

Just over two years after entering Australia through a merger with national firm Gadens, Dentons has hit the 280-lawyer mark in the country after absorbing Adelaide-based Fisher Jeffries. ‘This completes our footprint across the major cities in Australia,’ regional chair and chief executive Doug Stipanicev told Legal Business.

Legal Business

DWF makes first post-IPO splash with £3m Warsaw office acquisition

DWF makes first post-IPO splash with £3m Warsaw office acquisition

DWF is expanding into Poland with the £3m acquisition of K&L Gates’ 11-partner Warsaw office, its first investment since going public in March.

The move, expected to complete later this month, will see 45 lawyers and 31 support staff join DWF alongside the 11 partners in the firm’s first Poland office and seventh in continental Europe. K&L Gates Warsaw managing partner Michal Pawlowski will lead the office, which is expected to generate about £7m in revenue for the year to 30 April 2020.

It is DWF’s first acquisition post-IPO, when the firm rose £95m for a market cap of £366m, below the lower end of expectations. Of the capital raise, £19m was for repaying a portion of members’ capital contributions to DWF, up to £10m for investing 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 chief executive Andrew Leaitherland commented: ‘This move will strengthen DWF’s capabilities in our global sectors of financial services and real estate, among others, and provides further opportunities in technology and energy where our businesses have strong alignment.’

He added: ‘Poland has a strong and dynamic economy and is an important gateway to central, eastern and south-eastern Europe as a whole. Having a presence there delivers on our international strategy to be where our clients need us to be.’

A K&L Gates spokesperson said: ‘After a careful and thorough assessment of our clients’ needs against the backdrop of economic and related trends, current and future opportunities and factors in the market, and the great strength of the firm’s other offerings in Europe in particular and elsewhere, K&L Gates previously determined that it was in the best interest of the firm to separate from the practice based in Warsaw. The Warsaw-based lawyers are now in the process of joining with another firm and we are working with them on an amicable termination of our remaining relationship.’

DWF’s other European offices include Brussels, Paris, Milan, as well as three in Germany. The Warsaw office will take the firm’s overall headcount to more than 3,200 across 28 offices in four continents.

The firm put considerable investment into the IPO and is expected to make a number of post-listing acquisitions. In December, the firm hired former Lucozade Ribena Suntory GC Mollie Stoker as company secretary, following 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.

Hamish.mcnicol@legalbusiness.co.uk

Legal Business

DWF becomes UK’s largest listed law firm as it completes £95m IPO

DWF becomes UK’s largest listed law firm as it completes £95m IPO

After announcing its record £95m IPO on Monday (11 March), DWF has today (15 March) issued 300,000,000 shares and been admitted to the main board of the London Stock Exchange.

With a £366m valuation and offer size of £95m, DWF has officially become the UK’s largest listed law firm. £19m of the proceeds will be used to repay a portion of members’ capital contribution to DWF, with £10m earmarked for IT investment and the remainder reserved for general corporate purposes.

Allen & Overy (A&O) advised DWF on the float, with a team led by London corporate partner Gillian Holgate. A total of 17 A&O offices were involved in the mandate. Holgate commented: ‘This transformational transaction will enable DWF to capitalise on the positive trends in the markets in which it operates and to continue to expand its international and differentiated offerings.’

While it is a record figure, the £366m market capitalisation is below the expected range of £400m and £600m. The £95m capital raise however, trumps the £75m sum that was mooted by DWF in February.

As a result of the IPO, DWF’s equity partners face an upfront equity reduction of 60% – profit per equity partner was £327,000 last year – while non-equity partners can expect to see a profit share reduction of 10%.

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. Equity can be release for those considered ‘good leavers’, while ‘bad leavers’ run the risk of having equity clawed back.

The firm’s chief executive, Andrew Leaitherland, is in entitled to a basic annual salary of £530,000 following the IPO, with chief financial officer Christopher Stefani entitled to £320,000.

The previous record for the UK’s largest listed firm belonged to Ince Gordon Dadds, the milestone reached when Ince & Co and Gordon Dadds combined last year.

At press time, DWF shares were trading at 124p.

tom.baker@legalease.co.uk

Legal Business

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

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.

Hamish.mcnicol@legalbusiness.co.uk

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

Legal Business

Comment: It’ll take more than a float to make DWF the new DLA

Comment: It’ll take more than a float to make DWF the new DLA

Regular readers will have to forgive two columns in one issue on capitalising law firms but the day I write this piece DWF has finally set out its stall for that much-touted public float. As can be gleaned from last autumn’s cover feature on law firm IPOs, there is a considerable scepticism regarding the rhetoric surrounding DWF’s planned float, which, if it goes ahead, would be on the main market.

Despite initial talk of £1bn valuations, even the more modest £400m-£600m range some were circulating is seen as a huge stretch by a number of the advisers that have worked in this area.

The reasons for caution are obvious: DWF has a high equity partner/fee-earner leverage, low margins for a top 50 practice, high debt levels for a law firm and, until recently, was demonstrating pedestrian levels of organic expansion in its core UK business. After all, it’s not as if two of its core markets – insurance and employment – are high-growth or high margin areas. While growth has apparently picked up in the last two years alongside a sustained international push, a sizeable chunk of this appears to be through bolt-ons rather than a buzzing underlying business.

And, as predicted, DWF’s float will require partners to give up a huge chunk of cheese to increase the core corporate profit pool – 60% in the case of equity partners, an eye-watering amount, even if it should come back via dividends and bonus schemes. It’s just as well partners are agreeing to a five-year lock-in because that’s a lot of capital to put at risk.

DWF’s float will require partners to give up a huge chunk of cheese to increase the core corporate profit pool.

Moreover, many legal veterans are yet to be convinced by DWF’s sledge-hammer subtle attempts to replicate the DLA Piper phenomena without the benefits of DLA’s quality mid-market finance/disputes spine. This is not the flux of the 1990s and early 2000s, when the legal pecking order was in constant churn – repeating the Knowles glory days is a huge ask even with Sir Nigel now working at DWF.

Then there is the wider debate of how well public floats fit the model of law firms. In many cases the answer appears to be: ‘not very well’, with the exception of firms focused on volume work and the building of new law business models (which, to be fair, sounds like DWF).

While it is easy to see the case for fresh means of generating capital, at first glance retaining some profits (see Pritchard), securitising income on volume businesses, or floating New Law arms in which partners retain an equity stake appear more viable options for many major firms.

Nevertheless, DWF’s float will be a significant moment for the legal industry, attracting attention far beyond these shores. If nothing else, DWF must be saluted for daring to put its convictions to the test. In a profession that currently does a far better job of talking up its fresh-thinking than delivering real innovation, that must carry some weight and will alone garner much free publicity.

But as the long-term legacy of Knowles’ career increasingly demonstrates, as valuable as style can be, it has to be consistently kept in balance with substance. And that balance DWF has yet to establish.

alex.novarese@legalease.co.uk

For more on DWF’s float, see No free lunch – Will law firm IPOs be the next big thing?

Legal Business

It’ll take more than a float to make DWF the new DLA

It’ll take more than a float to make DWF the new DLA

Regular readers will have to forgive two columns in one issue on capitalising law firms but the day I write this piece DWF has finally set out its stall for that much-touted public float. As can be gleaned from last autumn’s cover feature on law firm IPOs, there is a considerable scepticism regarding the rhetoric surrounding DWF’s planned float, which, if it goes ahead, would be on the main market.

Despite initial talk of £1bn valuations, even the more modest £400m-£600m range some were circulating is seen as a huge stretch by a number of the advisers that have worked in this area.

Legal Business

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

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.

Hamish.mcnicol@legalbusiness.co.uk

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

Legal Business

DWF equity partners stump up 60% profit share to fire up planned float

DWF equity partners stump up 60% profit share to fire up planned float

DWF’s equity partners will be paid 40% of what they used to earn in an anticipated stock exchange listing, although the resulting dividend yield on shares is expected to leave their total compensation not ‘a million miles apart’ from current remuneration.

DWF today (31 January) released further details ahead of an anticipated London Stock Exchange main board listing in the first quarter of this year. The firm’s full registration document is expected to be published later today, awaiting approval from the UK Financial Conduct Authority (FCA).

The top 25-UK law firm’s equity and non-equity partners – 68 and 241 respectively last year – are participating in the float, although each will continue to be self-employed members, effectively a partnership owned by a plc. Instead of being compensated on a variable equity share, however, each partner will be on a fixed annual share and receive dividend income and participate in an annual partner bonus pool, expected to be 5% of the group’s pre-tax profits.

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%. Law firm floats need to create a corporate profit for investors separate to partners’ drawings. At least 25% of its equity is expected to floated.

DWF chief executive Andrew Leaitherland told Legal Business: ‘If you’re an equity partner, you’re going to be on a fixed profit share which is 40% of what you used to earn and then in addition to that you’ll get dividends based on the capital you’ve got allocated to you.’

Asked whether the balance would be similar to current equity partner remuneration, Leaitherland said: ‘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.’

Leaitherland could not reveal what the group’s forecast earnings before interest, tax and depreciation and amortisation would be, however, because of the ongoing IPO process. This figure would provide an indication of what market valuation the firm might achieve, with Leaitherland not able to provide details on the figure, either.

He commented: ‘We’ve been out there for numerous weeks meeting with potential investors and they like what they see, which is great.’

A valuation in the region of £400m-£600m has previously been tipped  but relatively low profitability suggests a valuation closer to £250m-£300m, based on previous law firm floats.

Each partner is also on a phased five-year lock-in which expires on the announcement of the group’s financial results in April 2024.  Equity partners will be able to withdraw a maximum of 20% of their capital from the business over that time.

The firm has put considerable investment into the IPO, which would be the sixth, and likely largest, UK law firm float to date. It has been working with US investment bank Stifel on the float since October 2017.

DWF also announced today its revenue for the six months to 31 October 2018 was up 18% to £133.4m, with 14% of that said to be organic growth – excluding any acquisitions made in the 12 months prior.

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.

Hamish.mcnicol@legalbusiness.co.uk

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

Legal Business

Pre-float DWF hires GC as another litigation funder lists and Burford secures $1.6bn

Pre-float DWF hires GC as another litigation funder lists and Burford secures $1.6bn

DWF has appointed a group general counsel (GC) ahead of its touted London Stock Exchange (LSE) listing early next year.

Litigation finance, meanwhile, has attracted more investor cash after Australian funder Litigation Capital Management (LCM) rose £20m on listing and Burford Capital secured £1.6bn in funding for new litigation investments. 

DWF said today (19 December) former Lucozade Ribena Suntory GC Mollie Stoker will join the firm as GC in January. Stoker is director of business development at Suntory Beverage and Food Europe and was Lucozade GC from 2014 to 2017.

Stoker will join DWF’s executive board and will 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.

The top-25 UK firm said in June 2018 it was considering an initial public offering (IPO), but it has been working with US investment bank Stifel on the float, targeted as a main board listing, since October 2017. The firm is believed to be seeking an early 2019 listing.

While the firm’s revenue has grown 25% over the last five years to £236m for 2017/18, it is struggling for profitability, with a profit per lawyer well below top 25 peers at just £23,000 last year. The profit margin is just 11%.

A valuation in the region of £400-£600m has previously been tipped but the low profitability suggests a valuation closer to £250m, based on previous law firm floats.

DWF chief executive and managing partner Andrew Leaitherland commented on Stoker’s hire: ‘Her strong background in corporate law, M&A and corporate governance, coupled with a high degree of commercial acumen will be valuable as we continue to grow the business globally.’

Stoker added: ‘This is an exciting time to join DWF. I look forward to supporting the business as it prepares for the next phase of its development.’

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.

Meanwhile, litigation funder LCM has listed on the LSE’s Alternative Investment Market (AIM), raising £20m at a market capitalisation of £56.5m. The firm recently launched its EMEA operations by opening an office in London, led by vice-chairman Nick Rowles-Davies, as well as an office in Singapore.

Rowles-Davies, formerly of Burford, had founded litigation financier Chancery Capital in 2017, but that business is understood to be folding into LCM. LCM recently de-listed from the Australian Stock Exchange and intends to use the £20m to fund its existing portfolio and for new pipeline opportunities.

LCM chief executive Patrick Moloney commented: ‘Being a London listed company positions us to fund an attractive, qualified pipeline of future projects and grow the business through the access to capital and a broadening of our shareholder base.’

He added: ‘Litigation financing is a growing alternative asset class uncorrelated with economic cycles, and we believe that we are now well-positioned to take advantage of the increasing number of opportunities across the sector globally.’

The listing comes shortly after fellow litigation financier, Vannin Capital, pulled its own IPO due to market volatility.

Finally, Burford said it had secured $1.6bn in funding for new litigation investments, following a strategic partnership with an unnamed sovereign wealth fund, a new private investment fund, and its own balance sheet. The wealth fund will provide $667m.

Burford chief executive Christopher Bogart commented: ‘Our success in being able to attract substantial long-term capital positions Burford to sustain its competitive advantage in the global legal finance industry.’

hamish.mcnicol@legalease.co.uk

For more on what tapping the capital markets would mean for major law firms, read our special reportNo free lunch – will law firm IPOs be the next big thing?