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The Flotation of Commercial Law Firms

 3 min read / 

Gateley PLC became the first law firm to float on the London stock exchange, listing itself as a public limited company and has possibly opened the floodgates for similar firms to gain additional forms of capitalisation. Certainly, the future for firms has changed with alternative business structures (ABS), and perhaps clients are looking for cost-effective ways to secure legal advice with forthcoming transactions and deals. The private practice firms are certainly lacking this, as the economy continues to slowly grow. The future for firms, however, continues to remain uncertain. Gateley’s business model might be the turning point for growing, successful law firms.

The benefits of floating a firm

There are three main reasons for such a floatation. Gateley can create a liquidity event for its current shareholders without having to sell the business in its entirety. The senior partners will control the companies finances, but will be answerable to its shareholders.

There may be other investors who have provided venture capital. Venture capitalists provide capital that is at risk. They need to sell their shares in those businesses that are successful to attribute returns to their limited partners. There was a risk in this particular instance. Most firms are limited liability partnerships (LLPs). The firm’s partners can inject capital into the business as a way of raising finance. However, the Legal Services Act 2007 has been a crucial law, insofar that it has opened the doors for non-lawyers to own and invest in firms that adopt an ABS. The ABS structure enables firms to be owned by other companies but also allows them to attract investment in the stock market. The biggest risk entailed with floating a firm is cost. Every factor concerned with commercial growth envelops cost. Many firms have tried to become efficient with cost, as clients are now looking for cheaper, efficient ways of conducting business, whether it is merging, issues related to tax, or whether it is a litigation dispute. It is important for firms to be able to predict the amount of capital they are able to raise through listing. If the prediction is inaccurate it could be detrimental to the business plan.

A further benefit is additional capital. By going public it can raise additional money to invest in the business. Gateley has confirmed that part of the £10m it aims to raise will be used for future acquisitions. Slater & Gordon became the world’s first publicly listed firm when it listed on the Australian stock exchange in 2007, allowing it to finance expansion to the UK and purchase additional firms. Notwithstanding the remuneration and bonus packages, and reputational branding, a firm’s IPO is a valuable factor for commercial growth.

Flotation for other firms

It is likely that other commercial law firms will follow suit. Irwin Mitchell has considered flotation as an option, and with clients’ demands for growth, many firms will be watching Gateley’s growth closely.

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H&M to Shut Stores as Quarterly Results Plunge

 2 min read / 

H&M Results

Fashion retailer H&M announced today that it will be shutting down more stores after it experienced its biggest drop in quarterly sales in at least a decade.

Although group sales rose by 4% over the year, fourth quarter sales shrank by 4% year-on-year, to 50.4bn kronor ($6bn), as fewer customers visited its stores. This was far below the retailer’s expectations. Shares in H&M have now hit their lowest level in eight years.

H&M plans to adapt to changes in the market by closing more stores and selling the brand through Chinese online platform Tmall. It aims to integrate its physical and digital stores more, and will give more details on their strategy changes at a meeting with investors on February 14.

The company said:

“The quarter was weak for the H&M brand’s physical stores, which were negatively affected by a continued challenging market situation with reduced footfall to stores due to the ongoing shift in the industry[…] In addition, there have been imbalances in parts of the H&M brand’s assortment composition.”

The company’s rival, Inditex, the owner of high street brand Zara, as well as Massimo Dutti, Bershka and Pull&Bear, has continually outperformed H&M, as it expands more into e-commerce. However, this week, the Spanish giant also reported a slowdown in sales in its third quarter but said sales improved again in November given the colder weather.

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Deutsche Bank analysts have said they believe that individual Japanese foreign-exchange (FX) traders are instead moving towards leveraged cryptocurrency trading in the search for astronomical returns. Already, Japan makes up 50% of the world’s leveraged FX trading and Nikkei recently said that 40% of cryptocurrency trading was denominated in yen throughout October and November. Evidently, the Japanese are growing tired of years of ultra-low interest rates and are turning to the blockchain to boost their savings.

Keep reading |  1 min read