More law firms than ever are considering listing on the stock market in order to raise funds, according to a new survey of finance directors at the U.K. top 100 law firms.

The research, conducted by Thomson Reuters, found that one-fifth of finance directors at the U.K.’s 100 largest law firms would now consider an initial public offering, compared with just 4 percent in 2013-14.

The research also shows that the percentage of finance directors who would consider private equity investment as a source of funding tripled last year to 24 percent, up from 8 percent in 2015-16.

Last week, Knights announced that it will become the fifth U.K. law firm to list on London’s AIM market, with a float set for later this month. Gateley was the first to do so in 2015, followed by Gordon Dadds and Keystone in 2017. Rosenblatt listed earlier this year.

“If you need to move or are thinking of a step change and investing and expanding offices or lawyers, capital has to come from somewhere,” said White & Case London-based capital markets partner Jonathan Parry. “Either partners can put their hands in their pockets or the firm can take out debt, but following the King & Wood Mallesons and Dewey & LeBoeuf controversies, there is possibly a reluctance to become too indebted. The other option is to get external equity via an IPO.”

In the U.K., professional investors and nonlawyers are allowed to hold equity stakes in law firms. In the U.S. this is still not possible—despite decades of debate on law firm ownership rules.

Jomati Consultants principal Tony Williams agreed but said that, generally, law firm access to capital is not a constraining factor. “They are able to borrow and they are able to borrow more cheaply. Whether you need to float to do it, I remain doubtful,” he said.

Michael Chissick

Fieldfisher managing partner Michael Chissick, whose firm advised the banks on three of the U.K. law firm IPOs to date—Gateley, Keystone and Rosenblatt— said these listings are shaking up the market.

“What is happening in the law firm IPO market is really interesting,” he said. “All law firm managing partners need to be keeping an eye on this development. The law firms that have listed to date have made a lot of money and have a war chest to play with. We are watching with interest to see if a bigger player comes to the market.”

To date, Gateley is the only U.K. top 50-ranked firm to float. Samantha Steer, director of large law strategy at Thomson Reuters, said that bigger, international law firms are less likely to list. The partnership model works well for them, she said, as they already have the funding to invest in new technologies and expansion.

White & Case’s Parry added that partners at large firms still enjoy the level of control they have over the running of the business, which could be lost should external investors get involved. And Fieldfisher’s Chissick also expressed doubts about whether the IPO option will work for international law firms.

“The IPOs so far are all smaller U.K. firms,” he said. “I am not aware of any international ones; local bar rules make it very difficult for firms like ours with integrated offices to list because the local bar rules prohibit third parties [from] sharing profits with nonlawyers.”

He noted that a lot of bar rules in continental Europe ban nonlawyers from sharing in firm profits, so they would run afoul of the rules if they allowed an investor or fund manager to share in profits.

“If we can solve the European bar issue then yes, we would be interested, but at the moment we can’t list as a fully integrated European law firm,” Chissick said. “Firms like us will need to watch what is happening with great interest—we can’t afford to have competitors at an advantage.”