So law firms (in NJ at least) are given the ethical go-ahead to own other law firms as subsidiaries, according to this article in the New Jersey Law Journal.
Fellow Legal Blog Network member Larry Bodine is quoted as calling this development a “potential gold mine” for law firms, allowing them to grab firms in hot practice areas and casting them off when the worm turns. More from Mr. Bodine, including the text of the opinion, here.
Sounds intriguing for a few adventurous law firms. Sounds like real fun for consultants, bankers and developers of legal indentity products.
But for the average law firm of some scale I really wonder if this isn’t precisely the wrong thing at the wrong time.
Doesn’t buying another firm only give you three things? A claim upon receivables, a hope that the good lawyers stay and a prayer that clients remain as well?
As a GC, I would have to think about this, and wouldn’t necessarily see this as a negative for a law firm that’s owned by another firm. But it sort of seems at first blush that such a firm is saying between the lines that it couldn’t cut it on its own.
It that good positioning in the marketplace?
If the management of some major firms are spending time looking at other firms or ancillary businesses, what does that say about their confidence in the existing business model?
Could this NJ ethics development, coupled with one of the results from the Clementi Commission in England (non-lawyer ownership of law firms; more from Bruce MacEwen here), spell the start of law firm roll-ups and eventual IPOs?
Boy, would I love to read a Form S-1 from a major law firm.
But if Wachtell Lipton ever goes public, sign me up. Something tells me that they are too busy focusing on their core transactional business that throws off over $2.3 million per year in revenue per lawyer.
An ethics opinion a gold mine? Or an open mine shaft? Time will tell.