What Color Is Your Toilet Paper?

Over in the UK, they're one step closer to the inevitable:  Whole or partial public ownership of a law firm.  (An investment bank is talking with "some of the largest firms" about IPO-ing them.)  Regular readers know that I've been following the progress of the "Clementi Commission" reforms in the UK, the most notable of which is removing the prohibition on law firm ownership by non-lawyer-partners.   In other words, IPO's for law firms.

Now, I would be the first to tell you that being public is not necessary, desirable, or attractive for most law firms as we know them today.  Law—certainly among the AmLaw 200 or the UK 100—is not capital-intensive, and to the extent firms need a minimal level of working capital, it's far easier and cheaper to generate it through partners' contributions to capital or bank debt than to take on the enormous overhead of public-company audits and filings. 

Then, of course, there's the simple issue of confidentiality:

"Any firm floating is going to have to issue a prospectus saying: "Come and have a look at us." As one UK managing partner puts it: "You'd have outside people crawling all over you, checking what colour your toilet paper was.""

But the Clementi reforms will accelerate one trend, which I can only applaud:  The increasing professionalization of the managerial and business side of large firms. This will be a salubrious unintended consequence of the disclosures attendant upon being a publicly traded entity: The non-negotiable demand of the marketplace that your firm strive for best-of-breed in your category.