Hello and welcome back to the Fides Weekly Update. Here you’ll find a summary of what’s been happening in your industry this week.
For a brief round-up of the key developments, scroll down to take a look our regular ‘Movers & Shakers of the Week’ feature.
1. DWF partners subject to five year capital lock in post IPO
News emerged this week that DWF partners will see their capital locked into the business for five years after the firm’s initial public offering (IPO), expected to take place before the end of March.
In what is set to become the largest law firm IPO to date, upon listing the firm’s partners will become its majority ‘selling’ shareholders.
However, according to a filing setting out the details of the float, partner’s capital in the business will also be subject to a phased lock-up, which limits the amount of capital partners can withdraw from the business to 20% per year for the first five years, half of which will be linked to performance.
DWF CEO and managing partner Andrew Leaitherland cited two principal reasons for the lock-in: to encourage performance, and to prevent the risk of partner departures, with remaining equity if partners were to leave going into a newly established employee benefit trust.
“We’re a people business and we depend on our ability to provide advice,” said Leaitherland. “From an investor perspective, they want to ensure continuity and growth and to prevent risks from occurring. So that’s why we created the lock-in.”
Should the listing go ahead, DWF will undergo a restructure in order to comply with FCA regulations as it seeks to become the first law firm to list on the main market of the London Stock Exchange, rather on the AIM market which has seen several additions in recent years.
DWF will apply for shares to be admitted to the premium listing segment of the FCA’s official list and to trade on the main market for listed securities on the LSE.
Those steps will then be follow by a name change, which would see its official title become DWF Group plc.
In order to fund the public listing, the firm will restructure its partnership and remove the distinction between fixed salary and equity partners. Former equity partners will see a 60% reduction in their current fixed profit share, with salaried partners seeing a 10% reduction.
While partners will be paid on fixed basis, they will also receive dividend income and performance-related bonuses paid out of an annual bonus pool.
The intention-to-float document comes alongside half-year results for 2018-19, which detail the firm’s revenue growth between 30 April and 31 October 2018.
In the six-month period, revenue grew by 18.3% to £133.4m, up from £112.7m last year. The half-year performance comes after the firm saw revenues rise 18.6% to £236.5m during the last financial year.
2. Good news for asset managers as EU consents to a post-Brexit agreement with FCA
First announced by Reuters yesterday, financial regulators in Europe and the UK have confirmed an agreement that will sustain cooperation post-Brexit for cross-border financial services.
The European Securities and Markets Authority (ESMA) and the Financial Conduct Authority (FCA) negotiated and agreed a Memorandum of Understanding (MoU), which safeguards cross-border sharing of information for financial firms. Particularly helpful for the asset management industry, the MoU means firms can continue to ‘delegate’ portfolio management to the UK.
Delegation is a key aspect necessary in asset management. It authorises fund managers in the UK to manage funds that are domiciled and regulated in other jurisdictions, such as Luxembourg and Ireland.
Chair of the Investment Association Chris Cummings expresses his thoughts on the MoU: “This is welcome news for millions of savers across Europe who together have some £1.8 trillion of savings managed by experts in the UK. Asset managers – and critically their clients – will now have the confidence they need that delegation to the UK will continue.”
Whilst this marks a positive step towards cooperation with ESMA, the FCA needs to continue to make gains with other EU27 regulators in signing terms to ensure freedom to operate across Europe.
The agreement between ESMA and the FCA was agreed “in substance” on Wednesday, with more details to be released shortly.
Movers & Shakers of the week
Ashurst London head Simon Beddow and fellow corporate partner Robert Ogilvy-Watson are leaving the firm to join Bryan Cave Leighton Paisner and Macfarlanes respectively
Real estate finance partner Ruth Harris is taking on the role of London office managing partner amid recent exits
Fried Frank brings on board its first dedicated funds lawyer from Linklaters Kathryn Cecil
Samantha McGonigle is leaving the US’s firm’s City base to become a co-founder of a growth fund.
King & Spalding has re-established its Paris real estate practice with the hire of a three-lawyer team from Ashurst led by partner Guillaume Aubatier.
Office Openings & Closings
Inclusion & Diversity