DWF CEO Andrew Leaitherland

Six top DWF executives have become multimillionaires following the firm's listing on the London Stock Exchange today (March 11).

Andrew Leaitherland, the firm's chief executive and managing partner, will hold 2.4 percent of the firm's shares, which based on the firm's £366 million market capitalisation puts his holding at £8.8 million, the firm's prospectus shows.

Others on the board who stand to make millions include: the firm's insurance CEO Glynn Jones and commercial services chief Stephen Miles, who will hold £4.4 million apiece; partner director Matthew Doughty – who was the key architect behind the deal – has a 0.9 percent share valued at £3.3 million, as does firm chairman Sir Nigel Knowles; while head of the firm's international business Stefan Paciorek is in line for £4 million.

Chief financial officer Chris Stefani and HR director Helen Hill will get 1.1 million shares and 237,000 shares respectively, in addition to a cash reward for their work on the IPO. Some independent non-executive directors have also bought shares. 

The individuals will join the list of newly rich law firm leaders who have led their firms onto the public markets.

Major shareholders that have bought into DWF include investment houses Standard Life Aberdeen (4 percent), Sand Grove Capital Management (4.1 percent), and Miton Group (4.4 percent). They are in addition to the firm's employee trust The Estera Trust (a total of 10.5 percent).

Conditional trading started this morning (March 11), with the share price starting at 125p, dropping to 124p by 3.30pm.

Change to the partner lock-in

As part of the listing, DWF has amended the terms of the five year lock-in for its partners, in a move that will guarantee them a full payout in their first year.

It had been planned that following the listing partners would be classed as selling shareholders but that they would only be able to receive 20% of their capital back each year, half of which would be tied to performance. But this performance element has now been waived by the firm for the first year, so partners are guaranteed their full 20% repayment.

DWF partner Matthew Doughty, who led the IPO for the firm, said the amendment was made to make sure partners got back a "meaningful amount" at the end of the first year of the lock-in.

The £95 million raised gives the firm a market capitalisation of £366 million, less than the £400 million to £600 million valuation it had been expected to achieve.

The £95 million is calculated from the sale of £75 million in brand-new shares, in addition to the sale of £20 million in existing shares owned by DWF partners. According to Doughty, the partners only sold "a proportion" of their existing shares.

Of the £75.0 million raised, £22 million will cover expenses incurred as a result of the IPO. In addition, £19 million will be used to repay partners' capital. Doughty said this will "most likely" be paid straight to the bank that finances the partners' equity loan.

Doughty said that although final pricing of the shares "clearly means there hasn't been as much cash out to partners", the five year lock-in will provide "significant value" and the firm "believes we'll be able to drive value for all shareholders going forward".

'Difficult market'

Commenting on the lower valuation, Leaitherland conceded that the firm battled an "uncertain market", which resulted in missing the target.

"As we worked closer to the deadline, it was getting clearer the market was difficult"

He told Legal Week: "We didn't hit our target, but it doesn't matter. As we worked closer to the deadline, it was getting clearer the market was difficult."

He added: "This was not about a day-one valuation realisation and it was in the interests of our business to proceed."

Leaitherland said the firm is now "eyeing opportunities" in the U.S. and Far East and that it aims to make further acquisitions this year. He added that the immediate priority is to continue to build out the firm's Australian offering.

DWF expanded its presence in the country last week when it merged with Melbourne-based boutique WARD Lawyers, a 23-member firm specialising in corporate advisory, financial services and real estate. In the U.S., the firm has an office in Chicago and agreed an exclusive association with Los Angeles-headquartered U.S. law firm Wood, Smith, Henning & Berman last year, giving it access to a further 22 offices across the country.

High hopes for some areas

In the prospectus, DWF outlined its high hopes for its international and 'connected services' divisions.

The firm set a 35 percent to 40 percent growth target over the "medium term" for its international practice, which covers its European offices in Berlin, Cologne, Munich, Brussels, Dublin, Milan and Paris. The international operation had just over £30 million in revenues in the 2017 to 2018 financial year.

It expected a 20 percent to 30 percent increase in revenue in the same period for its connected services division.

More modest growth is targeted for the firm's core commercial and insurance practice – four to five percent on top of the UK GDP growth rate.

Overall, DWF added that it is looking to boost its gross profit margin by between five and six percent in the medium term. It currently stands at 36.5 percent.

DWF is the first law firm to list on the main market of the LSE. Other law firms to have listed on the AIM market include Gateley, Knights, Gordon Dadds, Rosenblatt and Keystone Law.

"Investors will look at evidence of delivery"

John Llewelyn-Lloyd of brokers Arden Partners said the DWF float was "testament to the strength of institutional interest in the [legal] sector" and suggested the lower £366 million market cap target will serve the firm well: "With its more sensible valuation, the new company has a better chance of achieving its aims."

However, he added that the "acid test" lay ahead, and its share price as well as the firm's longer-term fortunes will depend largely on how it delivers against its objectives.

"Investors will look at evidence of delivery – how they're developing their business, new gains on the managed services side, good contracts and overseas office development will influence share price. Any sensible acquisitions will be well received," said Llewelyn-Lloyd.

"They will get rewarded if they achieve their milestones," he added.

Magic circle firms Clifford Chance and Allen & Overy both took roles on the listing, with A&O acting as U.K. and U.S. counsel to DWF and Clifford Chance advising lead manager Zeus Capital and underwriters Jefferies and Stifel.

With reporting by Rose Walker