Legal services act to allow firms to float on stock market

The new legal services act is to allow law firms to float on the stock market and thereby bring in fresh capital.

A report in the Financial Times reveals similar moves in Australia allowed one personal injury enterprise to sell shares to speculative investors and has used the extra resources to buy 30 smaller rival companies.

Acquisitions have contributed to the increase of its annual turnover from A$62.5 million (£37.96 million) in 2007 to A$124.7million this year, an improvement UK law firms might find tempting.

Private equity groups are among the bodies most likely to buy up providers following the legal services shake-up, potentially believing the move will render law firms more efficient and better organised.

Jeremy Hand, managing partner of Lyceum Capital, a UK-based mid-market buy-out group, warns: "There’s a nasty storm brewing for traditional law firms," saying the changes will open up the market to "a host of competitors".

Research by financial services group Smith and Williamson indicates around 25 per cent of major companies will court investment from other groups once the act comes into force.