Irwin Mitchell shapes up business for Tesco law investments
17 Feb, 2011
Irwin Mitchell looks set to become one of the first leading UK law firms to take advantage of the Legal Services Act (LSA), with the firm already restructuring its business to make it more attractive to outside investment.
The top 25 firm is seeking advice from accountants about restructuring in a more tax-efficient way as a corporate vehicle rather than as a partnership. The corporate member model would allow the firm to avoid the maximum 50% individual tax rate for a portion of its profits in exchange for a 28% corporate tax rate – a structure that would be more attractive to external investors.
Irwin Mitchell hopes to have plans in place by the summer that would allow it to be ready for a float or private equity investment when the law changes and permits alternative business structures (ABSs) from 6 October 2011.
The ABS model – often dubbed ‘Tesco law’ – will allow outside investment in law firms and for legal services to be provided outside of the traditional partnership model.
Irwin Mitchell is seen as well-placed to take advantage of ABSs because of its highly leveraged volume business and low costs. It is understood that the potential float is being used as a recruitment incentive for new equity partners, who would benefit alongside existing partners if outside capital were introduced.
Irwin Mitchell managing partner John Pickering said: “Like any prudent business, we are exploring a number of options to ensure that we remain well-positioned to respond to any opportunities that will be created by the LSA. This includes potential structural changes. As always, our aim is to ensure that we are best placed to continue to offer the best service to our clients.”
The latest company targeting opportunities offered by the LSA is Investec, which at the end of last year launched a professional services finance unit that will invest up to £10m in each law firm looking to restructure as an ABS.