Disruptive influence: Law firm Keystone reveals £50m float plans

Disruptive law firm Keystone today announced plans for a £50m float to boost its brand and enhance growth prospects.

Founded in 2002, Keystone was one of the first so-called “platform” firms. The company sits as an umbrella, allowing smaller firms to operate out of their own offices but under Keystone’s brand.

Lawyers do not receive a fixed fee from Keystone, instead, the firm passes down between 60 and 75 per cent of fees charged to individual lawyers.

Keystone will be admitted to the Alternative Investment Market (Aim) on 27 November, with the IPO raising £15m. The Chancery Lane-headquartered firm had previously eyed £10m of funds but upped its target after original plans were oversubscribed.

The majority of the funds will be used to pay down £9m of debt, with existing shareholders in line for a £5m payout.

Chief executive James Knight said the float would “provide us with the most resilient and stable platform to support our ambitious growth plans long into the future”.

He added:

The UK legal services market is the second largest in the world and I believe the Keystone model is well placed to take advantage of this significant opportunity. I look forward to continuing with our strategy of quality-centric growth, providing a superb standard of legal service to our many clients and delivering value for our shareholders.

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“Ripe for disruption”

Keystone said the £8.8bn mid-market law sector was “is ripe for disruption” with dissatisfied lawyers keen to shun ongoing fee pressure. The firm works across 23 service areas and over 50 industry sectors.

Over the last three financial years, the firm has generated revenue growth of over 20 per cent per annum. Most recently revenues totalled £25.6m generating earnings of £2.1m. The board said it intends to adopt a “progressive dividend policy” that reflects the expectation of future cash flow generation.

Keystone umbrella covers 250 lawyers, with 40 support staff. It converted to an alternative business structure four years ago, supported by a £3.2m cash injection for private equity firm Root Capital.

The 2007 Legal Services Act allows external investment in law firms. Scottish lawyer Gateley was the first to break ranks and float on the stock exchange in 2015. London-based Gordon Dadds listed in August.

Read more: Gateley gets blue chip backing for first UK law firm IPO

Behind the deal – with Panmure Gordon’s Andrew Potts

Who advised?

Panmure Gordon were investment bankers, supported by law firm Field Fisher. Squires provided legal support to the company, while RSM Tenon acted as reporting accountants.

How long did the deal take?

The idea of a float was first considered around nine months ago. But the formal process, which identified the November date, did not start until late summer.

Where did negotiations take place?

Generally at Keystone’s London offices. But the Potts said the strange thing was there were lots and lots of lawyers. This was to be expected given the company in question, he added.

Was it stressful, were there any late nights?

Potts said there are always late nights in this kind of work. A big stress was earlier in the summer when Sunderland – Potts’ football team – was relegated from the Premier League. He managed to work off plenty of the stress by preparing for a 10km swimming marathon at the London Aquatics Centre.

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