by Greentarget
If the prospect of a publicly traded U.S. law firm seems unlikely, consider that more than five decades ago, there was no such thing as a publicly traded American investment bank. Due to a nearly 200-year-old rule requiring that the New York Stock Exchange approve all shareholders of its member firms, the NYSE didn’t allow them. But thanks to Dan Lufkin, who engineered the 1970 initial public offering of his investment banking and brokerage firm, Donaldson, Lufkin & Jenrette, the NYSE amended its rules and it’s now difficult to imagine the big Wall Street firms like Goldman or Morgan Stanley as private partnerships. But they were. Just like today’s big law firms.
According to William Cohan, who relays this story in his article, The Next Big I.P.O. Scramble, it may be only a matter of time before a bold and enterprising law firm follows in Lufkin’s radical footsteps and converts its private partnership into a public corporation – a structure that would provide greater access to capital, help streamline law-firm mergers and allow retiring partners to cash out their shares. Like the NYSE once prevented investment bank listings, most state bar associations still have rules against non-lawyer ownership of law firms. But that has begun to change.
Utah and Arizona have relaxed the American Bar Association rule barring nonlawyers from sharing in law firm ownership. To a fiercely competitive industry that has few options for raising capital, these changes could open a door to a source of affordable growth capital, a liquid market for partners’ equity, and a reliable method for determining a firm’s relative value in a highly acquisitive marketplace. The two states have granted a total of 91 licenses for alternative legal business entities, according to The American Lawyer. Once a major law firm walks through that door, many more could follow.
Skeptical? If the true story of the investment banking industry’s conversion isn’t a sufficient analog, the rapidly growing appetite for litigation finance, even among the legal industry’s biggest firms, is further evidence that law firms are eager to tap alternative sources of capital to fund their growth.
So if this potential shift becomes reality, law firms that take the IPO plunge will need to communicate frequently with an entirely new audience — public shareholders. And meeting shareholders’ demand for information will require significant, fundamental changes to how law firms share information with stakeholders.
What does this mean for you? Effective shareholder communication is not a switch you can flip on the first day of trading. If you harbor hope that your law firm will someday ring that iconic opening bell, plan to implement the following five tactics well before you file your registration statement. Doing so will support a successful IPO and enhance your ability to communicate effectively with your shareholders going forward, supporting quarterly earnings and other material disclosures, and ultimately an appropriate valuation.
1. Generate Pre-Filing Awareness
When contemplating a public offering, the way your firm communicates right now matters. Once you file your S-1, or registration statement, you can’t be perceived as promoting the offering as you prepare to begin trading. But you are permitted to continue sharing certain information about your business as you have in the past.
To establish an appropriate baseline, your external communication plan should include:
- Announcements of your involvement in major matters, litigation wins, and other noteworthy milestones
- Timely content conveying unique positions of authority from your firm’s partners and subject matter experts
- Media interviews that result in your partners’ appearance in the press, sharing points-of-view on issues that matter to clients
- Information about your firm’s social impact, e.g. pro bono and DEI initiatives
Chances are you’re already doing many of these things as part of your owned and earned media efforts. And of course, all of these activities are valuable and worthwhile even if the opportunity or desire to take your firm public never arises. But to set your firm up to communicate more freely throughout the process of going public, begin covering all these bases by ramping up your external comms strategies now.
2. Establish Metrics for Your Business
Partnerships are evaluated differently than publicly traded firms. The American Lawyer ranks its A-List firms based on these measurements: revenue per lawyer, associate satisfaction, diversity, pro bono initiatives, and the percentage of female equity partners. Firms rank on the AmLaw 100 according to self-disclosed or estimated figures like gross revenue, profits per partner, and revenue per lawyer. This will not satisfy Wall Street.
Law firms weighing IPOs should consider a mix of metrics that your shareholders demand – which would be similar to those disclosed by most listed companies (revenue, income, and earnings per share) – and those that you want your shareholders to track as well, such as realization rate, total billable hours and utilization rates, and client acquisition and attrition rates.
Regardless of which metrics you choose, you need to identify them before your offering, educate investors about their value and importance during the offering roadshow, and set up systems that allow you to track those metrics on a weekly basis. Weekly? Yes. Most newly public companies trade below their offering prices within six to nine months of the IPO, often because management lacks visibility into their own metrics. This can result in quarterly financial results falling short of expectations and surprising shareholders. And surprised shareholders sell stock.
Establishing the right metrics now — and tracking them weekly — is the best way to guard against a future market flop.
3. Identify Appropriate Comps
Investment bankers always look at comparable companies when valuing an IPO. And naturally, analysts and brokers will want research on other publicly traded firms like yours in order to better understand your performance and persuade their investors to bet on you. But until several law firms go public, it will be difficult for them to find the comps they’re looking for.
This is another area where being proactive matters. Look for publicly traded firms in industries with similar models, like consulting, to give analysts and investors the comps they’ll need to evaluate your business.
4. Adopt IPO Disclosure Policies and Procedures
As a law firm, you’ll likely have a leg up in understanding the regulatory landscape that listed companies must navigate, particularly regarding the disclosure of material information. But it’s still worth mentioning that once you’ve filed to go public, leadership and other members of the firm can no longer engage in casual conversations about financial performance and news that might impact your valuation.
According to SEC guidelines, anything your firm discloses to one person must be disclosed to everyone. And if you share material non-public information — even if it’s done unintentionally — you could be accused of enabling insider trading.
5. Ramp Up Internal Communications
When the time comes, it will also be essential to communicate openly with employees about your IPO and protect your firm from confidentiality breaches and legal liability.
Employees would need to understand:
- The rationale and business case for the IPO
- How the shift from a partnership model to a publicly traded model will impact them
- Specific guidelines regarding what they can and cannot say to outsiders about their work
- Guidance on how they should answer questions they’re asked about your IPO
- Examples of common confidentiality breaches (like sharing information with a spouse, friend or a colleague from another firm)
Keep in mind that going public would represent a significant organizational change. To win employee buy-in and support, you must be proactive about managing the change internally.
Going Public Requires a New Approach to Law Firm Communication
Embarking on an IPO could be an incredibly exciting, all-eyes-on-your-firm moment. To leverage the opportunity a public offering could present, you must start planning early.
But it’s not enough to launch successfully. You’d also have to sustain (and build on) your success quarter after quarter and year after year. And all the while, you need to communicate with a level of openness and transparency that might feel totally foreign.
You don’t have to make this leap alone. The Greentarget team has experience helping clients navigate the IPO landscape, and we speak the unique language of partnership-based law firms. So if your firm explores going public, we’d love to walk with you every step of the way.
Challenge
When expert services and consulting firm Berkeley Research Group (BRG) tapped Greentarget to lead its third annual M&A disputes research campaign, the intense economic and geopolitical upheaval made it difficult to predict what the next month would bring—let alone how conditions might shape the landscape for the coming year. Russia had just invaded Ukraine. The conflict added to turmoil in financial and energy markets even as the global economy was still recovering from pandemic-era chaos.
Given the disruptive impact of those headwinds on global business and supply chains, Greentarget’s Research & Market Intelligence team decided to tackle that issue head-on by examining how those economic conditions were influencing global M&A disputes.
Providing independent analyses and expert testimony in these matters is a core BRG competency. Digging deeper into this research angle would demonstrate the firm’s expertise in the international M&A dispute landscape, and raise BRG’s profile among its target audience of disputes-focused lawyers and finance professionals.
But the headwinds were shifting quickly – so Greentarget needed to uncover insights that would still be meaningful and newsworthy several months later when the research published.
Solution
Greentarget’s research team devised a two-pronged approach that included both qualitative and quantitative elements: 12 one-on-one interviews and an online survey of 181 individuals.
During the qualitative portion of the campaign, Greentarget spoke with leading deal and dispute lawyers around the world, including in major financial hubs like Hong Kong, London and New York. BRG provided Greentarget full access to the interviewees, which helped the team explore each lawyer’s unique point of view and guide the direction of the conversation.
The research team used insights gleaned from those interviews to develop the survey, which included a combination of new questions and some from prior years for year-over-year comparisons in the report.
Survey respondents included dispute lawyers, corporate finance advisors, deal lawyers and private equity professionals working in Asia, Africa, the Middle East, Europe and North America – a mix of people from which no other survey captures insights.
The Content & Editorial team combined key findings and charts from the survey with the insights and quotes from the interviewees, weaving in analysis from BRG’s own thought leaders to create a distinctive, newsworthy research report that revealed new trends in M&A disputes. The forward-looking nature of the report also provided utility to readers by mapping out what respondents expected to see in 2023.
Results
The M&A Disputes Report 2022 cut through the noise of an oversaturated M&A media landscape, garnering high-quality coverage in several publications—despite publishing near the end of the year, when dealmakers are busiest.
Greentarget’s Media Relations team secured coverage in global business, legal and financial industry publications, such as Bloomberg, The American Lawyer and Private Equity News. A Legal Dive article on the research was among the publication’s most read of 2022.
The report drove 320 visitors to the BRG website within the first month of its publication and has been viewed over 560 times. The web page that hosted the report had a bounce rate of 38% on BRG’s website (rates between 26% and 40% are considered excellent), while web traffic increased generally. The biography page of a BRG director involved in the survey analysis saw a 14% increase in traffic. On social media, some LinkedIn posts had engagement rates of 5.1%, higher than BRG’s average 3.3% engagement rate on the platform.
BRG also used the report as a business development tool, presenting the data in webinars, client dinners and receptions and the Thought Leaders 4 Disputes Corporate Disputes Conference – a key industry event.
The M&A Disputes Report helped BRG thought leaders deepen their relationships with clients by providing them with data and analysis that directly impacts their practices.
Challenge
Northwestern University’s chemistry department (NUChem) came to Greentarget looking for ways to better promote its research, scientists, and resources. The goal was simple: Stay competitive for top faculty and students.
The department had more than enough talent, research prowess and pedagogical expertise to compete with the nation’s foremost chemistry departments, including MIT, CalTech, UChicago and Stanford. By fostering collaboration and supporting a diverse community of students and faculty members, the department had been at the forefront of scientific discovery for well over a century.
What NUChem didn’t have was a culture of publicizing that work to the next generation of STEM leaders or thriving businesses. So many of the institution’s breakthroughs were going underreported and uncredited. Academic leaders in the field knew the program was good — they just didn’t know how good.
Solution
When a client’s goal is to outperform its rivals, Greentarget starts there first. The initial proposal to NUChem underscored the importance of two types of research: primary research aimed at uncovering how students and faculty members viewed the department; and secondary research comparing NUChem’s reputation and promotional efforts against departments in close competition to be viewed by peers as the top chemistry department.
To help chemistry academics embrace the leading-edge marketing tactics Northwestern’s Kellogg School of Management was already known for, Greentarget then developed a comprehensive competitive assessment. Its findings revealed that the department’s aversion to self-promotion wasn’t a sentiment shared by its peers. In fact, many of the institutions NUChem competes with had robust PR and marketing programs in place actively demonstrating their authority.
But the program’s biggest shortcoming was social media. Not only did Northwestern’s five peer universities maintain an active presence across multiple social media platforms, but their individual chemistry departments did as well. This gave NUChem’s competitors the opportunity to solicit success stories from within their departments and share them with a wide audience. And as industry publications and associations covered these stories, NUChem’s competitors were able to amplify them on their own social channels. Their social media presence also enabled other departments to drive engagement among current students, alumni and faculty — a crucial step toward achieving world-class reach and influence.
Impact
By showing NUChem how their peers were winning the reputation battle — and crafting a unique social strategy on their behalf — the department was able to counter. In less than two months, NUChem’s LinkedIn audience went from zero to twice that of its closest competitor.
More importantly, chemistry leaders were the ones engaging, with professors and publications mentioning the department more than any other in the competitive set during the first month of the campaign. For academics with an ultimate goal of being the top chemistry program in the country, there was no better proof point than the attention and respect of their peers.
It’s no secret that law firm profits and productivity slipped last year, as 2021’s legal bonanza gave way to a more challenging stretch in which many firms found themselves with too many lawyers, and not enough work to go around.
Demand for legal services dropped 1.9% in 2022 compared to 2021, while expenses increased 7.9%, according to Wells Fargo’s Legal Specialty Group. Some law firms have already laid off lawyers and staff, while others may be considering reductions.
Last year, when the war for lateral talent still raged, we recommended that firms emphasize culture over profits in their legal media interviews as a way stand out in an environment where strong financial performance was the rule.
But as legal demand dries up while expenses climb, law firms need to adjust their messaging accordingly. Below, we outline considerations as firms prepare for those discussions.
What to Expect During the Interview
Economic uncertainty continues dominating headlines and will be a recurring theme in conversations between legal media and law firm leadership. Expect questions about how your firm plans to navigate the unpredictable financial environment in the coming year, from reining in expenses and headcount to balancing fiscal restraint with the need to invest in technology and talent.
With law firm mergers gaining momentum after a pandemic-era dip, legal reporters may ask whether your firm is open to a combination to grow headcount, expand its regional footprint and/or expand capabilities. Smaller firms and those with softening financial results should prepare for questions about potentially being acquired by larger or more prosperous firms.
The legal media knows your firm’s expenses increased last year, but you can talk about how they grew in 2022 and how you plan to manage them in 2023. On a more granular level, expect journalists to ask how your firm dealt with overcapacity last year – and how it plans to address the issue in 2023. Are you instituting programs to fill lawyers’ unused time through expanded pro bono work or business development initiatives?
Headcount Reductions
Nobody wants to talk about this. However, the legal media has widely covered the firms that have already reduced their headcounts in 2022 and 2023, and reporters will not shy away from questions around this topic.
If your firm plans to lay off attorneys and staff, make sure to announce those reductions internally before discussing them with members of the media. Keep in mind that any memo sent to lawyers and staff will be leaked – so when drafting the announcement, have your external audiences in mind, too.
If your firm has already reduced its attorney or professional staff ranks, interviews can help contextualize those decisions by framing them around your firm’s overall 2022 performance and strategy for 2023.
Real Estate, Technology and DEI
Where and how lawyers work will also be top of mind. Hybrid and remote work continue to be topics of interest. Firms should expect questions about changes to in-office policies and whether they remain open to fully remote hires.
Reporters will likely ask about firms’ physical footprints, too. Firm leaders should plan to discuss any changes in office space, and the adoption of strategies like hoteling. If your firm has a hiring strategy for 2023, this interview offers a great place to share it with potential talent.
Leaders should also expect questions about their firms’ technology investments. Has your firm splashed out on new software or platforms in the past year? Does your firm plan to scale back technology spending in the coming year?
Prepare for questions about potential retrenchment in other areas – including diversity, equity and inclusion (DEI), which many firms prioritized after the social and racial reckoning of 2020. Reporters may ask about what measurable progress you made against those commitments last year, and whether your firm plans to cut or pause its DEI and/or talent development initiatives amid profit pressures. Consider sharing your organization’s DEI targets and how you plan to meet those goals in the coming year.
Reflect on 2022 – And Map Out What’s Next
When preparing your talking points about 2022, think about how you would characterize the year at a macro level. Be prepared to talk about the practices, regions and industries that drove growth last year, and where your firm saw shifts in demand. This is a great opportunity to discuss notable matters from 2022, so ensure you have those details on hand.
During these interviews, firm leaders can discuss their strategy for 2023. Any major investments your firm plans for the year – office openings, new practice group focus, ancillary practices – should be shared here if possible.
Explain where the firm will focus this year in terms of practices and initiatives, as well as areas where you will be creating efficiencies. Where do you anticipate increased demand? Leaders should plan to talk about practices that may be ripe for growth, such as bankruptcy and restructuring, data privacy and security and regulatory.
With the economic outlook for the legal industry still uncertain, firms can find value in being transparent about financial results, strategic plans and cultural considerations – topics that will resonate with current employees and potential talent.
Prior to his arrest, Sam Bankman-Fried’s attempts to explain the collapse at FTX did little to reassure or assuage his audience and stakeholders. Nor did they inspire confidence in the company’s ability to rebound from its downfall. Rather, by over-explaining his position, SBF seemed intent on proving that FTX lacks (and apparently has always lacked) any sense of organization, discipline, or accountability.
Allegations of fraud aside, among Bankman-Fried’s mistakes is his insistence on behaving like a classic tragic figure. Like Shakespeare’s King Lear or Arthur Miller’s Willy Loman, Bankman-Fried appears to be unaware of how the world sees him. Yet he can’t seem to stop trying to convince everyone that his own flawed vision of himself is just and true.
What SBF needs (or, rather, needed) is a fool, just like the fool in King Lear’s court — a brave and discerning advisor who’s close to the center of power, able and willing to speak the truth that no one else can. If you’re a PR or communications leader, you’re uniquely suited to meet this need at your organization.
What Executives Can Learn from a Fool
In King Lear, the Fool is not merely a court jester. Sure, the Fool cracks jokes at the expense of the king. But the fool is there to do more than entertain. This character sees through the artifice of the king’s self-delusion and uses irony and wit to force King Lear to look in the mirror and face the consequences of his behavior.
The Fool is loyal to his ruler, for sure. He has the king’s best interests at heart and knows his strengths and weaknesses better than anyone. The Fool uses his position within Lear’s inner circle to try to protect the king, continually warning him of the folly of his poor decisions.
Where’s the Fool at FTX?
In an interview with Andrew Ross Sorkin, Bankman-Fried said there was no one at FTX who challenged him. If his account is to be believed, not a single person advised him of the missteps his company was taking. No one was responsible for monitoring risk or alerting higher-ups that what they were doing was dangerous or wrong. (Of course, perhaps someone did try to speak out and SBF was simply unwilling to listen. Lear ignored his Fool, too — and it led to his undoing.)
The result? FTX is bankrupt. Bankman-Fried has resigned as CEO. He lost his personal fortune and the fortunes of others. Many of those who previously lauded SBF’s ingenuity have disappeared. And SBF has pled not guilty to allegations of fraud, conspiracy, and money laundering — underscoring his commitment to proving that his vision of himself is true.
It’s impossible to know if things would have turned out differently for FTX had someone seized the Fool’s mantle. But the lesson here is that every king (or CEO) needs someone who’s willing to play the wise Fool, especially in the face of a PR maelstrom.
Here’s why PR leaders are uniquely suited to play this critical role.
You Know How to Shape Messages Your Audience Will Accept
Of all the executives in the CEO’s sphere of influence, PR and communications leaders are closest to the organization’s audience. On good days, you’re the person who’s carefully crafting messages that resonate with the public and advance your organization’s strategic goals. On bad days, you know which messages stand a chance of breaking through the noise to reach and reassure your stakeholders. Therefore, you know what your audience will accept as credible, and what it will find disingenuous.
As much as they may want to, CEOs can’t kill a negative PR story or otherwise spin their way out of a crisis. They also shouldn’t blindly take legal counsel’s advice to stay silent (although, in SBF’s case, silence would likely have been the better strategy).
It’s your job to help your CEO communicate responsibly in the midst of any PR challenges your company may face. If you don’t believe what the CEO is saying, you know your audience won’t either. And because it’s your responsibility to protect your firm’s reputation, you have an obligation to rethink any messages that ring hollow or — worse — untrue. It’s not about doing the right thing from a moral perspective (though it is…), it’s about doing what’s best for the company’s reputation.
To play the Fool effectively, you’ll need to:
- Trust your instincts
- Put your CEO and other executive leaders in your audience’s shoes
- Get comfortable pushing back effectively on your CEO’s ideas in order to tell a better organizational story
- Foster the right kind of transparency and accountability
You Understand How the Firm Should (and Should Not) Respond to a PR Crisis
Following the FTX collapse, the only information Bankman-Fried offered led many reasonable people to draw one of two conclusions: either he’s a criminal or he’s profoundly incompetent. Whichever conclusion you drew, he certainly did little to repair his image, or restore the reputation of his company, or at least slow the erosion of either.
True, he apologized. But a shallow demonstration of contrition without meaningful insight into what went wrong or what he’d do differently next time doesn’t mean a whole lot to people who’ve lost everything. Bankman-Fried provides an excellent example of how CEOs should not respond to a PR crisis.
During a crisis, PR counselors remind their CEOs that:
- Now’s the time to set ego aside
- Bad stories are probably inevitable, but good PR can make bad stories less bad
- Statements framed in default corporate-speak alienate the audience further — now is the time for authenticity and vulnerability
- Crises are an opportunity to fix what is broken within the organization
- It’s ok to punch back (purposefully) against false claims, misinformation or carelessness
PR firms have spent decades creating effective crisis communications playbooks for a reason. Your CEO might want to break with convention to share her or his desired message. But there should always be a thoughtful strategy behind the approach your organization takes.
Play the PR Fool to Direct a Smarter Conversation at Your Firm
The downfall of FTX — and SBF’s subsequent media tour — provide an extreme example of a badly handled crisis. And though the whole situation is a train wreck you can’t help but watch, there are valuable lessons here for CEOs as well as PR professionals.
CEOs must create space for trusted advisors to tell them the truth — even the hard truths they don’t particularly want to hear. And PR/communications leaders must be willing to play the Fool — especially when, like King Lear, their CEO seems bent on folly of another sort (whether they’re aware of it or not).
Greentarget can help you put a PR plan in place that upholds and protects your firm’s reputation. There’s no need to speak truth to power on your own since we’re here to help.
