Mumbai Senior partners of law firms said law firms, weighed down by the flurry of work related to IPOs, are paying an average of 25-30% more fees to help companies comply with regulations and draft initial share sale documents. are demanding.
38 companies entered the primary markets this year, the most in a decade, which is more than ₹60,000 crore, according to data from stock exchanges and primary market tracker Prime Database. In addition, 42 are awaiting approval of their draft IPO papers from the Securities and Exchange Board of India, joining several others that have already secured the market regulator’s approval.
Dozens of other companies have begun the process of going public, fueling demand for experienced lawyers to handle legal work.
“Senior partners of some firms are doing 10 or more deals at any one time these days,” said a partner at a Mumbai-based law firm. “While you have about 20 investment banks of different sizes, hardly six- seven law firms of meaningful size are doing capital markets work. Most of the work on the IPO document is done by lawyers, given that teams are under pressure. “
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He said on condition of anonymity that given the deals most law firms are handling now, people are now giving up on new jobs if the fees are not attractive.
“Firms are often quoted ₹1.5-2 crore fee for IPO, sometimes even more, and the average fee has easily gone up by 25-30%,” he said.
Typically an IPO would require at least 3-4 investment banks, depending on the amount of money to be raised. For very large share sales, a maximum of 10 may be required. But in each IPO there are usually only two law firms, one representing the company and the other the merchant bank. In deals that require overseas marketing, an international law firm is hired.
However, an investment banker said on condition of anonymity that even in deals that do not require international marketing, lawyers are asking companies to hire an international law firm to share the workload.
“Earlier you only had one senior advocate handling the entire deal; The firms then began to have two lawyers on each deal to share the load; Then you had firms saying that they would do deals that had international marketing so that there would be a foreign law firm to share the workload. And now, even in small deals to say ₹500 crores, where you usually don’t need to go to foreign investors, even in those deals, law firms are asking to bring a foreign firm on board,” the investment banker named Said requesting anonymity.
He said this trend has led to a significant increase in legal fees, especially for small firms.
“Earlier you used to believe that your legal bill would be passed ₹1-1.5 crore; But now every individual firm is quoting it as a fee. In some instances, we have also seen that companies charge such high fees. ₹2.5 crores. And if you have to bring a foreign law firm into a deal where you may not need them, the total legal fees can add up to approx. ₹5 crore or more,” he said.
Certainly, the jump in fees is also due to historically low levels that law firms were forced to charge earlier, said another senior partner at a law firm.
“The capital market fee was always skewed towards the bottom and was stable for many years. And even now, we are nowhere close to the level of merger and acquisition fees,” he said requesting anonymity.
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