It may seem like science fiction in some markets, but in England a private equity fund is busy buying up law firms and has formed a £100m legal business already. Will it change the legal world? Well, technology is at the heart of the answer.
First, what’s happening? Lawfront, backed by private equity (PE) group Blixt, has just completed its latest deal, buying Kent law firm Brachers, which is understood to have revenues of around £20m. This follows many others, with many more likely to come.
The individual law firms keep their brands, which maintains local ‘goodwill’, but by having a single corporate entity – Lawfront – the combined businesses can share services centrally, which will reduce total costs. And that’s a very PE way of thinking, i.e. roll-up a collection of similar assets, then find a way to cut costs, while retaining value.
Real Change?
After the Legal Services Act was passed in the UK, many believed it would revolutionise the legal sector as it allowed investors to own law firms, and even for them to be listed on the stock market (which hasn’t gone well….see the great LinkedIn post by Graeme Johnston about this). But, strangely, this radical move didn’t change the legal world very much at all.
Why?
The answer was surprisingly simple, perhaps so simple that it was generally overlooked, despite the hundreds of articles, talks, white papers, and more about ABSs (alternative business structures).
The problem was that although ownership structures could now change, the way of working didn’t, even though no-one had forbidden such an evolution.
I.e. If the ‘means of legal production’ don’t evolve, then how can we expect a different result?
Look at it this way. You own a pin-making business. It’s largely artisanal, although does use some technology to support the skilled workers in their labour. After some time you decide to sell it to an investor. They later put it on the stock market. After that it goes private again. Then it’s bought by a conglomerate. Then it lists again…..and on and on. New owner after new owner. There are some structural, HR, and organisational changes in the support functions, but the central thing, the one thing that really matters: how this business makes stuff that people will pay for, hardly changes at all.
In which case, despite a roller-coaster corporate journey for the pin factory, nothing of any note for the end user of these pins, or those who make them, happens at all. They might as well have been inside a hermetically sealed chamber, cut off from the rest of the world.
And that has largely been the case with the law. Ownership in itself does not change the means of legal production. It can…..it could…..but that doesn’t mean it will.
How Can Things Change?
One benefit of turning a law firm partnership into a more traditional corporate is that investment has lasting value. In a law firm, the owners – i.e. equity partners – are the oldest folks in the business an
