Duke Street annouce first UK leveraged buy-out of law firm

For the last few years, many law firms have been predicting that the Legal Services Act, which came into force on 6th October 2011, would be something of a damp squib and make little impact on the majority of law firms. However, early signs are that in the commodity end of the market at least, where personal injury insurance litigation is big business, there are some big changes coming to the competitive landscape, with the announcement of the first ever leveraged buy-out of a UK law firm.

Private equity house Duke Street has today announced that it has acquired a majority stake in the Parabis Group, the parent company of insurance litigation law firms Plexus Law and Cogent Law, in a deal which values the combined group at between £150m and £200m. Although EBITDA figures are not available, it is understood that revenues for Parabis are expected to be approximately £160 million in the current financial year.

Parabis provides personal injury litigation services via its Plexus and Cogent Law arms, and acts for a large number of insurers in the UK. But the firms have gone further than the provision of traditional legal services, as, like Jersey's CPA, they have a number of other non-legal service deivisions, which handle claims management outsourcing, rehabilitation, loss adjusting, health & safety assessment and audit work.

The combined Group has 60 partners, approximately 400 lawyers and 600 paralegals and is led by chief executive Tim Oliver and commercial director Tim Roberts. They will be joined by Paul Lester, former chief executive of VT Group, and Bob Scott, former group CEO of Aviva, who will be appointed as non-executive directors. Lester will become chairman of Parabis on the deal's completion, which is expected to be within 3 months, and is dependent on regulatory approval.

Duke Street, who follow a buy-and-build model, are expected to focus on extending the business process outsourcing elements of the business, and will be looking to acquire other complementary firms.

The annoucement by Duke Street follows on from Australia's Slater & Gordon, the world's first publicly listed law firm, having acquired UK personal injury specialist law firm Russell Jones & Walker, and the Liverpool-based personal injury law firm Silverbeck Rymer having been acquired by software and outsourcing firm Quindell Portfolio.

There will no doubt be a temptation for those working in other parts of the legal market to dismiss these developments as something which are unlikely to spread outside of the specialist work of personal injury, but to do so could be a dangerous misjudgement. The introduction of significant investment capital into providers of outsourced services for law firms is likely to have an impact on the wider legal sector, as clients become increasingly unwilling to pay top City rates for relatively low level work. Firms who ignore this dynamic do so at their peril.