A private equity pile-in can be manna for the owners of moribund businesses seeking a payday – or to grow rapidly. Consumers, by contrast, have cause to be less enthusiastic. Witness this week’s report from the Competition and Markets Authority detailing how vet bills have rocketed since the sector came to be dominated by large and often PE-backed corporates.
Will the day come when the SRA probes how much PE-backed law firms charge clients, compared with peers owned by senior management? Unlikely. The reflexively free-market SRA hates to get granular with its law firm constituency (which is part of its problem).
And what of workers? They may suddenly find themselves toiling not for an engaged owner who cheerfully hails them in the lift each morning, but rather a rootless and restless mountain of cash forever in search of short-term accretion.
In her column this week, Mother in Law frets that younger solicitors working for externally owned firms are becoming semi-detached from the business of law. Gen Z just wants to ‘fee-earn and go home’, she says. Why would the next generation of bosses want to commit to firms whose profits will forever be siphoned off elsewhere?
A good question, though the answer is not straightforward. Almost everyone who toils for a private enterprise must reconcile themselves to the profits of their labour being siphoned off elsewhere. That’s capitalism.
At all events, Mother in Law’s column is serendipitous. This issue also carries a feature charting PE’s rapid advance in the law. Joanna Goodman’s excellent overview prompts another question: where’s the money?
Sector analysts point to the limited opportunities for PE houses to exit within their preferred time frames. Livingbridge’s sale of Stowe Family Law to Investcorp is one of the few examples so far, but that was a PE-to-PE deal rather than a clean exit to a wider buyer pool. ‘Hardly a strong signal of underlying demand,’ observes law firm M&A specialist Jeff Zindani.
Elsewhere, the lack of exits is more telling. Inflexion invested in ONP in 2019 but is still there seven years on. ‘That’s well beyond a typical hold period and difficult to ignore,’ says Jeff.
For the moment, private equity in the law seems to have parked its money and entered a holding pattern.
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