Duncan Lewis, the country’s biggest civil legal aid law firm, is preparing to be taken over by a public company once reforms allow, the Gazette can reveal.

The London firm is discussing a takeover with a company listed on the FTSE 250 index, and said it intends to hold similar discussions with other companies before the full introduction of alternative business structures.

Practice director Adam Makepeace said that the firm is being ‘realistic’ in pursuing a takeover because of the way civil legal aid is funded.

Duncan Lewis, which has a turnover of around £20m, is the first major law firm to publicly outline its plans to seek external investment.

Makepeace said: ‘We are realistic; the implications for ownership of businesses in the sector are quite clear, and we want to be at the forefront of any changes.

‘If you envisage consolidation even on a relatively minor scale, say needing to employ 200 additional case workers, then the working capital requirement due to the way legal aid is funded will run to £2m or more. If an external source is going to introduce working capital of this order to a business with a turnover of £20m – such as ours – then they are going to want full control of the business.’

Private investors will be able to invest in and acquire law firms that become alternative business structures from 6 October 2011. Co-operative Legal Services, the legal services arm of Kent County Council, and legal expenses insurer DAS have already spoken publicly about their desire to become ABSs.

However, a recent survey of 100 law firms by accountants Baker Tilly found that just 8% would ‘definitely consider’ having an outside investor.

Duncan Lewis is already run as a limited company. The firm amended its corporate structure earlier this year to prepare for a possible takeover, cutting the number of directors on its board from 39 to five, according to the firm’s accounts for the year ended 31 March 2009, and separating its legal and business functions.

The firm increased its turnover by 56% to £16.02m over the year, with profits after tax rising by 48%, to £986,000.