Private equity investors are becoming much more interested in doing deals with law firms, a report on the Legal Services Act 2007 launched today has revealed.

A study by public relations company Byfield Consultancy, in association with law firm Fox Williams, shows that private investors have been stepping up their interest in the legal sector.

George Bull, head of the professional practices group at accountants Baker Tilly, who was one of 20 legal industry ­figures who participated in an in-depth interview for the Big Bang report, said he has had ‘more meetings with private equity’ in the past two months ‘than in any comparable period since [the act was passed]’.

Bull predicted between 10 and 20 firms will get private equity funding in the first phase once external investment in law firms is permitted, expected in 2011. However, he does not expect any more than five law firms to list on the stock exchange in the first five years. He believes flotations will mostly involve listed companies ‘hoovering up 20 to 30 high street firms’ to create a homogenised offering.

Bull also predicted a third category of ‘angel investors’ who would put money into start-up law firms, depending on how the ‘fitness to own’ test was formulated in the final version of the rules governing external investment.

Jeremy Hand, managing partner at private equity firm Lyceum Capital, told the report: ‘The legal services industry appeals to us because it’s big and fragmented with only a few really well-managed firms – frankly, not many customers get great value for their spend.’

A copy of the report can be obtained from info@byfieldconsultancy.com.