Carrick PE Fund Takes Majority Stake in Factor

In an unexpected move, Carrick Capital Partners, a West Coast private equity fund, has bought a majority stake in Factor, the ex-Axiom business that is pioneering complex legal work at scale.

While the market may well have expected Factor to take some new external investment following its formal launch this year, and its stream of senior hires, including Ed Sohn from EY Law, the majority shareholder move is exceptional.

Even though Factor was once part of Axiom, to move to this level of equity sale after less than a year of independent operation is relatively unusual in the legal tech/NewLaw space. However, the cash injection will no doubt allow Factor to now expand far more rapidly and is certainly predicated on such rapid growth being achieved.

The two businesses are not giving a specific indication of how much was paid for the majority stake. Carrick already has a shareholding in Factor and made an investment into Axiom as far back as 2013.

The only indication we have of the scale is this statement: ‘The deal, expected to close by October 2020, represents one of the biggest net new investments in the legal solutions market.’

If that is so, and given there have been investments in the legal tech and compliance space in the $10,000,000s recently, then we are perhaps starting to get a sense of the scale. Of course, they’re not saying. So, you’ll have to make your own educated guess the same as the rest of us.

They said that the new cash ‘will allow Factor to immediately expand its presence in the global marketplace and accelerate its development of innovative, large-scale, customised, legal solutions for clients in the Enterprise, Life Sciences and Financial Services sectors‘.

And of even greater interest is this statement: ‘Factor will also draw upon Carrick’s proven track record of growing technology-enabled services businesses.’

The two companies also wanted to point out that: ‘Alternative providers are disrupting the traditional law firm model, and corporate law departments continue to look for help solving increasingly complex legal and business problems that require advanced technology and process expertise on a massive scale.’

Well, it’s hard to disagree with that, although we can probably drop ‘alternative’. Process-focused groups, whether on the complex or simple end of the spectrum, are becoming central to the commercial legal market.

Jim Madden, Co-Founder of Carrick, and interestingly also the Founder of business process outsourcing provider Exult, which was sold for $795m in 2004, i.e. so he understands process (and making tonnes of money from it), ….said: ‘Our move to become majority shareholder of Factor was a strategic decision based on the company’s unique track record of delivering differentiated solutions to the legal market.’

‘Factor has a huge growth opportunity in the much larger sphere of more complex work. Rather than innovating around the periphery, they are helping GCs and businesses where they need it most.’

Varun Mehta, CEO of Factor, added: ‘Carrick has already demonstrated it is a committed and trusted partner of ours. The new chapter in our partnership with Carrick positions us to bring new client solutions to the market at unprecedented scale, and fuel even faster growth than we achieved in our first six months as a rebranded company.

‘Factor has the geographic reach, domain expertise and financial backing to provide our clients with the industry’s most innovative solutions. We fully expect to leverage this investment into larger opportunities, and more focus on our customers and our mission in transforming the way legal solutions are delivered for General Counsels and the companies they serve.’

For a detailed AL interview with Factor CEO, Mehta, where he sets out the company’s strategic vision – see here.