It may seem like science fiction in some markets, but in England a private equity fund is busy buying up law firms and has formed a £100m legal business already. Will it change the legal world? Well, technology is at the heart of the answer.
First, what’s happening? Lawfront, backed by private equity (PE) group Blixt, has just completed its latest deal, buying Kent law firm Brachers, which is understood to have revenues of around £20m. This follows many others, with many more likely to come.
The individual law firms keep their brands, which maintains local ‘goodwill’, but by having a single corporate entity – Lawfront – the combined businesses can share services centrally, which will reduce total costs. And that’s a very PE way of thinking, i.e. roll-up a collection of similar assets, then find a way to cut costs, while retaining value.
Real Change?
After the Legal Services Act was passed in the UK, many believed it would revolutionise the legal sector as it allowed investors to own law firms, and even for them to be listed on the stock market (which hasn’t gone well….see the great LinkedIn post by Graeme Johnston about this). But, strangely, this radical move didn’t change the legal world very much at all.
Why?
The answer was surprisingly simple, perhaps so simple that it was generally overlooked, despite the hundreds of articles, talks, white papers, and more about ABSs (alternative business structures).
The problem was that although ownership structures could now change, the way of working didn’t, even though no-one had forbidden such an evolution.
I.e. If the ‘means of legal production’ don’t evolve, then how can we expect a different result?
Look at it this way. You own a pin-making business. It’s largely artisanal, although does use some technology to support the skilled workers in their labour. After some time you decide to sell it to an investor. They later put it on the stock market. After that it goes private again. Then it’s bought by a conglomerate. Then it lists again…..and on and on. New owner after new owner. There are some structural, HR, and organisational changes in the support functions, but the central thing, the one thing that really matters: how this business makes stuff that people will pay for, hardly changes at all.
In which case, despite a roller-coaster corporate journey for the pin factory, nothing of any note for the end user of these pins, or those who make them, happens at all. They might as well have been inside a hermetically sealed chamber, cut off from the rest of the world.
And that has largely been the case with the law. Ownership in itself does not change the means of legal production. It can…..it could…..but that doesn’t mean it will.
How Can Things Change?
One benefit of turning a law firm partnership into a more traditional corporate is that investment has lasting value. In a law firm, the owners – i.e. equity partners – are the oldest folks in the business and in some cases are looking forward to a well-earned retirement.
They also make their money from annual distributions, i.e. a law firm earns £Xm annually in fees, costs are paid off, and the rest is shared out. In effect a law firm partnership begins each new financial year at £0.00. (In fact, maybe worse than £0.00, because there will be loans it’s taken out, as well as longstanding commitments it has to honour, such as office rents.)
In such a world, those at the top may understandably say: ‘Look, I make good money just doing what I did before. I’d like to reduce the costs of the business to push up my PEP (profits per equity partner) and maybe raise everyone’s hourly rates, but to totally rethink all of our workflows and imbue them with new technology….? Why would we do that?
‘It will cost us money we don’t need to spend – as if we did need to do that, how come I make more money every year, and don’t change how I work? Then it will be disruptive and I like my patterns of behaviour. Then, we don’t know for sure it will help, as I don’t see anyone else doing this, and I don’t like to be first when it comes to new things. Plus, lastly, I plan to retire in five years, so why reduce my PEP to fund something I won’t be around to enjoy the benefits of? Once I leave the firm, that’s it. No more income from it.’
In such a world, radical changes to the means of production are tough to achieve, although not impossible, if there is a will to do so. (And we can talk about burning platforms and positive drivers another day.)
But, if your legal business is owned by a PE fund, or other party with a lot of cash, and which is not thinking in terms of PEP or the individual ownership needs of each senior lawyer, maybe that can change?
Maybe they can put in place the growing range of technology that actually alters how things are made in the legal world, whether that is genAI-based or something else – and in reality it will be a broad mix of technologies and approaches combined, but all focused on one thing: increase efficiency and drive up productivity, i.e. a lot more bang for your invested buck.
What if the owner looks at the business and says: ‘OK, we can get some economies of scale here via shared services…..but we can also think about how this business makes the stuff that it sells, not just tinker with the backroom operations side of things.’
Once that step is taken, then there is much that can be achieved. And what an incredible opportunity: to totally remake a law firm from top to bottom, bringing in tech and rethinking workflows, reorganising all that legal talent so it’s not necessarily based on an age-based pyramid, but rather who is best at which task.
(As an aside, why not have some junior associates who are in their 50s, and some of those at the top of the firm in their late 20s? Allow those who are brilliant at client-winning, or deploying tech to rise rapidly to the most senior levels, while also allowing some really excellent process-focused lawyers – of whatever age – to stay doing just that, if they enjoy that work. A traditional law firm is a gerontocracy, but does it have to be that way?)
OK, I’ll wrap up here, but you get the point: it’s not the ownership in itself that really changes things, it’s the conscious decision to invest in changing the means of legal production.
Will Lawfront do this…? It could. It would seem that they have the cash behind them to fund such a change. Let’s see if they go beyond cost savings via central services and seek to totally reengineer the £100m legal business they have built.
Richard Tromans, Founder, Artificial Lawyer, Feb 2025.
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