Eversheds Sutherland is spinning off its £40m New Law business in a bid to supercharge its growth to £100m over the next five years, while opening it up to external investment.
The firm today (26 June) launched Konexo, an entity merging its advisory, interim resourcing and managed service offerings – including its ES Consulting business – to act as a global alternative legal service and compliance provider. Eversheds intends to make it a separate corporate structure, initially owned by the partnership but with the potential to attract external investment.
Konexo generates about £40m in revenue, growing 38% in the last year and winning the firm’s single biggest matter during the latest financial year. A five-year strategy plans to take the arm – which will ultimately be an alternative business structure (ABS) and FCA-regulated – to £100m. Konexo has about 300 staff, of which half are contractors, and will be headed by financial services partner Graham Richardson (pictured, middle).
Richardson told Legal Business the firm had been working on the project for the last six to nine months in reaction to increased activity in this part of the market, both from the Big Four accounting firms as well as existing players such as Axiom and UnitedLex.
‘It’s moved on from some small niche players to some very significant offerings. In-house legal teams are wanting these alternatives, there’s increased interest to buy from a broader range than just a traditional law firm,’ he said. ‘There’s a bit of a defensive thing as well: if we aren’t seen as having an alternative provider service the alternatives start eating the main law firm’s lunch. If we keep it in Konexo, then that’s better than losing it to PwC or Axiom, for example.’
Richardson said the five-year growth strategy had identified Asia and the US market as key opportunities, with Konexo launching in Kuala Lumpur shortly and the latter in September. The firm also sees now as the time to expand further into what it says is a £10bn global alternative legal service provider market.
To do so, however, will likely require some form of external investment. Richardson said that making Konexo a separate corporate structure makes that a possibility, and the firm has already spoken to some corporate finance companies. The business is operating profitably but would like more profitable growth before seeking investment.
‘If we were to go to market as of today, certainly there’d be interest and the profitability wouldn’t hold us back,’ Richardson said.
Eversheds has also given Konexo an investment pot for initial recruitment – a new partner-level head of technology and transformation role has been created – from which it could also potentially fund acquisitions. As a standalone entity, Konexo will also be able to re-invest its profit into the business.
Richardson commented: ‘We don’t have a £100m pot to do that. We’ve done well to be given our year one investment that we do have but with an eye to if we need much more in the future we’re set up in a way to go get that. We’ know there’s a good appetite out there, it’s an investible market.’
Eversheds co-chief executive Lee Ranson told Legal Business Konexo would help define the existing services Eversheds had without it getting lost within the context of the broader law firm. He said the demand from clients for these businesses was strong and if firms did not react, other people would.
‘We have to be alive to the fact that the investment in technology that’s needed to deal with some of those things that are happening might not come from the normal law firm offering and we might have to do things differently.’
The move comes as alternative providers ramp up: Axiom announced its initial public offering in February, UnitedLex secured $500m from CVC Capital partners last year, Lawyers On Demand sold to private equity, and Elevate went on an acquisition spree.