DAC Beachcroft is exploring a potential sale of its claims business to private equity investors.
The firm is talking to investors about selling its 1,000 person Claims Solutions Group (CSG), which operates across 12 locations in the UK and deals mostly in volume insurance litigation on behalf of insurers and corporate clients. According to the most recently filed Companies House accounts revenue for CSG stood at £84.8m for the year to April 2024.
Discussions come more than two years after RollonFriday reported that the firm was in exclusive talks with mid-market private equity fund Limerston Capital to buy the business. However, by that June, the firm had reportedly rolled back on the sale.
Legal Business understands that discussions with private equity houses have resumed in recent months, with buyout firms including HIG being linked with the potential sale, according to sources. It is understood talks with HIG are no longer ongoing.
A spokesperson for DAC Beachcroft said: ‘We continue to explore options to enhance the long-term investment into CSG. CSG continues to operate in a very dynamic market. We are constantly assessing those markets and adapting our strategy to ensure that we are able to invest in the future of CSG in a way that enhances its overall offering and benefits our clients.’
In 2015, the Solicitors Regulation Authority granted permission for the CSG to become an Alternative Business Structure (ABS) which allows law firms to receive external investment.
Private equity investment in law firms has been a long touted topic but momentum has gathered recently.
Last month, international law firm Cohen & Gresser announced that it is using investment bank KBW Stifel to explore selling a stake in the business to investors. The same month, McDermott Will & Schulte expressed its willingness to explore private investment, while stressing that any such moves were at preliminary stage.
Other notable deals in recent years have included CBPE investing in national firm Horwich Farrelly, August Capital investing in Midlands firm Higgs, LDC taking a stake in virtual firm Harper James, and PE-backed consolidator Lawfront snapping up South England firm Trethowans on the back of five other law firm acquisitions since 2021.
Earlier this week, leading off-shore law firm Walkers agreed a deal with private equity house Vitruvian Partners to jointly run its fiduciary services business, Walkers Professional Services.
In the US, a number of firms have been exploring alternative structures called management service organisations (MSOs) to get around rules which have previously limited the viability of external investment by restrictions on non-lawyer ownership. By dividing the business into the law firm and a back office MSO firms would be able to take external investment into the MSO without breaching existing rules.
While some partners have raised concerns about the compatibility of incentives between law firms and PE houses, many remain interested in exploring possibilities with some arguing that insurance firms in particular could be ripe for investment.
One senior partner at an international law firm said: ‘There are segments of the market for whom this could be transformational, maybe a DAC Beachcroft or Kennedys, where there are insurance panels over multiple years that provide a certainty of revenue that can be commoditised – that’s attractive for private equity.’
