Industry pioneers are attracting public and private interest in alternative models
While many lofty predictions of New Law’s rise remain unrealised, the market’s traditional champions have all made major contributions to its growth in recent weeks. Flexible lawyering business Axiom engaged in a surprise private equity (PE) sale; US alternative provider UnitedLex turned over $350m in an impressive year; while Elevate achieved revenues of £76m in another record result.
While investment into New Law is becoming increasingly commonplace, Axiom’s sale to buyout house Permira in September still raised eyebrows as the company abandoned its long-mooted plans for an initial public offering (IPO). Many considered an Axiom IPO to be a bellwether for the fast-growing alternative legal services market, while the decision to pursue private investment follows a path pursued by peers such as Lawyers On Demand and UnitedLex.
‘There are big opportunities in the market and we always had different ways to seize them,’ Axiom’s senior vice president David Pierce told Legal Business. ‘One option was an IPO, but private investment came up through conversations with Permira and the advantages aren’t just access to capital but also access to its familiarity with legal.’
Some will feel Axiom’s decision to call time on its much-anticipated public offering lends credence to concerns public investors do not sufficiently understand legal. Pierce, however, said the tripartite split of the wider Axiom business in April was still integral to securing investment: ‘There was no general market trend or dynamic that informed our decision. The break-off has made us a streamlined, more focused version of what we were and it’s pretty normal for PE to look at a business that can do a couple of things very well.’
The break-off also saw Axiom Managed Solutions (AMS) become an independent business – one that is currently being eyed by another private equity bidder: MML Capital Partners. Legal Business reported in September that the Axiom spin-off was in talks with a number of bidders, though MML had entered due diligence.
The influx of private money into New Law began in earnest last year when US provider UnitedLex landed a $500m war chest after CVC Capital Partners acquired a majority stake in the business. Since then UnitedLex has grown to achieve a turnover of $350m, up 27% on its previous set of financials. UK revenue likewise saw a hike, increasing 8% to £58.5m. The results mean UnitedLex is keen to bulk up its senior leadership team across the UK and Europe, as well as explore opportunity for growth through acquisitions, with smaller law firms a potential target.
‘The investment is going to increase,’ said chief executive Daniel Reed. ‘The legal market is large and fragmented, so there are huge opportunities to get into areas ripe for investment.’
Meanwhile, peer Elevate also unveiled an impressive set of financials after reporting a revenue of £76m for last year, £20m of which was generated by the company’s UK business. While five acquisitions in the last 12 months – most notably UK flexible lawyer business Halebury at the start of 2019 – have undoubtedly bolstered the company’s financials, which have increased 58% since 2017.
‘The acquisitions have made a difference, but the underlying business is growing as well,’ president John Croft told Legal Business. ‘That’s because we don’t view ourselves as New Law but as a law company delivering legal services. As the market understands that more, we’re getting more buyers of our service.’
Elevate too has been overt about its ambitions to complete an IPO, with a 2021 target date. According to Croft, public investment is still the desired outcome: ‘Part of our DNA is focus and not getting distracted. But an IPO is still our plan and it’s helpful for the business to know what’s happening as that informs the decisions we make.’
For more on New Law developments from within top UK law firms, read ‘New tricks’