Private equity investors ‘indifferent’ to law firms

12 November, 2015

The head of one of the UK’s few law firms to secure private equity funding has said that financiers are losing interest in the legal services market.

Colum Smith, chief executive of southern England firm McMillan Williams, said that other professions and sectors such as IT are now more attractive to commercial investors than the legal profession, which is to heavily regulated and entrenched in its views.

Private equity investment in law firms was made possible by the Legal Services Act, but McMillan Williams remains one of just a handful to take that route.

“I am stunned anyone has invested in a law firm,” Colum Smith told the NatWest legal conference in London last week.

“There are much better things to do with your money. I would expect to see lots more [law firm] implosions. My private equity house is spending no effort on law firms,” he said. “We’re a lot of effort and heavily regulated in an industry they don’t really understand. A couple of IT start-ups are much less hassle [to investors].”

Colum Smith added that his own firm only managed to attract private equity investment because of its commitment to business growth and that he knew of at least two private equity houses that assessed 250 firms before deciding not to commit any investment.

He said that firms need to find other ways of financing their business at a time when it is difficult to persuade young solicitors to become partners.

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