Lloyd: This is a good sector for PE firms
The latest law firm to be bought by private equity has ambitions to more than double in size in just a year, its chief executive has revealed.
Neil Lloyd, chief executive of Midlands firm FBC Manby Bowdler, said he also expected the Adeptio Law Group, of which it is now part, to be made up of four regional practices over the next two years.
As reported last month, Horizon Capital has established Adeptio “to execute a strategy to build a leading national legal services group through the acquisition of regional law firms”. Adeptio is Latin for achievement, acquisition and ambition.
Horizon has committed an initial £30m to the venture, less than half of which, FBC chief executive Neil Lloyd told Legal Futures, went on the acquisition of his firm.
Mr Lloyd is also chief executive of Adeptio, owned 60% by Horizon and 30% by FBC’s partners, with the remaining 10% for future FBC partners or owners of acquired firms.
FBC has a broad practice servicing SMEs and private clients. Its most recent annual results, for the year to 31 March 2024, reported an operating profit of £5.7m on a turnover of £16.5m and Mr Lloyd explained that, with high levels of existing productivity, the partners saw acquisitions and new offices as the route to growth – its next step will be to open a new office in Knowle, near Solihull.
FBC made three relatively small acquisitions around five years ago and “we recognised that if we wanted to grow quicker, we were going to have to buy something bigger. And for that you need money. It’s a lot to ask the partners to suddenly put in another £6m of debt [so] we were going to have to look somewhere different than traditional funding from the bank.”
The investment made in the business’s infrastructure in recent years meant it was quickly scalable, meaning the approach from Horizon came at a good time.
Mr Lloyd said he received good feedback on Horizon from the head of accountancy firm Dains, headquartered in Birmingham, which it bought in 2021 and has since supported in doing nine acquisitions.
Having access to the experience and expertise of other Horizon portfolio companies would be a benefit of the deal, he added – soon after, he was due at a meeting with his counterparts at all the other firms it had invested in.
With a background in the banking industry, Mr Lloyd joined FBC in 2015 as sales director and became managing director in 2020, with the firm converting to an alternative business structure so that he could be an equity partner. “We’ve always been quite progressive… The partners have never been afraid of change,” he said.
The goal is to get FBC to a turnover of around £40m in just a year. “We’ve got some offers out at the moment, which would get us to £36m,” he said. As an ABS, it could look at complementary professional services too, like HR, tax or financial advice.
But Mr Lloyd stressed that he was not keen on small bolt-on deals, which is the strategy for the regional firms bought by rival private equity-owned group Lawfront (he has not met his namesake, who runs Lawfront). Rather, he was looking at law firms with turnovers of up to £10m.
“There’s a gulf now between your £2-3m firms and [larger] firms in terms of the level of technology, the processes that they’ve got and the risk controls,” he explained.
He pointed to the string of law firms fined by the Solicitors Regulation Authority in the last year for failures to comply with anti-money laundering rules. “They’re all small firms that just don’t have the processes in place and don’t have the people to do it. Buying larger practices means you’ve got less of a gap in terms of client experience and the risk culture.”
Indeed, “risk and compliance is the big thing for me”, he continued. “As much as I trawl over the numbers, I also look at the Lexcel reports and the client experience reports, and look at Review Solicitors.”
Horizon’s ambition for the wider group was to have four regional firms, all retaining their own identities and cultures, which would then expand through acquisition – and it could put more funding into Adeptio if needed.
It was important to be one of the earlier movers because the law would likely follow the accountancy sector, where more and more private equity firms have entered the market.
“Everything’s going in the right direction,” Mr Lloyd said. “It’s a growing market, the spend is increasing, you can’t really do without it. [Areas like] catastrophic injury, clinical negligence, family, it’s pretty recession proof. So it’s a good sector for them to come into.”
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