McCann: Accelerating growth
National insurance and commercial law firm HF has become the latest to take private equity investment, with all staff to receive payouts due its existing share scheme.
Subject to regulatory approval, HF has sold a 30% stake to CBPE Capital, whose 19-strong portfolio includes intellectual property firm HGF and accountants BKL.
The Manchester-headquartered law firm once known as Horwich Farrelly, which has more than 700 staff and offices in nine other cities in the UK and Ireland, restructured as a limited company in 2021 and last year introduced an all-employee share scheme.
As a result, all staff will receive either £1,000 or £2,000 thanks to the deal, and a new share scheme along similar lines will then be introduced.
HF’s current strategy, launched in 2022, is to reach a turnover of £100m by 2027 – it was £45m then, £52m in 2023 and it set to hit £66m this year.
Ronan McCann, HF’s chief executive and managing partner, told Legal Futures there were two key drivers behind the investment: so the firm could continue to maintain its position as “a market leader in innovation despite being one of the smaller players” in the insurance law sector – it has a tech subsidiary called HighFive – and to accelerate growth through mergers and acquisitions (M&A).
In the summer, HF acquired Manchester boutique employment law firm Law By Design and two other businesses within the ‘By Design’ group that provide specialist HR, HR investigations and organisational development services.
HF had a £13m facility from NatWest to fund M&A but Mr McCann said external investment allowed him to accelerate growth.
He explained that he had originally favoured a stock market listing, but this was no longer seen as the best route for law firms.
Private equity or a trade deal were the other options and he was attracted by CBPE when it approached HF, because of its culture, the success of its investments to date, understanding of professional services, and its expertise in M&A.
Mr McCann added that the importance of maintaining HF’s culture – to which, along with innovation, he attributed the firm’s strong growth – meant he was only looking for a minority investor.
The history of private equity in the law to date is mixed and indeed HF took on a number of teams from Plexus Law, which had two rounds of private equity investment, when it collapsed.
Mr McCann suggested that some of the deals in the past “haven’t been done from a position of strength where there has either been a debt position or challenges within the business that caused them to reach out to private equity”.
He continued: “This is very different – this is from a position of strength where we want to grow with a carefully selected partner.”
Two other major players in HF’s market, Keoghs and DWF, have had external investment and Mr McCann suggested that it was attractive because of repeat revenue from insurers.
However, he said the legal sector was “seen as quite attractive generally by private equity” and he had seen a significant uptick in approaches in recent times – from two or three a year to one every month.
“Private equity has been heavily focused on the accountancy sector for last five years and that has probably run its course,” he said. It has now “turned its sights to legal”.
In a statement, CBPE partners Richard Thompson and Naveen Passi said: “HF is an outstanding business led by a very strong management team. Under Ronan’s leadership, the business has built a client centric growth focused culture.
“HF is differentiated through its ability to combine highly technical ‘lawyer led’ services and trusted advice with a technology led approach to higher volume work.
“We are backing the business to continue its strong organic growth, further investment in technology and targeted M&A to expand its service offering.”
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