Lawfront – Setting the pace in legal M&A

Over the past two or three years, dealmaking in the legal sector has begun to spring back to life, following a decade of steady decline during the 2010s.

While the sector is far from reaching the levels of activity seen in industries such as wealth management and insurance, there is no doubt that legal M&A is on the rise and one of the companies leading this trend is Lawfront.

Lawfront was founded in 2021 by private equity firm Blixt Group, with the aim of building a national legal services business through the acquisitions of leading regional law firms, which would serve as hubs throughout the UK.

Once acquired by Lawfront, the company backs these firms to achieve further organic growth through investment in people and technology, centralising certain operations and empowering them to make further bolt-on acquisitions of their own – which Lawfront describe as “merge-ins”.

To date, the company has completed four major acquisitions and a further four merge-ins. This has helped Lawfront grow to more than £70 million in revenue over the past three years and the company is ramping up its ambitions as it becomes ever more prominent in the UK legal sector.

Shortly after Lawfront closed its fourth major acquisition, in a deal that saw it acquire Manchester-based Slater Heelis, BSR spoke with Lawfront CEO Neil Lloyd and COO Axel Koelsch to discuss the company’s M&A model and plans for the future.

Lawfront’s M&A-led story
During the 2010s, M&A in the UK’s legal sector fell steadily. According to a 2023 analysis of Solicitors Regulation Authority (SRA) figures by law firm Hazlewoods, activity in the sector fell from a high of 278 deals in 2011 to 143 in 2019.

The impact of the COVID-19 pandemic saw activity fall yet further, hitting a new low of 99 deals in 2021. Since then, however, there have been persistent signs that M&A could be poised for a big increase.

Writing last year, we identified several key factors that potentially pointed to a boom in legal industry dealmaking: fragmentation, growing private equity interest, succession issues and the growing role of AI in the sector.

In different ways, Lawfront’s story reflects each of these emerging trends. The company was, after all, set up by a private equity firm – demonstrating how an investor class previously considered sceptical of the industry began to take an interest as historically more popular markets (such as insurance) began to mature.

Speaking to The Law Society Gazette last year, Blixt Principal Rachel Reddy explained her firm’s interest in the legal sector and, ultimately, what motivated it to establish Lawfront: “What we saw is this incredibly fragmented market. There are 9,500 law firms in the country and so many are 1-2 partner firms.”

“Most operate in a partnership model which is so heavily dependent on those partners being willing to invest in the business. Younger partners might want to invest in technology, new offices or to grow the business, but generally older partners are more concerned with getting the cash out. These dynamics are really difficult to deal with.”

Lawfront’s proposition directly addresses several of these issues. The acquisition model, which focuses on acquiring strong regional firms and empowering them to execute their own merge-in acquisitions, enables Lawfront and Blixt to capitalise on the huge fragmentation that exists in the market following a decade of slowing activity.

A sale to Lawfront can allow owners eyeing retirement to make an exit from their business, leaving it in the hands of an owner focused on retaining and building on the company’s existing workforce talent. Meanwhile, Lawfront’s private equity backing means that it can fund investment in technology, while increasing efficiencies by centralising some of the more cumbersome back office activities.

The goal at the beginning was simple, but ambitious: using acquisitions to create a national full-service law business focusing on private client and SME-sized corporate services with £100 million in turnover within four to five years. Nearly three years later, with turnover having passed £70 million and hubs across the UK, that goal is well within reach.

In August 2021, Blixt made its first acquisition with a deal for Essex practice Fisher Jones Greenwood (FJG). The deal set the model for future acquisitions that would be made under the Lawfront banner: FJG provides a wide range of personal and business law services, has a strong presence in Essex and London, generated £7.3 million in turnover at the time of acquisition and, crucially, had an eye on its succession options – with four of its eight equity partners in their sixties at the time.

The deal also reflected another crucial aspect of Blixt’s strategy: despite the focus on succession and the involvement of a private equity firm, the onus was firmly placed on longevity. All of FJG’s equity partners agreed to stay on for a period of at least three or four years post-acquisition, providing a sense of continuity for the business, securing valuable expertise for Blixt and giving the older equity partners a clearer idea of when they might be able to exit the business.

FJG Managing Partner Paula Cameron, who became Chief Operations Officer following the acquisition, said that Blixt had targeted the firm in order for “our values and culture to run through that national organisation.”

In October 2022, Blixt made two significant moves: appointing Neil Lloyd as CEO of the Lawfront business and making its second acquisition with a deal for Lancashire-based Farleys Solicitors.

Lloyd brought with him a wealth of experience in operating buy-and-build growth strategies, having served as CEO of private equity-backed dentist group Dental Partners – a major consolidator in one of the UK’s most active dealmaking sectors – from 2017 to 2022.

During Lloyd’s tenure, Dental Partners grew exponentially through acquisitions, going from a small group of practices, to among the biggest in the UK at the time that August Equity realised its investment in the firm and it merged with fellow consolidator Rodericks.

At the time of acquisition, Farleys added six offices across the North West to the Lawfront portfolio, as well as 150 staff, including 15 partners. As with FJG, the company continued to operate under its existing brand following the acquisition, with all staff remaining in place.

In May 2023, the group made its next significant acquisition, taking over East Midlands firm Nelsons in a deal that added offices in Nottingham, Derby and Leicester and brought its turnover past the £45 million mark.

Again, the acquisition saw Lawfront retain Nelsons’ workforce, while pledging investment to enable the firm to make further regional acquisitions, expand its services and ramp up recruitment.

Earlier this year, Lawfront completed its most recent major acquisition, with a deal for Manchester-based Slater Heelis. Like the company’s previous acquisitions, Slater Heelis is a strong regional firm that operates across multiple service lines, having bolstered its offering over recent years with a number of acquisitions.

The deal took Lawfront past the £70 million turnover mark and Lloyd said that it was “further validation of our unique approach to the general legal services market: backing firms’ management teams, preserving their client facing brands, and most importantly, enhancing the prospects of their people.”

An interesting element of the deal was how much of it was driven on the vendor side. According to Slater Heelis Head of Corporate Simon Wallwork, the company began the process of seeking a buyer in June 2023, engaging Alvarez & Marsal, who marketed the business for sale and acted as intermediary throughout the deal.

Wallwork said that the proposition offered by Lawfront was “excellent” and that the group “has a shared vision of growth and investment and enables Slater Heelis to continue and fulfil its own vision.” Wallwork added that the acquisition would enable the company to accelerate its own acquisition strategy and invest further in its operations.

Following the acquisition, Neil Lloyd stated that Lawfront was seeing “rapidly growing interest” in its proposition, stating that its offering responded to challenges facing many owners, including “succession, legacy and the scale of investment required to remain competitive.”

Lawfront’s target profile
Lawfront places a strong emphasis on acquiring general legal services firms with strong growth credentials, a focus on their people and culture and an impeccable reputation in their region for client service.

Speaking with BSR, Lawfront CEO Neil Lloyd summed up the company’s target profile as being businesses of scale, generating between £15 million and £40 million in revenue, a history of organic and/or inorganic growth and a strong management team.

These firms serve as Lawfront’s regional hubs, with the group investing in their management teams, IT systems and growth strategies (whether organic or inorganic), whilst also maintaining their hard-earned brand reputation in their region.

While its M&A strategy is geographically wide ranging, Lawfront’s acquisition criteria is relatively tight. For its major acquisitions, the group typically targets firms of a similar size and similar level of EBITDA.

Lawfront operates an earnings-based valuation system on its acquisitions, identifying a sustainable EBITDA figure at target businesses' pre-partner salaries. It then imputes an agreed level of partner salaries, enabling it to come up with an adjusted EBITDA figure, on which it applies its multiple.

Generally, Lloyd said, the company has seen a relatively narrow range of valuations on its acquisitions so far, with most of the companies it has taken over gaining a valuation within half a point either way.

How does Lawfront support its companies post-acquisition?
Speaking with BSR, Lloyd said that a crucial factor in enabling a smooth integration process post-acquisition is ensuring that companies have strong teams and a good staff culture pre-acquisition.

In the wake of an acquisition, Lawfront’s focus shifts to strengthening this culture and ensuring that it is able to reap the benefits of acquiring a strong workforce. Lloyd said that, across all its acquisitions, Lawfront has seen staff churn of under 12 per cent – indicating that this strategy is working.

Lloyd summed up the company’s approach as being to perpetuate what the companies already have and maintain the existing strong management teams, while providing improved financial information, tools and advice services to strengthen operations.

Lawfront’s strategy of investing in the leadership teams of the companies it acquires was demonstrated by the recent announcement that two of Slater Heelis’ long-term partners would be promoted to senior leadership positions at the company.

Rachel Fletcher, a partner at Slater Heelis since 2019 and head of the company’s crime and regulatory team, was promoted to managing partner, handling the firm’s day-to-day operations, leading the Executive team and executing the company’s strategy and business plan.

Chris Bishop, meanwhile, a partner since 1998, was promoted to senior partner and will be responsible for overseeing Slater Heelis’ governance and culture, representing the company externally, ensuring alignment between its values and objectives and leading the search for rising talent to join the team.

Discussing the appointments at the time, Lawfront COO Axel Koelsch said: “This renewal of leadership will bring fresh perspectives to a continuity of values and experience, both of which are a hallmark of successful professional services firms. We are confident that Rachel and Chris will make an impactful team and lead the firm to continued success.”

While all of the firm’s major acquisitions retain their branding, management teams and the vast majority of their staff, certain functions are brought together under Lawfront’s national platform – including IT, finances and risk management – leaving the individual companies to focus on continuously improving their client service quality.

Information technology is a major issue for many law firms, including strong regional players, and was identified by Axel Koelsch and Neil Lloyd as a leading consideration for companies when considering their succession options. As a result, investment in IT forms a core part of Lawfront’s offering to its companies and Lloyd said that the firm is planning an IT investment of £3 million over the next three years.

Ultimately, perhaps the most valuable asset that Lawfront offers companies post-acquisition is high-level expertise in key areas such as finance, people, marketing, culture and recruitment. Lloyd says that these areas, particularly an inability to recruit, have held back other operators in the sector, with Lawfront’s expertise in people and culture one of the main things that marks its offering out from competitors.

Lloyd added that another element of Lawfront’s post-acquisition offering was creating connections between the firms it acquires – a central aim of its strategy of developing a nationwide network.

While this is a long-term strategy, Lloyd said that it is already bearing fruit. Lawfront recently hosted its first ever national conference, which saw 250 staff from across its network gather at the NEC Birmingham.

Merge-ins
Of course, perhaps the most notable thing that Lawfront offers its subsidiaries is the ability to grow through acquisitions of their own. As well as targeting firms with strong organic growth and an excellent workforce and culture, Lawfront has also made a habit of targeting firms with a history of acquisitive growth.

For example, the company’s most recent acquisition, Slater Heelis, had previously completed a number of acquisitions that had helped it to expand its service offering into areas including charity law, regulatory work and insolvency.

Combining this existing M&A experience with Blixt’s private equity backing, the expertise of the Lawfront leadership team (particularly Lloyd) in buy-and-hold growth strategies and the ongoing fragmentation of the UK legal services industry, means that Lawfront companies are well poised to grow through acquisitions of their own.

Alongside its four major acquisitions, Lawfront has also backed four “merge-in” deals at its regional hubs. Fisher Jones Greenwood acquired fellow Essex firm Steed & Steed in 2022, expanding its offering in key practice areas such as family law, private client, dispute resolution and conveyancing, and taking its total headcount to around 200.

Lawfront’s merge-in strategy accelerated last year, as it backed three acquisitions at its subsidiary companies. In April 2023, Farleys acquired Rossendale-based Mulderrigs Solicitors, a specialist in serious injury and professional negligence claims. The deal broadened Farleys’ presence in Lancashire, taking its portfolio to seven offices across the region and in Greater Manchester.

Subsequently, in Autumn 2023, Lawfront backed two acquisitions at Nelsons, with the East Midlands firm acquiring Pattersons Commercial Law and Cleggs Solicitors in October and November 2023, respectively.

Discussing Nelsons’ acquisition of Pattersons at the time, Neil Lloyd succinctly summed up the importance of merge-ins and Lawfront’s wider offering to its regional companies: “The key to group success is backing our regional leadership teams to achieve their own growth ambitions.”

How does Lawfront’s offering meet the needs of law firms?
In our interview with Neil Lloyd, he identified three key challenges facing UK legal services businesses, which Lawfront’s acquisition offering is specifically tailored to address.

The first is a fundamental one prevalent in many industries: succession. Lawfront’s acquisition of Fisher Jones highlighted an issue facing many UK legal services businesses, with the company’s partners being a mix of long standing figures approaching retirement age and younger counterparts that will ultimately take the firm forward.

As Neil explained, equity partners often struggle to attract investors into the business, meaning that younger partners seeking to invest in growth can often struggle to finance their plans. Lawfront can meet this issue head on, offering an exit path for older partners and a chance for younger partners to step up and take on senior leadership roles.

Secondly, Neil highlighted valuation as a key concern, with partners often struggling to attract a strong value on exit. Lawfront’s earnings-based valuation system can ensure that a business attracts a fair valuation that accurately reflects the company’s status and acknowledges the work that has been put into establishing it as a regional leader.

Finally, Axel Koelsch identified investment in IT, particularly AI and core systems, as a major challenge facing legal services businesses. Again, this can often become problematic for younger partners at established firms, where older partners may be more concerned with taking money out of the business than investing in new technology.

As Axel explained, many legal businesses are small outfits that are operating on outdated IT systems. As technologies such as AI become increasingly prevalent across the legal sector, these businesses are faced with the prospect of making significant investment (Axel says high six-figure or low seven-figure investments in IT are often needed) in order to keep pace with their industry counterparts.

Lawfront’s focus on investing in IT, as well as centralising many core operations, means that acquired firms are no longer faced with the burden of having to make extensive, costly investments in their systems and can focus on providing client services, while safe in the knowledge that there is expertise and financial backing for any IT updates that may be needed.

Legal sector M&A – The bigger picture
Neil agreed that the legal sector is an immature M&A market, especially in comparison with similar sectors such as insurance and accountancy, as well as the highly-consolidated dental sector he previously worked in.

Having operated for years in these two sectors, Neil has a potentially unique insight into two M&A markets, each at very different stages of their lifecycle. While the major consolidators in the dental sector have been around for decades and the pace of dealmaking is slowing, the legal M&A market, as Neil points out, is undeveloped and he suggests it could be 10 – 15 years away from maturity.

While there are similarities between the two seemingly disparate sectors – in terms of companies in each sector being operated by highly-educated, highly-motivated professionals who directly generate 100 per cent of their revenue – the differences are extensive.

Ultimately, legal firms are larger and far more complex than the more homogenous practices in the dental industry, while ownership structures differ widely between dental practices (which are typically tightly owned between one or two practitioners) and legal firms (which are more broadly held under the equity partnership model).

These complexities highlighted by Neil have significant implications at both ends of the M&A process, creating issues during both negotiations and integration. In terms of the pre-deal period, Neil says that the equity partnership model can prove problematic.

As legal firms are run for the benefit of the partners, rather than other shareholders, and (as stated previously) often have outdated IT systems, their financial bookkeeping can be somewhat unsophisticated – making due diligence a challenging process. As Neil also pointed out, the fact that you are dealing very directly with lawyers when acquiring a legal firm also means that the process of finalising a sale and purchase agreement can be highly convoluted.

When it comes to the post-deal period, Neil concedes that the scale, complexity and ownership structure in place at legal firms can make integration a more complex process.

Despite these challenges, Neil says that the Lawfront’s focus on acquiring firms that are a strong cultural fit and have an experienced, established management team that will work well within the wider group makes integration easier and diminishes the risk inherent in the post-acquisition period.

The company’s M&A offering, which is tailored to meeting the concerns of partners at UK legal firms, have helped it to stand out from the crowd.

According to Neil, the firm’s proposition has meant that it has seen little competition for deals so far, but he added that other private equity firms were interested in two of the four major deals it has so far completed.

However, while Lawfront is of course a PE-backed firm, Neil says that the company’s unique offering to owners meant that both of these businesses chose Lawfront over other interested parties.

Neil continued that, while owners are often initially sceptical of selling to a private equity-backed firm, they often experience an “epiphany” when they are presented with Lawfront’s proposition, which can help them navigate the hurdle that exists for law firms in operating as both a business and a legal practice.

As Lawfront becomes more well-known, credible and successful in the industry, Neil says that it is being “invited through the door” for discussions with companies more often, and with increasingly larger firms – a fact perhaps best demonstrated by the Slater Heelis acquisition.

Even as the legal sector market matures and more buyers enter the space, Neil is not concerned that Lawfront will become crowded out by a growing number of competitors.

While he does think it possible that more private equity entrants will emerge, he points out that Lawfront has prevailed in previous deals that have been a competitive process. He explains that Lawfront’s proposition is “compelling as compared with a direct PE investment”, providing greater certainty in terms of deal structure, the timetable of the consideration and there is a higher probability of deal execution.

He emphasises again that Lawfront’s strategy “directly addresses the concerns of firms: succession, valuation, investment, and legacy.”

Neil added: “We back and invest in local management and brands, we facilitate the retirement of older equity partners leading to the refreshing of management and we are proven investors in IT and digital, and a focus on people and culture is the key plank of our strategy.”

What next for Lawfront?
There is no doubt that the company’s M&A-led growth strategy is bearing fruit so far. As well as successfully completing a number of deals and merge-ins, the company has also seen strong growth across its network.

Neil says that all of Lawfront’s businesses hit their budget in the year to March and saw strong organic and acquisitive growth, with the three regional firms (prior to the Slater Heelis deal) seeing organic growth of 6 per cent over the past year and being on track to grow further.

Discussing the firm’s pipeline of future deals, Neil was keen to point out that, due to the complex ownership structure of legal firms and the stringent regulation of the sector, acquisitions are “a long time in gestation” - with deals often taking between three to six months. We’d point out that that is actually a relatively speedy timeline.

Following the Slater Heelis deal, Neil says that Lawfront has “several other opportunities ranging from pre-offer to in negotiation”, but “cannot forecast when the next larger acquisition will be”.

Despite this, Neil says the company is aiming to complete one or two larger acquisitions in the £15 million - £30 million EBITDA range per annum. Currently, the firm is targeting another three to four deals, which would help it achieve its aim of reaching £140 million in revenue (an extension of Blixt’s initial aim of building a £100 million revenue business) over the next couple of years and gaining a place as a top 40 UK legal firm.

These goals will likely become easier to achieve as the company targets increasingly larger deals. While FJG had revenue of £7.3 million when it was acquired in 2021, Neil says that Lawfront is now targeting firms with EBITDA of over £10 million and is seeing a growing number of opportunities for firms with more than £20 million in earnings.

Looking to Lawfront’s longer-term future, Neil points out that, as a private equity-backed business, there will ultimately of course be a transaction involving the company – which he tentatively expects to be to another private equity firm, rather than a big national law firm.

However, he adds that Lawfront is the first investment in a 10-year-fund, meaning that any sale is years away and there is no rush for Blixt to cash out on its investment in the business.

This gives Lawfront plenty of time to continue on its current upward trajectory, developing its network across the UK, sustainably backing and growing the companies it acquires and continuing to rapidly increase its revenue and service offerings, all co-ordinated by an M&A strategy that has firmly established the company as a major operator in the sector in the space of just four years.

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