Private equity keen on the biggest and smallest City firms, says PE-backed solicitor

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By Legal Futures

22 July 2010


City of London: private equity keen on a market they have not been able to access

Private equity investors are interested in either the top City firms or niche practices, according to the solicitor who this week set up a law firm with private equity loans which could be turned into equity stakes when allowed.

Matthew Hudson, a leading private equity lawyer, made headlines for his City start-up, MJ Hudson, and told Legal Futures that City law firms are highly appealing to private equity houses. They are “highly cash generative”, he explained, have high growth and margins, have a pre-eminent position in the global legal market and represent a capital market that until now private equity has been unable to access.

He predicted, however, that it will either be the “world-beating” big firms, or focused boutique practices which will attract the cash.

Mr Hudson could not say that the loans would for certain be converted. MJ Hudson is structured with a limited partnership lending money to the regulated LLP. In due course, the alternative business structure part of the loan could be capitalised into a company which would become a corporate member of the LLP. It is the limited partnership that takes the stakes in client funds.

Mr Hudson is also offering to align his interests closely with those of his clients by reinvesting a proportion of his fees in their funds. Further, he is offering an alternative to hourly billing by following the investment bank model of a monthly retainer and a percentage of any successful transaction. However, “quite a few clients say they just want hourly billing”, he said.

Mr Hudson said the Legal Services Act “should assist the transformation for a traditional law firm away from an annual cash flow model into a long-term balance sheet-based business, developing an annuity based and deeper relationship with clients”.

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