Thomas: Foresight offers patient capital
A conveyancing law firm only set up in May 2021 has been bought by private equity in a deal that values it at £25m.
Foresight Group has snapped up Cheltenham-headquartered Montpellier Legal to support its continued expansion, including further offices across the South-West.
Montpellier has nearly 100 staff and a turnover exceeding £10m, with branches in Bath, Cirencester, Gloucester, Stroud, Worcester and London. It is among the small number of law firms to achieve B Corp status.
Founder Simon Thomas told Legal Futures that he had received multiple approaches from potential buyers and had focused on three in particular.
Foresight did not offer the most, he said, but was the best fit “because their mantra is patient capital and they have an evergreen fund” – meaning there is not an end-date by which investments have to be realised.
“This allows us to manage our growth at the pace we want rather than an artificial pace set by private equity.”
Mr Thomas – who said the firm’s margins were “much higher” than industry standard – said he wanted the investment so as to take the business “as large as we can”.
He explained: “Foresight is a very established, very experienced investment company with a track record of taking small companies and turning them into much larger ones. We wanted that know-how and expertise.”
He declined to put targets on Montpellier’s growth “because we don’t need to do that. What I can say is that we’re going to continue to open new branches every year and more than one”.
The firm’s focus was on the south of England because it looked to charge a premium for its services. “We’re a best-in-breed firm and that appeals to some parts of the market and not others. We’re not chasing the race to the bottom, we’re not stacking ’em high and selling ’em cheap. We’re focusing on quality.”
The price sensitivity of clients is a constant dilemma for conveyancers. “We don’t need everyone to say yes,” said Mr Thomas. “It’s no different from someone using one of the top estate agencies instead of Purplebricks. You pay a very different price, you get a very different experience and some choose one, some choose the other.”
At the same time, do clients appreciate the difference when it comes to conveyancing? A first-time buyer may not, he accepted.
“But if you ask someone who’s moved house a couple of times, it doesn’t take them long to realise that actually cheap isn’t the right way to play things when you’ve got a £1m house to sell or buy. They’re much more focused on where their lawyers are based, what they’re going to get for their money, is it going to be done properly and promptly by a qualified person?
“And often the answer to that is ‘no’ if they go cheap. So they’re not looking for the cheapest and those are the kind of clients and market we’re in.”
This focus on a premium fee for a premium service was also why Montpellier was not on referral panels.
Mr Thomas said he believed in the value of physical offices as the best route to productivity and happy staff. “Rather than hiring loads of people to work from home or some warehouse in a business park, we want people to work in small teams in the town. They’re working for that town. We feel that’s the best fit.”
This is not the solicitor’s first experience with private equity. In 2019, BGF made a multi-million pound investment [1] equity release specialist Equilaw and conveyancer Thomas Legal, sister companies that Mr Thomas co-founded.
By the time of the deal, he was a minority owner and said the experience was different this time around, with the management team staying in place, and boosted by non-executive chair Tom Hartley, a former KPMG partner who spent nearly nine years as chief executive of flexible lawyers business LOD.
There is a debate about whether specialist or full-service firms are the best targets for investment. For Mr Thomas, “most of the market leaders in any industry are those that focus on their core business and they don’t get distracted by doing too many things at once”.
He continued: “Lawyers more than most professions have been guilty of just being general practitioners. But many have wised up to the fact that we should actually focus on doing one thing well and smart investment companies are realising that boutique firms are the best ones to go for – pick a market-leading one and you are on for a winner.”
This meant he was not looking to expand into related areas of law, such as private client, and was not actively looking for mergers or acquisitions either.
“We feel that we are the most modern, dynamic firm out there. So any firm we look to buy is not going to be as good and we’ll then have to fix it. Why would we do that?”
Amy Crofton, managing director at Foresight Group, added: “This is our second investment from the Foresight South West Fund, and we are delighted to back such an experienced team in such a demonstrably high quality business.
“Their commitment to customer satisfaction and service excellence aligns perfectly with our investment philosophy, and we are excited to support their continued expansion and success.”