Dillarstone: Firms that wait could miss out on private equity
A 25-partner law firm has become the first mid-market practice in London to take private equity investment.
Greenwoods – which also has offices in Cambridge and Peterborough – said it would use the cash from Gresham House Ventures to grow both organically and through acquisition.
Chief executive Rob Dillarstone refused to say whether Gresham has taken a majority or minority stake in the firm, which has around 140 staff.
“We’ve got big plans, and now we’ve got the backing to make them happen,” he said.
It is Gresham’s first law firm investment, although it has put £4.1m over the past four years into Legatics, a legal transaction management software provider for global law firms.
Greenwoods’ most recent published accounts, for the year to 30 April 2024, recorded a profit of £2.7m on a turnover of £13.8m, although Mr Dillarstone said this rose to £17.2m in the most recent year.
The investment will also be put towards technology, embedding sustainability initiatives, and expanding learning and development programmes for staff.
Graham Coxell will become non-executive chair – among his other roles, he is chair of top 40 accountancy firm BKL, which also has PE backing.
Mr Dillarstone told Legal Futures that he had watched as PE moved from other professions into the law.
After initially focused on personal injury and more commoditised services like conveyancing, “increasingly I saw other firms take private equity investment that looked and felt a bit more like us”.
This was against a background where running a law firm has become much harder than in the past, he went on.
The modern law firm has to have “a decent tech, platform no matter what your size”, especially with “every firm looking over their shoulder to see how AI’s going to impact the legal sector”.
Then there were the regulatory obligations, which require “a lot of capital”, as well the question of succession, with younger lawyers less keen to buy into partnership than previous generations.
These factors were causing a lot of law firms to question how they were going to fund themselves going forward, he said. As a result, Greenwoods went out to find an investor and, after a lengthy search, was introduced to Gresham by Forward Capital Finance.
Mr Dillarstone said another option would have been to join one of the PE-backed platforms that are emerging, but they decided against it: “We really do feel that we’ve built something special at Greenwoods. We’re very nimble in terms of how we do things, and we wanted to find a private equity partner who looked at life through the same eyes as us.”
He said other funding options, such as bank or partner funding, were quickly discounted: “Finding a private equity partner is not just about the capital that they bring, it’s about the expertise that they bring as well…
“When I look back at mergers that we’ve done in the past, there’s lots of lessons to be learned there. Private equity are absolute experts in deal execution.”
Further, PE was expert at scaling businesses “and knowing how to integrate, particularly in buy-and-build models”. Thirdly, “they’re experts in knowing how to incentivise people”.
He continued: “So all of those are things that private equity bring to an investment. It’s not just the capital. In all the discussions I had, I was really impressed from the word go with Gresham House and nothing has swayed me from that view.”
One of Greenwoods’ unique selling points was that, to his surprise, there was not another private equity backed full-service law firm in London “in the mid-market space in which we see ourselves”. None of the platforms or listed consolidator Knights had entered London. “So I think London presents a really good opportunity for us.”
At the same time, Greenwoods’ roots were to the east and the acquisition strategy would focus on London, East Anglia and the home counties.
Mr Dillarstone said they were not looking to build a group – he would integrate any acquisitions into Greenwoods.
He added that there had been no resistance from his partners to outside investment. “This hasn’t been something which we’ve done quickly… Everybody completely gets the reasoning and I think the worry is that, had we left this for another couple of years, it would be too late then.
“I know of managing partners in the accountancy space who wish they’d acted some years before, because effectively all of the platform slots have gone because any sector can only accommodate so many platforms.”
Greg Blin, investment partner at Gresham House Ventures, said Greenwoods had “a strong track record and a clear vision for the future”.
He added: “Our investment will support the business’s plans to innovate and grow – both organically and through acquisitions – while maintaining the culture and values that has already set it apart.”