Lynch: Investor interest in law will continue to accelerate
A private equity-backed serious injury firm is to move into other consumer law services for the first time with an “imminent” acquisition, Legal Futures can reveal.
The news about Southport-based Fletchers, backed by Sun Capital, comes on the back of strong results in the year to 30 April that showed a 32% increase in turnover from £58m to £77m, although profits were down £1m on the previous year at £8.1m.
The figures highlighted the benefit of PE backing, said chief financial officer Alex Lynch.
Sun acquired Fletchers four years ago and has since backed the acquisitions of law firms Cycle SOS, Minton Morill, Serious Injury Law and, at the start of this year, Scott Rees & Co, as well as digital marketing specialist Blume and in March lead generators Claims.co.uk.
In July, it added the 80-strong serious injury practice of national firm Shoosmiths, and three new offices as well.
According to the accounts, Scott Rees cost £4.7m (£2m upfront and £2.7m deferred) and Shoosmiths £12m (half up front and half deferred).
Ms Lynch said the firm received a lot of direct approaches from practices looking to be acquired. “We think there’s so much more room to grow,” she said, especially in personal injury (PI).
Total PI revenue in 2024-25 was approaching £27m, with acquisitions taking staff numbers up 90 on the year to 267 and case signings increasing by 20%.
In clinical negligence, revenue was £23m, with case signings up 35% and staff numbers 32 higher over the year at 257. This was before the Shoosmiths deal.
The firm said it took around 72,000 enquiries annually from people with potential claims against the NHS, mainly through its Patient Claim Line brand.
In all, client acquisition costs doubled to £18m “as the firm continued to invest heavily in building long-term profitability and market share”, the accounts said.
The group as a whole had 791 staff at the end of the year, 143 more than 12 months earlier.
Fletchers is now looking beyond injury work for the first time, with a deal “imminent”, Ms Lynch said.
This would be a “platform acquisition” on which the firm would build the practice.
She explained they were confident that the infrastructure put in place in recent times – around client service, customer acquisition and so on – would work just as well in other areas of law.
More broadly, Ms Lynch said private equity like the fact that aggregate returns in PI and clinical negligence were “attractive and predictable, albeit over a long-time”.
Fletchers has used its data to create “a very accurate forecasting model” and the owners “can bank on what our EBITDA is going to be”. The downside in injury work is that lock-up can be very long.
An added advantage of PE backing, she went on, was that all earning went back into the business, rather than being withdrawn by partners.
“Private equity puts money into law firms to make them more valuable; partnerships tend to focus on extracting money out of firms for the partners. That approach is perfectly reasonable but tends not to drive growth, whereas our ability to re-invest means we can grow at 25-35% [a year].”
There is a small cohort of equity partners, while other senior staff (there are 55 salaried partners) can reinvest their bonuses into the firm and the money grows at the same speed as the group.
Ms Lynch said three-quarters of the firm’s growth was organic and the rest through acquisitions. “Blume, the group’s case acquisition specialist, and Fletchers charity partnerships helped drive our case signings up by 26% year on year, including a continued shift towards higher-value work.”
Before it was bought, Fletchers was more known for taking on large numbers of smaller serious injury cases.
Ms Lynch predicted that investor interest in the legal sector would continue to accelerate, especially for consumer law firms.
“Typically consumer firms like us have a large number of individual cases, and more diverse sources of work, making them inherently less risky to invest in.
“High-earning corporate law firms are often dependent on a narrower set of relationships that are held by ‘key rainmakers’, who want to take their share of the value and are pretty mobile.”
One would think the logical next buy would be Slater and Gordon!