Lloyd: Strong organic growth
Law firms being over-reliant on client account interest for their profits is among the reasons why the private equity-backed Adeptio Law Group has yet to make a major acquisition, its chief executive has revealed.
Neil Lloyd said there had been “quite a few false starts” since Horizon Capital created Adeptio [1] in October 2024 with the acquisition of Midlands firm FBC Manby Bowdler – of which he is also chief executive.
But it currently has four offers out to potential ‘hub’ firms as it looks to create a group with a turnover of £100-120m and an EBITDA of £20m.
“You can’t really get to know a firm from what’s in the public domain, so when you start digging a bit deeper, you find that there might be insurance claims in there that you didn’t know about or how reliant firms are on client interest.”
Client account interest is particularly topical at the moment with the government consultation on using it to help fund the Ministry of Justice. Mr Lloyd said he had found interest making up 10-15% of profits “at the lowest” and 80-90% “at the highest”. It has no value so far as an investor was concerned.
Another problem he has found at some firms was over-reliance on a particular client.
But “generally the biggest issue has been the amount of time it takes people to decide”, he said.
Adeptio is owned 60% by Horizon and 30% by FBC’s partners, with the remaining 10% for future FBC partners or owners of acquired firms.
FBC Manby Bowdler last week announced its first bolt-on acquisition [2] since joining the group, Jordans Solicitors, and Mr Lloyd said another was set to complete next month.
Jordans provided both two new offices – in Blackheath and Halesowen – as well as particular strength in conveyancing, he said, while FBC would look to build up its private client and family teams too.
Mr Lloyd told Legal Futures [3] following the Horizon deal that he was not actually that keen on small bolt-on deals, but he said this week that it made sense while waiting for the larger transactions to come to fruition.
Adeptio has also just hired chartered accountant Anu Tayal as director of mergers and acquisitions from the same role at IT company FluidOne.
Mr Lloyd said the appointment represented “a strategic step forward for the group” and was not a response to the lack of deals to date: “We were always going to do it – it has just been about finding the right person. There’s a big market out there, so it needs somebody that’s just totally focused on doing it.”
In the meantime, FBC has been growing organically, opening offices in Knowle and Birmingham, recruiting 30 new lawyers – half at partner level – investing in a customer relationship management system, and beginning an AI workstream.
As the end of January, FBC was growing at more than 10%, against what Mr Lloyd said was a market average of around 6%. But it has not met his goal of doubling in size in the first year, something he said could only be achieved through acquisition.
So is Horizon frustrated by the lack of deals? Mr Lloyd replied: “They would always like more M&A, but because the organic growth rate is so strong, we’ve actually managed to hit the numbers that they set us without it. So they’re happy at the moment.”
He acknowledged that there was more competition for acquisitions – with the likes of near neighbours Higgs entering the fray after taking private equity itself, for example – but Mr Lloyd said it has had no impact on price as yet.
All the PE-backed offerings have different propositions, he went on. Even Lawfront, whose model of creating a network of good-sized regional law firms grow Adeptio seems to be copying.
“The difference is where we are in the journey,” Mr Lloyd explained. “Michael Jordan [the owner of Jordans Solicitors] gets more of a say in what the business looks like than if he joined us three or four years down the line.”
So while Adeptio has not grown as quickly as he initially hoped, the ambitions have not changed.
“We’ve been able to bring people into the business. The work is there. The legal market is in a good position. It’s a growing market. It’s part of the government’s growth strategy, so if you can find the right people and bring them in, then they’ll find work and they’ll deliver for you.
“We’ve got 22 people in Birmingham now from a standing start, and they’re all new people into the office and delivering decent results every month.
“That gives Horizon comfort that we know what we’re doing while we’re waiting for some of this M&A to come through.”