Lew: Permanent home to all SME firms
An investor-backed search fund has acquired a conveyancing and private client law firm as the start of a ‘buy and build’ strategy aimed particularly at SME practices with succession issues.
River Cam Group has bought Ives & Co, which has three directors and 25 staff working across three offices around Nottingham and one in Rainham, Kent.
A search fund is essentially a vehicle that raises money to search for a company to buy.
Set up by Louis Lew, formerly of healthcare search fund Thames Equity Partners, River Cam has three main investors: Mexico-based Cerralvo Capital, a leading search fund investor; Will Thorndike, managing director of US private investment company The Cromwell Harbor Partnership; and Alex Tuya, chief executive of Page Bros Group in Norwich, a printing company he bought some years ago after raising a search fund himself.
Mr Lew told Legal Futures that initially the fund was looking at professional services more broadly but he focused in on a legal services ‘buy and build’ strategy after identifying the succession issue many firms faced.
“Thirty per cent of law firm owners are 55 years old or older. So that means that in the next five to 10 years, there’ll be a lot that want to exit but they’ll only have a few private equity options or they’ll have to merge with bigger law firms. Those two [options] are not sufficient because some sellers want more liquidity, which we can provide.”
His approach was also a way for owners to protect staff and the brands they have built.
Ives & Co director Paul Thomas said he was attracted by the succession element. He is 67 and looking to retire soon, “but obviously I wanted to get something out of the business which reflects the effort and expertise that I’ve put into it”. The directors also felt “we’ve taken it as far as we can ourselves”.
Staff were not able to afford to buy him out– they did not want to take on the borrowing required – while merger talks with another firm had not come to fruition.
River Cam’s offer was attractive because Mr Lew “has given us a lot of guidance on how to take it to another level, but at the same time, we’re able to manage it still”.
Mr Thomas will continue with the firm as an adviser, while fellow directors Ruth Stevenson and Laura Peacock will continue running Ives & Co.
“We really love the firm,” said Ms Stevenson. “We love the job. We love the people. What we just don’t like is that when you’re owning it, you can’t ever just have a break.” Staff have responded well to the change, she added.
Ms Peacock said the support in growing the business “whilst not compromising the culture that we have” was very appealing.
Mr Lew was introduced to Ives & Co by M&A company Benchmark International. “Our goal was not to buy a giant,” he said. “We are not a private equity firm. Our goal was to buy a law firm that we believe has super strong growth potential.”
Conveyancing appears to be increasingly a game for the big boys but Mr Lew said he was actually attracted by the Ives & Co model of setting up offices and “providing such a great quality of service that they basically give no reason for the residents in the neighbourhood to look elsewhere”.
As a result, “the quality of revenue is really high because there is sustainability built in with the customer loyalty and the referral network that they have put together”.
He himself brings varied corporate experience, particularly in building strategic partnerships and in pricing. “I believe Ives & Co provides such a high quality of service that it could actually demand a higher price… People are willing to play a little bit of a premium just to get a better service.”
Ms Stevenson said the firm’s philosophy was to “treat clients how we want to be treated”, meaning same-day responses to calls and emails, leading to a large number of repeat clients. “They like the fact that we are local. We’ll do home visits or hospital visits, if necessary.”
Mr Lew said his plan was to accelerate the office openings that the directors had planned. “We already have the next few locations identified, but with the capital injection from the investors, we can accelerate that vision.”
He added that he was already “reviewing a few deals” for other firms. “We want to provide a permanent home to all the SME law firms that want to exit but not necessarily to private equity.”
There was also the “white space” of deals that were too small for private equity.
The plan was to centralise back-office functions but retain local management, brands and decision-making.
Though initially it made sense to start expanding from the Midlands and South-East, there was no geographical limit, Mr Lew said.
The focus was on conveyancing and private client services, which the investors liked because there was “zero customer concentration risk”.
Mr Lew said there would still be opportunities for staff to be promoted to management and grow with the firm. “But we understand the dynamic that some people just want ownership, they want to be partners. If that’s what they choose to do, there are still other law firms that can join.”