National profit-share law firm Setfords is embarking on the next stage of its development after taking on Series B private equity investment, with its original investor exiting.
The level of investment by Phoenix Equity Partners is undisclosed. BGF, which injected £3.75m into the firm in late 2016, said it had generated a “high return on capital”.
Setfords is one of the few ‘virtual’ or dispersed firms that has built a full-service practice that encompasses non-commercial work; most of the growing number of these profit-share practices focus solely on commercial work.
Founded by cousins Guy and Chris Setford in 2006, who are co-chief executives, it now supports 340 consultants across the country, of whom 121 joined during lockdown between March and December 2020.
It recorded a 30% increase in turnover to £17.6m for its last financial year, up from £13.5m to 30 September 2019 and £10.7m the year before.
Phoenix describes itself as a growth-focused private equity firm that specialises in medium-sized, UK-based businesses valued up to £200m. It has made 55 investments since launching in 2001, since when it has raised £1.5bn in capital.
The investment will be used to develop the Setfords platform and lead generation capabilities, its technology and the services it offers its lawyers and their clients.
Guy Setford said: “Phoenix’s experience and knowledge of growing tech-enabled platforms such as ours, that connect vendors and customers, will be invaluable as we build on the success we have enjoyed since founding the firm.”
He told Legal Futures that, in another four years’ time, “we would like to be the market-leading, full service, national fee-share firm”.
Anticipating recruiting hundreds more lawyers in the years to come, he added: “We’ve developed and secured a strong market position and there’s a lot more that we can achieve.”
Will Skinner, a partner at Phoenix, said: “Setfords is an exciting business that is disrupting the legal services sector and the way it has traditionally operated.
“Guy and Chris have done an outstanding job in building their business from scratch and developing a model that provides a superior offering to solicitors and clients alike. We look forward to working with Chris and Guy, and their team, to help deliver on their ambitious growth plans.”
BGF said the Setfords’ growth over the past four years “has driven an outsized profitability trajectory thanks to the scalable, tech-enabled platform that the business has developed”.
Rahul Satsangi, investor at BGF, said: “This has been a highly successful exit for BGF, demonstrating the value of supporting a high-calibre founding management team to deploy patient growth capital to capture market share.
“It has been a pleasure working with Guy and Chris on their journey to scale up the Setfords platform.
“They have been relentless in their pursuit of bringing a better way of working to the legal services market which has generated strong interest from experienced lawyers looking to maximise their potential.”
Research published last week predicted that firms of legal consultants like Setfords were set for huge growth and would become the dominant business model in the consolidation of the high street and mid-market.
Arden Partners PLC estimated that around 50,000 solicitors – a third of the profession – could be working as consultants in just five years’ time, with traditional small partnerships a rarity by then.