Top 10 accountancy firm Moore Kingston Smith (MKS) is set to expand its legal services arm after becoming the first to take on private equity (PE) funding while staying a limited liability partnership (LLP).
Managing partner Maureen Penfold predicted that the innovative structure would encourage more law firms to take on PE as well.
What was then Kingston Smith became the first accountancy firm to obtain an alternative business structure (ABS) licence from the Institute of Chartered Accountants in England and Wales in 2014, allowing it to conduct reserved probate work only.
The following year, it became the first ABS to switch regulators, when the Solicitors Regulation Authority granted a licence.
MKS agreed a deal with major European PE house Waterland last week without having to move to a limited company operating model.
In a statement, the firm said: “The newly adopted structure will allow other acquisition targets to join the firm in a seamless way, whilst ensuring the opportunity for people to progress into becoming equity partners and joint owners of an enlarged business.
“This flexibility was a significant consideration for the firm’s partners in pursuing this new deal structure.
“Equally important was the partners’ ability to retain full operational control of the day-to-day business, in line with their commitment to protect the culture and ethos they have developed over many years.”
Ms Penfold told Legal Futures: “The financing we receive from Waterland will enable us to write cheques as part of our acquisition and merger strategy. While our main target is to entice partnerships and partners to join us, we believe that scale will enable the infrastructure for success.”
MKS’s legal services team has two partners, nine other solicitors and two paralegals, offering both corporate and private client legal services to SME and high-net-worth clients.
Ms Penfold was clear that the growth plan included the ABS and could potentially include acquisitions. “The world in which our clients operate is becoming increasingly complex,” she said.
“Ensuring our clients have access to the experts they need whilst navigating through that complexity, is a core part of our growth strategy. We want to add both depth and breadth to our current legal offering to ensure that we are anticipating and responding to our clients’ current and future needs.”
Ms Penfold said the deal would encourage more PE investment in law firms as well.
“We expect the innovative structure of this deal, which enabled us to maintain our LLP status, to pave the way for other firms – including law firms – to follow suit. That could open up a whole new market for PE investment in the legal sector.”
William Wastie, partner and head of the professional practices group at Addleshaw Goddard, which was MKS’s legal advisor on the deal, added: “To retain the flexibility of an LLP ownership structure combined with taking on private equity funding has created a new model for investment growth, and we are sure that this will provide significant further opportunity for the future growth of the business.”