Three and a half years ago Duke Street became the first private equity house to buy a majority stake in a UK law firm when it bought into Parabis, after the Legal Services Act had opened up the market to outside investment.
At the time, the buyout house said it had not yet decided how it would exit its investment in three to five years, but the tales emerging from Parabis in recent weeks are not likely to have been among the possible exit options publicly discussed back then.
Rather than demonstrating how law firms can generate decent returns for investors via IPOs or secondary buyouts, the story has instead dominated our headlines for less positive reasons, after it emerged last week that Duke Street had written down its investment in the insurance law firm earlier this year.
Partners at defendant insurance arm Plexus were asked to agree to a two-year lock-in ahead of a potential sale to rival PE-backed law firm Keoghs, while a large team of lawyers was planning a move elsewhere.
On Wednesday this week we reported that the Keoghs talks had ended and that the Plexus business was being bought via a management buyout led by Parabis founders Andrew McDougall and Tim Roberts.
And the story isn't over yet, as the fate of the wider Parabis umbrella company - currently being guided through a restructuring by turnaround specialists AlixPartners - remains unclear, with potential sale discussions underway for several of the group's businesses.
What is clear is the impact that events at Parabis are likely to have on future external investment in law firms. Though several other private equity houses have followed Duke Street's lead and bought into law, the much-touted flurry of high-profile deals has never materialised, and recents events are only set to prolong this trend.
As Jomati consultant Tony Williams comments: "This is bad news for private equity investments. In people businesses it is always challenging as your key assets go home every night and may not return the next day. Combined with a low growth market, changes in the personal injury sector and possibly a concentration on growth for growth's sake and you have a pretty value-destructive combination."
Looking beyond Parabis, other popular stories on Legal Week over the last week include the news that White & Case is aiming to dramatically increase its presence in London and New York, with chairman Hugh Verrier setting out a target to increase City lawyer headcount from 350 to 500 within five years.
Meanwhile, current and former Linklaters partners offered their views on how Gideon Moore convinced the magic circle firm's partners that he is the man for the managing partner job, while the mooted transatlantic merger between Eversheds and Foley & Lardner hit the skids, with talks over a tie-up confirmed to have ended.
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