It’s been over a decade since New York based private equity firm Accretive Technologies creatively acquired multiple large collection law firms, including Wolpoff & Abramson and Mann Brackenm, to create Axiant LLC. This marked the last time that a private equity firm attempted to aggressively roll-up collection law firms. Is it possible that private equity firms are back in the market for collection law firms?
Last week, Chicago based private equity firm CIVC Partners acquired Magna Legal Services in partnership with the company’s management team. Magna provides litigation support services to over 2,000 law firms and corporations across the United States. The company’s services include court reporting, jury evaluation and consulting, translation, video, graphic design, and record retrieval services. Will legal collection services be added to their suite of services? If not by Magna, perhaps one of the other recently formed partnerships will move in that direction.
The legal services space has been very active recently. Boston-based Abry Partners acquired U.S. Legal Support, a Houston-based provider of litigation support services with more than 85 offices located across the United States. In October 2018, Consilio, a portfolio company of GI Partners, acquired Charlotte-based DiscoverReady, a provider of legal support services. GI Partners formed Consilio in April 2018 through the acquisitions of two legal services providers – Advanced Discovery, a portfolio company of Trivest Partners, and Consilio, a portfolio company of Shamrock Partners and Trinity Hunt.
The legal collection sector fits the criteria that these, and other private equity firms, set when they look to enter a new sector. This service industry is large, profitable, has a fragmented base of smaller firms, and benefits from outsourcing trends. Like Accretive Technologies more than a decade ago, and private equity firm Welsh Carson when it acquired the collection law firm of Hate, Hate and Landau in the early 1990s, these non-law firm acquirers will have to creatively bifurcate the law practice from the service business to be eligible buyers. Although the ownership laws have been challenged in the courts, law firms are still required to be majority owned by lawyers. This did not stop private equity previously and I see no reason it will stop them now.