Almost 100 law firms and companies have told the solicitors’ regulator that they want to take advantage of a liberalised legal market in England and Wales, beating the regulator’s expectations.
The Solicitors Regulation Authority said on Monday that it had received 96 initial applications since the beginning of the year to become so-called alternative business structures, the name for entities that are either law firms with external investors or companies offering legal services for the first time.
An ABS is possible under the Legal Services Act, which came into effect in October. A parliamentary delay in the Ministry of Justice endorsing the regulator’s ability to allocate licences to ABSs meant that the application process only began on January 3, however. The point of the new legislation was to make buying legal services as easy as buying a tin of beans, garnering the act the nickname “Tesco Law” – even though the supermarket group has not announced any plans to launch legal services.
Under the two-stage licensing process, firms must register their interest with the regulator to become an ABS, then fill out a second form that details their plans.
“We’ll have to wait and see if the numbers of Stage 1 applications we receive is consistent with the number of actual ABS we eventually regulate,” said Antony Townsend, the regulator’s chief executive. “We have an authorisation process that is very rigorous, so 96 applications doesn’t necessarily translate into 96 organisations being regulated as ABS.”
Mr Townsend estimated in December that 20 firms would apply to the SRA, leading to 15 actual ABSs. The regulator said it had not yet received any more detailed second-stage applications for an ABS licence, which include employment and criminal-record checks for all staff, and information on the corporate structure of the new entity.
The regulator’s statistics come as Parabis, a group whose subsidiaries include law firms that handle insurance claims, confirmed it would accept a £50m investment from Duke Street Capital, intended to be used to acquire other law firms in the sector. The deal, still subject to regulatory approval, values Parabis at between £150m and £200m.
“The intention is to support management with Duke Street’s operational expertise in transforming the business from a professional services firm to a business process outsourcer, and to drive the continued consolidation of the legal services industry via Duke Street’s successful buy-and-build model,” Iain Kennedy, a partner at Duke Street, said in a statement.
In the past two weeks, Quindell Portfolio, an Aim-traded outsourcing company, said it would pay £19.3m for a Liverpool-based law firm that specialises in personal injury claims, while Slater & Gordon, a law firm that is publicly traded in Australia, said it was buying Russell Jones & Walker, a London-headquartered firm that also has a personal-injury litigation division, for £53.8m.