Lyceum Capital has become the first investment house to openly target legal services as the private equity firm moves to position itself ahead of sweeping deregulation of the U.K. profession.
The buyout house has also appointed a senior advisory panel to seal its credentials, including former Clifford Chance managing partner Tony Williams, high-profile legal IT consultant Richard Susskind and Paul Hewitt, who was instrumental in developing legal services arms at the RAC and Co-operative Group.
The venture, revealed Thursday by Legal Week, is being overseen by Lyceum's managing partner, Jeremy Hand, the incoming chairman of the BVCA -- private equity's main industry body in the U.K.
Lyceum is to target opportunities from the Legal Services Act by investing in midtier firms to help fund their growth, including taking minority and full controlling stakes.
With the help of the panel, Lyceum, which has just announced its latest £255 million ($512.17 million) fund, will look for potential investment targets and give business advice in addition to funding.
Hand told Legal Week: "Law firms are businesses. We are not pretending we are lawyers but we can help businesses develop -- whether through giving advice, overhauling IT systems or allowing them to grow with new hires."
The buyout house is already talking to a number of firms with a view to getting structures in place before the LSA comes into full force in 2011. It is currently targeting midmarket firms and those doing bulk work.
Hand is not limiting the size of investment, with options including a significant investment in a sizable legal practice in return for a small stake or a large investment in a smaller firm in return for a controlling share.
Williams, the former head of Andersen Legal and founder of Jomati Consultants, said they expected to target firms in the 20 million-plus pound revenue bracket which are looking to expand.
He commented: "Corporate firms in a busy market will not think about this but in a quieter market, when panel processes are getting more rigorous and money is tighter, it suddenly becomes more interesting -- firms start to concentrate. This has come at the right time."
Lyceum expects outside investment will be particularly attractive for firms seeking funds to carry out a merger or to develop a new practice area. Hand also sees opportunities for consolidation in firms' bulk work by putting in place funding for new IT systems.
He added: "People think they are in a competitive industry but they do not appreciate how different it is in other sectors. This will change the entire business landscape. There is no doubt in my mind there will be winners and losers in this situation: Firms cannot be complacent. There is no guaranteeing firms at the top of their game now will be there in a few years' time."
Lyceum's move will raise the stakes at a time when a number of banks and investment houses are reported to be gauging the scope for investing in law firms in light of the LSA. The legislation will make the U.K. by far the most liberal legal market in the world.