LPO Industry Consolidation Underway?

Acquisitions, alliances, and recapitalizations have been hot topics recently among LPO vendors and the broader legal services industry.  Industry competitors are conducting transactions to strengthen and expand existing services, and industry investors are creating new entities and recapitalizing existing ones to enter the market with fuller offerings.   Experienced managers recognize that transactions are a normal part of business operations, but the recent increase in activity suggests that the long-anticipated consolidation in the legal services industry is underway. 

Industry Competitors

Integreon, the industry’s leading consolidator, recently acquired Grail Research, Monitor’s Captive Strategic Research and Decision Support Unit.  The Grail acquisition continues Integreon’s history of purchasing legal services companies including Datum Legal, the CBF Group, and the E-Discovery operations of ONSITE3.  In addition, law firm Pillsbury Winthrop Shaw Pittman LLP this week announced an alliance with ACT Litigation Services, Inc., Discovery Services Inc., Integreon, Protiviti, and TransPerfect Legal Solutions under which it will provide a single-source solution to integrated discovery management.  It will be surprising if this alliance, or one of the competitors to it that are sure to emerge, does not form the basis for a single vendor to offer a solution that includes all components of the Electronic Discovery Reference Model.  American law firms have not been very public about their work with LPOs to date, so the announcement of a Pillsbury Winthrop alliance with multiple LPO vendors bodes well for LPO growth in America. (I’ll write specifically about the alliance in a future post.)

In recent weeks I have heard from both an Indian law firm seeking to leverage its existing presence in cross-border transactions into business for its budding LPO subsidiary and from existing LPO vendors seeking acquisitions to gain or expand their positions among the LPO industry mainstays (for a stratification of LPO vendors see Expanded Service Models for LPO Vendors).  In each case, industry competitors have recognized the need to fortify their services by adding the capabilities of existing competitors.

Industry Investors

In addition to the machinations of LPO industry competitors, there are a number of financial investors that have deployed, or are actively seeking to deploy, capital in the legal services industry.  Most recently, Intermediate Capital Group (“ICG”), an investor and fund manager, acquired 47% of CPA Global.  Financial details of the transaction weren’t disclosed, but The Wall Street Journal reported that the enterprise value of the deal was around £440 million and that ICG is taking a 47% stake.  In November, UK-based Lyceum Capital invested £25m into LPO start-up Laureate Legal Services (LLS)Integreon, controlled by Philippine conglomerate Ayala Corporation, has also announced an effort to raise $80M to $100M from private equity players to fund further acquisitions.  The actions of financial investors are particularly noteworthy in the U.K., where the Legal Services Act now allows non-lawyers to invest in law firms.  Sophisticated investors that have already deployed capital in the legal services industry include the funders of Mindcrest (Talon Asset Management), Pangea3 (Sequoia Capital and The GlenRock Group, LLC.)  and UnitedLex (Helion Venture Partners and Canaan Partners).    

Recent weeks have also brought multiple legal services-related inquiries from private equity/venture firms and their advisors on both sides of the Atlantic.  The heightened interest suggests that 2010 will see significant additional investment in the LPO industry.

Conclusion

Industry competitors have formed alliances and acquisitions to broaden their legal service lines, new investors are seeking to create new or expanded entities with broader capabilities, and sophisticated financiers control many of the established competitors.  The economic markets suggest that law firms may be beginning a recovery, but legal cost control is still a significant initiative at companies consuming legal services, and at law firms.  These factors, taken together, strongly suggest that company transactions during 2010 will significantly alter the landscape of the legal services industry.

Red Bridge Strategy, Inc. provides a full suite of strategy, due diligence and integration services for legal services industry participants.  Contact Matthew Sullivan for additional information.

5 Responses to LPO Industry Consolidation Underway?

  1. Consolidation of LPO industry is the most significant happening in the Legal Services Industry. Thanks for such a valuable and outstanding update.

  2. […] This post was mentioned on Twitter by Integreon and ronfriedmann, Red Bridge Strategy. Red Bridge Strategy said: Matt Sullivan asks, "LPO Industry Consolidation Underway?" in his blog at http://bit.ly/acth38 […]

  3. […] announced an integrated discovery management offering in alliance with multiple LPO vendors (See LPO Industry Consolidation Underway?).  In addition to influencing potential LPO industry consolidation, the alliance is important […]

  4. […] and development role bodes well for CPA Global and the LPO market in general.  As I outlined in LPO Industry Consolidation Underway?, LPO industry “competitors have formed alliances and acquisitions to broaden their legal service […]

  5. Integreon’s effort to raise capital cited in this post has come to fruition. (See Actis Invests US$50 Million in Integreon .)

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