Introduction: 0:00

Welcome to Episode 1 of Leading the Deal, the podcast that takes you inside the world of law firm leadership, private equity, and legal sector M&A. In this opening episode, respected legal journalist Neil Rose sits down with Jeff Zindani, founder of Acquira Professional Services, to explore what's behind the dramatic rise in law firm deals and and what it means for the future of the UK legal market.

Neil Rose: 0:26

So Jeff, good to speak to you. We've known each other a long time, but not everyone in the legal market, although most people have met you, not everyone has. So can you just give us a brief overview of how you got to where you are and running Aquira?

Jeff Zindani: 0:39

Yeah, I suppose in terms of my previous lives, that's probably more interesting. I've actually been in the legal industry 30 years now, believe it or not. I was a solicitor at a really good law firm, Russell Jones & Walker, who you might remember from years ago. and kind of worked my way up the ranks to be an equity partner which was interesting types of partnership dynamics and politics so i did that until probably was about 40ish finished working for them in 2003, 2004, then decided to do my own thing, set my own practice up, which was around personal injury, litigation, employment work, etc. Built it up to about 80, 90 people working for me, Neil. It was really a very different world to a

Neil Rose: 1:24

big law firm. Well, it's good. No regrets that you didn't hang around and you could be running stage from Gordon right now. For those who don't know, the Russell Jones and Walker was swallowed up by Slater and Gordon. They were their first incursion into the UK. It's really

Jeff Zindani: 1:38

quite weird because I actually met up with their chief exec recently, just a lovely guy. And they're doing a lot of good stuff now, I think. People move on, don't they, Neil? They move on. So that's it. But yeah, and then I started to actually realize what I was good at was probably giving some advisory work to law firms. So I started to do that. And really during COVID, it was obvious to me that there wasn't really, I suppose, much specialist advice apart from some of the accountancy professions and other recruitment type businesses that popped up. But there weren't really any lawyers working in the sector to actually advise firms who were looking perhaps to exit, sell and those firms. Particularly now, of course, we're investors looking to make acquisitions. So hence, acquire a ruler. Simple as that. And I guess the market

Neil Rose: 2:27

has moved on. I remember there were merger brokers and things like that. But then in the old days, mergers, probably most mergers were much like, you know, they were all the same. Whereas these nowadays, you've got so many different potential investors, so many different structures. It's a much more interesting role.

Jeff Zindani: 2:45

Yeah, and also, I think you probably realize, because we're probably going back a bit, sort of down memory lane, I mean, I think a lot of partners never actually saw the value. They kind of took their capital account out when they retired, and that was it, really, Neil. The firm just carried on, and now they've obviously realized there's actually value over and above what's in their capital accounts. I think that's been a big shift in terms of value, and obviously, we're probably coming to some of the interesting questions about why there is investment, but it obviously turns on value, doesn't it, of course?

Neil Rose: 3:18

Perhaps go back to 2012, 2011, when first alternative business structures started. To what extent has people's mindset changed so that they think, actually, yes, I can sell, I can profit from getting out? And to what extent has it not been the beach in the Caribbean that some perhaps were hoping for?

Jeff Zindani: 3:40

Yeah, I think there are a lot of sort of issues there, aren't there, really? I mean, definitely firms have realized now they can actually sell something. You know, a lot of them have obviously started to realize, of course, they've built up something. You take my old sort of stomping ground, the PI world. I mean, there's an asset base, of course, which is called work in progress. That's definitely been something they've looked at. But I think it's still the case, though– let me kind of just throw this in, really– When I'm dealing with partners, I work on the buy side and on the sell side or the exiting side, because it's like selling houses. What is absolutely astonishing is when you have that conversation with those partners, maybe it's a small boutique firm, Neil, when you actually say, do you know what the value potentially of your firm is? Their answer is, well, no, we really don't. They're not being coy. That's actually very common. They're more likely to know the value of their own house or their car but not their own law firm. So I don't think a lot still have grasped the fact that there's real value in their practices.

Neil Rose: 4:43

One of the reasons we're talking today is that there has been a sharp uptick in private equity investment, particularly in the last year. But before we get to that, and this is a very broad question, but the experience of the last 10, 12 years since external investment has been allowed, have we now reached the point where we've seen some disasters? There was Parabas, there was Roberts Jackson, people lost a lot of money. Of course, traditional firms have gone under owing lots of money as well, so it's not necessarily an ABS thing. But have we now reached a stage where people are really finally understanding how to invest in law firms and how not to do it wrong?

Jeff Zindani: 5:27

I think to some extent, yes. I think you've obviously had... Those market failures, which have probably shaped the way in which those new investors have seen the sector. But I suppose the way I see it, particularly with external investors, is they haven't reached the point, of course, where they're looking to kind of sell. They've got to, at some point, haven't they, look at an exit to realize the value that they believe that's there.

Neil Rose: 6:00

Well, we've had a few, haven't we? There was Stowe, Sheffords are on their second round, I think, aren't they, at the moment? Yeah. It's still a, if you can have a nascent maturity, but it's kind of a nascent maturity,

Jeff Zindani: 6:11

isn't it? Yeah. Again, as you know, we did a white paper on a quite detailed one on the sector. Extremely

Neil Rose: 6:17

good. I'm not just saying that because I'm talking to you. I read a lot of these things and it was a particularly good one. Thanks. I think probably we went into

Jeff Zindani: 6:24

arguably too much detail.

Neil Rose: 6:25

Well, that's why

Jeff Zindani: 6:26

I

Neil Rose: 6:26

liked

Jeff Zindani: 6:26

it, I

Neil Rose: 6:26

think.

Jeff Zindani: 6:27

Yeah, yeah. I think it was because we started, well, I won't go into all that now, but I still think it's quite an immature marketplace. Let me throw this at you, actually. What's the success rate of these PE houses? Well, most of them we don't know, do we? That's not just in the legal sector. I'm talking about overall. Let's leave the legal sector for a second. PE success is actually not that good. I've got the actual stats in front of me, but the failure rate is, I think, one in 10, 20% sometimes. I don't know. It's kind of... odd because people don't ask those questions in terms of the kind of track record some of these PE houses have got. I'm not knocking them, nor am I a cheerleader for it. I think it's kind of interesting for me to sort of sometimes look at that when I'm working for a potential seller. It's a kind of form of due diligence, isn't it? It's okay. Yeah, right. They take your business, but you don't get all your money on day one. So will you actually see the rest of what you're promised? Equally, we don't know how many law firm mergers have been a success. 100%, yeah. Are they really mergers? Yeah, exactly. I know exactly what you're saying. And we'll hopefully have something out in September, probably October, the way the summer goes on. Do mergers work in the legal sector?

Neil Rose: 7:40

Because there has been some research on that, hasn't there?

Jeff Zindani: 7:42

Yeah. I still think there's not much empirical stuff around some of them. But yeah, I mean, so it's difficult. I still think it's quite an immature marketplace. I mean, genuinely, I'm having probably, I've got another one tomorrow, one investor call a week. Now, that just tells you, obviously, a bit about the interest, I

Neil Rose: 7:58

suppose. Well, yeah, let's get into that. Why is that? So undoubtedly, we've seen more deals over the last year. Your report shows that or last year. couple of years, and I just have to look at the things I'm writing about on Legal Futures. There was one last week, wasn't there? And when we were recording this yesterday, we saw Fletcher's, who would be obviously private equity backed with another big acquisition. So these businesses are, well, there was Stowe, although Stowe was quite a small one. They're clearly making tracks, some of these at least. So why now? Why all this interest?

Jeff Zindani: 8:30

Good question. I suppose there's a bigger picture, and that's PE globally. They have what's called a lot of dry powder, a lot of capital is just sitting there, which they can deploy. Of course, they've used some of this already in the accountancy profession. The accountancy world is obviously now probably two, three years ahead of the legal sector. So I think it's not a surprise. They've kind of looked at professional services as a whole and thought, well, okay, we can actually invest in a law firm. We can do all sorts of things, a bit like the accountancy world. Let's see what's happening, really. That's part of it.

Neil Rose: 9:02

This is an extremely simplistic way of doing it, but they feasted on accountancy, and law is the next one.

Jeff Zindani: 9:10

You're right. I saw it as a nomadic type of thing. approach to business. You literally move on to more fertile or the fertile land. There's only so many opportunities of accountancy left. So let's move on to another bit of fertile land, so to speak. So it's kind of nomadic, possibly. I don't know. They've certainly seen those opportunities and deployed capital already.

Neil Rose: 9:34

Is it kind of a herd mentality as well?

Jeff Zindani: 9:36

So it is, frankly, from some of the investor calls I've had where being open, they just don't understand law firms. They may have dealt with corporate commercial law firms, obviously, from a client perspective, but I just think they're almost clueless about the kind of cultural issues in law firms and how to deal with it. So, yeah, there's a lot of arguable naivety. And I think they've got this playbook, Neil, really, almost a standard playbook, a buy-to-build playbook, which they'll try and deploy. And I think they can just do the same in...

Neil Rose: 10:11

So what are the cultural issues that are different in a law firm than they are in an accountancy partnership, say? I

Jeff Zindani: 10:17

think do clients instruct law firms because of the brand? Probably some of the corporate firms, yeah. But is it because of the individual lawyers rather than an accountancy firm that's got almost a sort of brand to it in that sense? I think lawyers are different to accountants in terms of how they're managed. Probably like you, I've... at all sorts of meetings with accountants and lawyers, and they stand out. I might be wrong, actually. I might be saying lawyers is totally different. I think they're much more difficult to manage, frankly, as well.

Neil Rose: 10:51

That's probably right. The nature of lawyers, certainly my experience over the last 30-plus years, it can be a little bit individualistic. Equally, that goes the other way around. To what extent does the culture of a law firm mitigate against lawyers accepting an external investor.

Jeff Zindani: 11:10

That's interesting because of the partnership model. You've got this LLP model predominantly, haven't you, still? And with that comes, I suppose, the dynamics of a partnership, particularly where they're looking at succession issues. So let me turn it around a bit, really. When I've been sitting down with partners at, say, mid-market firms who are looking potentially at PE, there's A lot of pushback really around that. It's almost, no, we're not selling out to an investor. We want to keep our independence. We're going to lose that partnership that we've got. How are we going to attract other potentially younger associates to become partners? And it's almost like we're not going to do it because of those kind of succession issues to some extent.

Neil Rose: 11:59

Is this why the new-ish model pioneered by Lawfront of buy and build firms staying kind of independent and retaining some of the, certainly Adeptio I think is their model, is retaining some equity to share with future partners. Is that why this seems to be emerging as the preferred model?

Jeff Zindani: 12:22

Yeah, I think what I've seen, and I think you may be right actually, but what I've seen is almost the compensation philosophy changing from the idea that, look, it's just cash and earnout in terms of a deal. You'll get maybe something at the end. But as far as anybody else is concerned, they're not even in the game, really. They just don't get anything. But where you leave some equity within the business, then you're going to keep potentially some of those future partners. I mean, I still haven't got my head around how they're going to do it sometimes. Let me give you this example. If you're a young associate or a salary partner, and you are really motoring well with clients, you're really building up value, why on earth would you stay in a firm that doesn't reward you? You'd want to be looking at some equity stake, wouldn't you? That's the career path still, I think. Although, What I'm seeing is a bit of a distinction in the market between consumer-facing law firms and those kind of corporate commercial practices. Seems fair. Yeah, I think for the consumer sort of end, personal injury end, the family sort of end, PE is probably right for it. It's perfect, arguably.

Neil Rose: 13:37

Then again, we're also being told that the generations after us, Jeff, are not so keen, particularly younger lawyers, are not so keen on partnership anyway. Now, I mean, these are extremely broad questions. from surveys whose provenance is sometimes questionable, but you do hear it anecdotally as well, that younger lawyers aren't so focused on equity partnership.

Jeff Zindani: 14:02

Yeah. I kind of don't buy all that. I'm perhaps going against all the stuff out there. I think there's still a lot of young, ambitious lawyers. I think if you're in a consumer-facing law firm, maybe when you're doing a lot of standardized, automated work, It's difficult to shine, but I think if you're a young lawyer, I don't know, in a boutique, IP, media firm in London, then I think they're going to still be really ambitious, Neil. It's quite exciting, isn't it, when you're working in that environment, potentially, for some people?

Neil Rose: 14:34

Yeah, it wasn't for me, but then that's why we're here today. And rather than you just having this conversation with me as my advisor... We're still seeing law firm mergers, or they tend to be acquisitions of large firms with smaller firms. We do still sometimes see relatively equally sized firms merging. The traditional law firm merger, is it still alive?

Jeff Zindani: 14:58

Ah, now you've got me going, Neil. You've got me going, right? Not often I get excited, actually. What I think happened almost by default is with the level of interest amongst investors, PE houses, you've got particularly mid-market firms, saying to themselves, what the hell do we do? Because they're thinking, hold on, do we actually do something with a peer house? Do we actually remain independent? But how on earth are we going to compete? Because the big issue about how we're going to scale up and compete against some of the bigger beasts. I mean, I don't know what Lawfront is at the moment. Is it about 120, 150 million? Something

Neil Rose: 15:35

like that.

Jeff Zindani: 15:36

Yeah. So from almost nothing a few years ago to where they are. So could they get up to 300, 400 million? Do you follow me? So that's quite a hard one to compete against. But what I'm seeing is we don't want to sell out to some of the consolidators. We don't want to sell out to a PE house. But what we are looking at or want to look at is a traditional merger to join forces. People say to me, oh, God, Jeff, why are you saying that? I'm saying it because that's what I'm picking up from firms. And going back to this issue of success, do some of these things work? Let me give you a really good example. A firm that has managed to do this a bit under the radar, HCR Legal. They merged with Hewittson's, I think, four years ago, something like that. And their revenue at the time was 65 million. It's now 100 million. And they've managed to do it. I think their leadership team have spent a lot of time around culture, tried to align things, and can see almost the results really. I don't know all the detail, but I know enough to understand that. That's quite compelling, isn't it, really?

Neil Rose: 16:41

When I first started out as a legal journalist, 30 years ago. Then, even then, the talk was that the market was going to polarize. The big were going to get bigger. The niche were going to get, you know, going to have the boutique firms and the middle would be squeezed. And so the narrative hasn't really changed. But are we now really seeing that? Everyone says the drivers are need to invest in technology. You need size. You need scale. Is there any disputing that? Or actually, can you still, if you're in that middle of just like a generalist firm, You're not that huge, but you're not also niche. Do you still have a future?

Jeff Zindani: 17:20

I think the scale point is kind of interesting. Again, we're really back to practice areas, aren't we, to some extent. I don't know if you're in a claims environment, you have to have a certain scale before I think it's going to work for you. I'm not so convinced still, and it probably goes against some of the work I do really, because I want more people to buy and sell, don't I? But I'm seeing some really... quite exciting things with some of the firms that I'm talking to, particularly who are looking at acquisitions. And what they're saying to me, some of the bigger firms, because they're obsessed with standardization, automation, a lot of processes, et cetera, they've actually taken the eye off the ball when it comes to clients. That kind of personal client care That really has been critical, I suppose, to the way in which firms have been successful. The organic growth bit, I think, is still not probably as appreciated as it should be, really. So some firms are doing really well, I think. And you're probably like me. You've got to the age where when somebody says to you it's binary, you know it's more complex than yes or no.

Neil Rose: 18:24

How much of a driver is that? technology and the cost of technology. Everyone's talking about AI. Literally cannot go to any legal event without talking about AI. How much of an issue is that for firms and the need to invest?

Jeff Zindani: 18:41

Just going back to some of the investor sort of work I've done with, obviously, from PE houses to others, they really get the kind of tech side of things, particularly the kind of tech stack. It's not just... Gen AI. It's bigger than that, of course. And what I see with some firms, even some quite sizable firms, is they seem to be quite naive, really. They seem to be quite comfortable spending a lot of money, but not sure where that's going with that. So that's, to some extent, going back to what we were talking earlier on about why those kind of PE houses are really good. I would say to you that it's almost like a big squeeze, Neil. What you've got is the IT pressures, the cost of it. And really the fear, it's almost like the fear of it all. You know, you mentioned this to a lot of sort of older partners and it's kind of, they're just not sure, are they really? And also the kind of cost stuff, as I've mentioned. But I think also it's the squeeze on the other side with talent, retaining obviously people they've got and hiring people as well. So, and I think if they're not growing, there's no momentum. When we're looking at targeting practices, we're looking at whether they're static or declining because they may be, worth talking to.

Neil Rose: 19:56

Let's get into these deals. And if we're talking particularly about private equity, what are they looking for?

Jeff Zindani: 20:02

Again, it's sector driven, of course, isn't it? Overall, what they're looking at, you know, we've got to be careful because there's certain types of firms they want in particular sectors. Lawfront's a good example because they're after regional full service firms, aren't they? Yes. As opposed to, say, some European capital or looking at personal injury, clinical negligence. But overall, what they're looking at, I think, is or what somebody said to me actually as an investor, we're looking at eternally profitable firms, Jeff, those steady firms that just keep going and where we can change quite significantly their operational costs by putting in a kind of infrastructure that they're really good at and scaling up the business. So that's what's driving it to obviously produce that kind of overall change.

Neil Rose: 20:51

One thing you always hear about the appeal of accountancy firms is, Thank you very much. type, gunner cook type firm, Sepfords with a fee share firm. It's not. They all work remotely, but they are almost all employees. And interestingly, almost 70% of their income comes from annual contracts. That is the kind of repeatable. Oh, they look like. They struck me as like a perfect investment target because they got mainly senior lawyers, repeatable income. Not surprised. Yeah.

Jeff Zindani: 21:44

Yeah, I think you're spot on, actually, because, again, from investor calls I've had, and it's almost we want the– don't laugh, actually– but the sort of Spotify platform, really, of just subscriptions or Netflix or however you want to do it. But

Neil Rose: 21:59

there are very few firms that do that.

Jeff Zindani: 22:01

Yeah, although certain practices like employment and they're ripe for it, really. You've seen that, I suppose. So I think that's what they're looking at. But, I mean, I think the Harper James one for me was really interesting because LDC have– obviously been in the legal sector before, you see, and they've made investments. And what's really cute about it, I think, is kind of one of the messages I'm getting across is you don't have to look at 100%. You could look at a bit like Keystone 10, 12 years ago, where they had to scale up capital for about 30%, and that

Neil Rose: 22:29

can work. Yeah, I mean, they asked me not to say what the percentage is, Thinking back as a client, so obviously I'm a small business owner, and many years ago when Riverview Law came on the scene, which was, if you remember them, who subsequently bought by EY, and I think the whole thing's kind of blown up after that, but they came from an employment law background, not lawyers, but that idea of offering an annual subscription service, and they started off offering small businesses very well-priced contracts. And as a small business, we actually signed up to them. And it was about 200 quid a month, something like 250 quid a month for unlimited legal advice. Obviously, you never saw anyone, but that's fine. They even actually phoned up now and again and said, everything all right? Anything we can help you with? They were practically asking us to use the service. It was a very broad service. It didn't cover property, but everyday business things. They even had an intellectual property issue that covered that. It was really good until their model shifted and they targeted big companies. And there are law firms that offer that. I think that's good service. Yeah.

Jeff Zindani: 23:42

Yeah, you can just sort of imagine it with Gen AI going forward, can't you really? With perhaps smaller firms doing that with a platform. So yeah, it's exciting times, I suppose, as far as that's concerned.

Neil Rose: 23:53

Personally, I just think it's quite, it's actually an attractive model for a small business owner, but then it requires volume because you're not going to make much money out of a small business like me. But so you need a lot of us. What surprises you? law firms when they get into these discussions with investors?

Jeff Zindani: 24:09

I think one thing they are surprised at is the speed initially. Let me give you an example between, say, a PE or an investor and a law firm who is looking to acquire or merge a smaller firm. The external investor is so quick, Neil. I mean, literally within a week or two of getting some limited due diligence. They put a proposal together as opposed to several weeks with a law firm. So the kind of speed in which they operate is different. I think the other big thing for me is on the due diligence side. It is fairly brutal. It's pretty brutal anyway when a law firm's looking to perhaps sell to another party. But I think with a PE house or an investor, they are obviously thorough, but they just go into a level of detail, which A lot of law firms that I've worked with find pretty uncomfortable, to be honest with you. They find it really, really stressful and difficult. I think also culturally, it's almost like kissing a few frogs, really. Some are very different. Some are arguably aggressive. I've seen some quite forceful meetings, partners in law firms who've just gone, no, this isn't for us. A whole range of things, I suppose.

Neil Rose: 25:22

The speed thing must be particularly difficult, given my experience in various guises. Decision making in partnerships can be glacially slow and extremely painful. Yeah, it is. I

Jeff Zindani: 25:35

mean, let me just sort of mention something, which is a big issue, which I don't think has been properly covered. And that is on the integration side with a law firm. So it could be a PE house or a law firm. The law firms or investors who are doing it well are meticulous when it comes to an integration transition plan, absolutely meticulous. But the problem with some of these firms, particularly LLP, where there's a lot of partners, is that decision-making process becomes, it's like a quagmire really. I just want to give you a bizarre example recently where, obviously I'm not naming names, I couldn't do that, but it's a larger firm acquiring a smaller practice. Everything is going well. Once you've got, from my experience, the FD supporting a project, you're kind of there all the way through. It's not an issue, Jeff. The partners are going to approve it. This is a board, which you would expect to have. I'm sure they've always had full authority, that kind of stuff. And there you are, really. Everything's great. And up to essentially almost up to exchanging contracts. We've got to put it to the partnership, Jeff. It's kind of rubber stamping exercise. No, it wasn't. And anyway, it didn't end well. That's all I can say. It didn't end well. I mean, this is one of the– I think a big tension, actually, this LLP model, which is really full distribution of profits, isn't it? Everything is taken out normally. I mean, they'll leave something in the tank, but usually it's a– as opposed to the very slow, careful investor model where they're reinvesting. That's kind of interesting. There's another dynamic, really.

Neil Rose: 27:09

Well, yeah. I mean, that must be one of the big things for partners to get over, isn't it? The fact that they're not going to take everything out every year in future.

Jeff Zindani: 27:16

Yeah. The trouble with them, though, is that sometimes, I say trouble with them as if who are they kind of, is I have to explain that. If you are going to take a salary, then that means– the figures come down, really, in terms of what the deal looks like. Kind of your cake and eat it, of course, can you?

Neil Rose: 27:33

But to mix that metaphor, there is also jam smother, isn't there? When you're potentially, you get your initial bit of payout, then you're on your lower salary, and then there's a second event when the investor sells or whatever. I've heard this back a few times, a couple of things, really. One is,

Jeff Zindani: 27:51

It's got to be life-changing for us to do it because they're obviously extracting everything. So it's got to be really attractive for it to work. I literally saw it the other week where a firm said to me, well, look, if we don't do it, Jeff, somebody else will. Just think about that. You know, if we don't do it, the younger partners at some point will do it. I thought, really? Okay, that's kind of interesting.

Neil Rose: 28:11

Once you get into culture issues, you talk obviously about that a lot. You mentioned integration. What's it mean in practice? I suppose, in a way, culture is more of an issue with merger than investment, is it, when you're bringing two different groups of people together? I

Jeff Zindani: 28:28

think, obviously, when it comes to– it is a shift in ownership, so it's, to me, the same thing. Obviously, you may have an investor that's got a light touch nail, so I kind of see that. But let's just deal with, obviously– I suppose, law firms in terms of law firm culture. I mean, if you asked me this a few years ago, I'd say, well, actually, it's the numbers, really. No, not really. The numbers are important, but usually they're wrong anyway. I mean, I've spent a lot of time on this, and it's kind of matchmaking exercise sometimes. It really is. But let me give you an example. If you've got a corporate commercial firm, if you've got that tight sort of culture within the firm, very bureaucratic, a lot of process, people almost like billing machines at times, And then you contrast it to another corporate commercial firm where everything's really cool. You know, everybody's in chinos, T-shirts, and we don't have targets, Jeff. We don't have billing targets. Our only metric is looking after the client. Yeah, that extreme. So you get a tight and loose culture. Now, there's no point trying to put firms together, which are polar opposites, it's just not going to work. The cultural bit is important. But I think what I've seen as well is there's a disconnect sometimes between what they're telling me about the kind of values of the firm, because it's culture. It's really values, isn't it, really, in that practice? What are the values? What are they expecting in terms of behavior from the lawyers, from their staff? Sometimes it disconnects. I'm seeing some of the partners, leadership team, and they're saying, look, this is what we do, this is how it is. And then During the process of getting to potentially exchange, I'm seeing a different picture from meeting other people or picking up other things. And I'm not sure sometimes the leadership team really, they'll tell you this is our culture, Jeff, because I asked them. I always want to know a little bit about what almost their DNA is of the firm. Sometimes, Neil, if I'm honest with you, they can't articulate it. It's the usual marketing straplines that you see.

Neil Rose: 30:27

Well, yeah, because you have the advantage there as a journalist. You just get the straplines of the traditional values in a modern setting and all this kind of stuff. And every firm, of course, is client-centric. They say they are. It can be difficult from the outside. It's difficult to tear any of these firms apart, frankly.

Jeff Zindani: 30:47

No, no, you're right. But they are sometimes. It's almost like what's the secret sauce, really? What's really going on there? And it's difficult for me to sometimes unravel it. But as I said to you, those tight and loose law firms is probably a good example. If you've got a PE house, which is very process, of course, driven, we want a lot of reporting, a lot of almost like mini audits each month. That's not going to work for a firm that's pretty loose, relatively How much of a difference does it make being bought by a private equity or a

Neil Rose: 31:27

private equity taking a minority stake?

Jeff Zindani: 31:34

I think it's a big difference. I suppose it's the controlling interest that matters. Take a minority interest. I think that's potentially for a lot of firms quite exciting. I think it just gives them capital because I think some of the firms who are doing well, Neil, they can get the money. That's not, I suppose, the issue. But it's also the expertise that they get. And then you move on to full control, not so sure with certain firms because we don't see the full story, do we? We get a press release and you obviously know better than me. The press release says this is what's happened and it's wonderful, etc. But we're not always told what the casualties are and there are casualties.

Neil Rose: 32:14

You always have to ask. Obviously, there are certain firms. I mean, Knights are renowned for making people

Jeff Zindani: 32:19

redundant. The great thing about Knights is they're honest, aren't they? Yeah. They knew what they were signing up to,

Neil Rose: 32:24

didn't they? It's only a handful of partners who signed up to it, ultimately. I mean, the Knights thing moves us on to, actually, the law front type model. To what extent are investors seeing these buy and build scenarios? To what extent is the savings or the value that they're making simply in centralising central functions? To what extent is that the focus rather than what the lawyers are doing?

Jeff Zindani: 32:51

I think the savvy, I can't obviously... But I think the savvy ones are actually looking at how they can improve lawyer efficiency, really, as lawyers, not just the operational kind of back office stuff. I'm not being funny. It's actually pretty easy to do all that back office stuff. service stuff isn't it I would have thought because once you've got that scale you literally take five or six firms don't you and you go right everything's been shifted to Manchester or should be Birmingham actually should be all shifted to Birmingham by the way but anyway so that's a kind of an easy one to do in my view but I think getting lawyers to I suppose be technically better lawyers better with clients I don't know I don't know how much they're investing I know Fletchers are really very focused around that in terms of trying to have that kind of culture within their workforce.

Neil Rose: 33:42

The other issue that not thinking about Knights brings up is listing and IPOs. Are we already over that? Or would that still happen? Okay, cool. That's

Jeff Zindani: 33:51

it. Yeah, it could come back, you know, because if you think about it, if we then start having a number of P-backed groups, where are they going to go? Where are they going to exit to? Could they just simply float? That's one. really sweet exit route potentially. I think it could be something to potentially look at in terms of listing.

Neil Rose: 34:15

We've had some dramatic failures, but also Gately, they've grown nicely they've done a lot of acquisitions not exactly quietly but they're certainly not as flashy as knights partly because they've been but they buy quite a lot they've mainly bought complementary professional services rather than law firms obviously knights have used the money i think we're up to 25 acquisitions in the last few years and keystone has been you put your money into keystone when they listed, you've done really quite nicely.

Jeff Zindani: 34:45

As I said to you earlier on, we've got something probably coming out whenever it does come out onto Mergers Worker. I think the interesting bit is to track what the revenue of those firms was at the time they were acquired. And I'm not... It's a spoiler, I suppose. And then look at the revenue of Knights now and see where they are, really. Kind of paints a different picture to some extent.

Neil Rose: 35:04

It must be quite difficult to work out what their organic growth has been, though, given all the acquisitions. I suppose that's the kind of point I'm coming to, actually,

Jeff Zindani: 35:10

is... Are these, whether it's an external investor or a consolidator, are the eyes of the prize really simply scale? I would possibly argue, and hopefully this will be backed up by some of the stuff we've got. that they've, again, probably taken their foot off the pedal when it comes to organic growth. It's almost, let's do the acquisition. Let's just keep growing, growing, growing. And losing that organic development stuff, because they lose good people sometimes in the process. And some of these investors, consolidators will say, well, look, that's just aren't part and parcel of how it works, really. You know, you only have to lose a few good fee earners to kind of make a difference, don't you, really?

Neil Rose: 35:51

I'm sure they would contest that. I think they generally put that in their results. The other two listed firms, I just want to ask later questions to them. So, Gately are not the only ones, but perhaps the most prominent of law firms that I've looked to diversify into recently. other professional services, what complementary and I suppose you've got the AMPA group, Shakespeare Martino, they've done that as well. The House of Browns. How much of an option is that in a month for law firms? I've always

Jeff Zindani: 36:21

thought that has got more potential than obviously what's already happened. But

Neil Rose: 36:26

I think you've got Fusion Group. We've perhaps seen more accountancy firms buying law firms than the other way around.

Jeff Zindani: 36:30

You even saw a kind of insolvency house, didn't you? Leonard Curtis.

Neil Rose: 36:34

Yeah, and there was that one Dow Schofield-Watt support a law firm. Yeah, mainly in accountancy financial services. Yeah, I mean,

Jeff Zindani: 36:45

absolutely. They've got a fantastic sort of large model, professional services model. They don't normally take a full stake. I think it's a I

Neil Rose: 36:52

suppose, potentially, Neil, that

Jeff Zindani: 37:03

might be it. As they've run out of targets in the accountancy world, maybe it's easier just taking what they've got and... Somehow fusing them with a law firm or law

Neil Rose: 37:14

firm. Yeah, I mean, my dad was retired now, but he was a high street accountant. I always thought that in a market perhaps where convenience is as important as quality compared to if you're instructing link makers, you don't necessarily need them to be in the same room, in the same building as your accountants. It made a lot of sense. To be like a professional supermarket. Yeah.

Jeff Zindani: 37:36

I've seen the other way around and I've always thought, well, actually, it's funny because law firms, as you know, are chasing accountancy firms. Referrals, aren't they? That's the truth. So it just makes sense for it to be almost one shop almost. If you just look at it in terms of the client journey, you might have a business that's obviously a non-legal business, selling their business, family business. They go to their accountants. The accountants do all the figures and everything, goes to a corporate lawyer to do all the legal stuff. They need tax advice from the accountants or somebody else. Then they need a private client lawyer to do some stuff to protect, obviously, their investments and everything else. So the whole thing is... And

Neil Rose: 38:14

then they get divorced.

Jeff Zindani: 38:16

Yeah, yeah. They get, obviously, an expensive car and they do all sorts of things, yeah.

Neil Rose: 38:21

Yeah, we've had all sorts over the years. There's even some undertakers who bought a law firm many years ago, I remember, in what was clearly a great example of horizontal integration. I remember the haulage firm that got involved. Well, yeah, the Stobart. That was one of the most jaw-dropping stories I've ever written for Legal Futures. I mean, it just seemed so unlikely, didn't it? Stobart Barristers. A game-changer. A game-changer. Well, there have been many of those. And the other list, if I just wanted to touch on these keystones, they've been very successful. And that model, this disperse or this fee share model, seems to be really quite popular. The SEPs have got investment. There have been others. So what is it about that model, you think, that investors like? Again,

Jeff Zindani: 39:05

it's that kind of predictability, I suppose. I would say, are they really law firms? They are from a regulatory point of view. But are they mainly investors? tech type platforms? Is it a kind of form of Uber where they literally just have got the platform to use? Are they almost like recruitment businesses as well? Because let's face it, the more lawyers they have at certain scale, the better. The investors, I think, are really interested in those kind of businesses because once you've got so many lawyers at a particular scale and you then start putting some clever tech in, It all gets quite interesting. Keystone have proved that really, Neil, because what was it, 10, 12 years ago, they were... 14, 15 million and they're up to 80, 100 million now. I

Neil Rose: 39:51

would have thought a key question is to what extent these firms generate new clients as keystone rather than the individual lawyers bringing them in. One of the questions is that they're sucking out all the experienced lawyers and what about the next generation and who's training them? That's a separate issue, I think.

Jeff Zindani: 40:09

I think the reality is, take, say, if you're a litigator, some of the work I used to do, it's very difficult to do that in isolation, really. You need a team around

Neil Rose: 40:19

you? Yeah, these are essentially sole practitioners and small law firms all working together on a platform.

Jeff Zindani: 40:24

But maybe the hybrid model where there are some hybrid firms where they've actually got consultants and salaried

Neil Rose: 40:31

lawyers. Yeah, I mean, Taylor-Rose, that's the Taylor-Rose model of a traditional firm and a consultancy firm to what extent the two meet, really, but they seem to be doing fairly well. And it's something that we've looked

Jeff Zindani: 40:44

at and for all sorts of reasons why I wouldn't go into, but the big issue is the scale of some of these businesses because given the amount they've had to invest in IT and everything else, they have to get to a certain scale to make it pay because remember, they're giving the lawyers the lion's share of the fees, aren't they? 70% plus in some instances. So they've got to have obviously a lot of Yeah, I mean, it

Neil Rose: 41:11

was like a bidding war, isn't it, for some of these? Is it Aria Grace? If you know Lindsay Healy, pitches over 90%, something like that, of your fees. Oh, I didn't know that. Because they're not a regulated law firm. That's the other thing as well. That's an interesting question. Maybe we're getting off to a far off topic about... unregulated firms. Aria Grace is a fee share firm. It's got lots of senior lawyers, but it's not regulated by the SRA because it doesn't need to be. And the reality is, of course, an awful lot of law firms actually don't need to be regulated for most of what they do. We've got 9,000 law firms at the moment. The number's been dropping. It was 10,000 15 years ago. So that's a lot of law firms that are not merging and not taking private equity, not doing clever things with ownership or joining forces with accountants and all the rest of it. So is this actually representing a deep structural shift in how law firms are owned and led?

Jeff Zindani: 42:10

Definitely a structural shift. I suppose a bigger question is, will you see the scale and pace increase really rapidly? I don't think you will. I think it's more long-term, I think medium to long-term, sort of five, 10 years. I think we can already visualize, can't we, what it's probably going to look like, as I said to you, in terms of the consumer sector. I think you're going to see much bigger beasts potentially backed by investors. I think in the non-consumer end of the marketplace, I think those mid-market pressures are not going to go away. And I think you'll see more consolidation contraction there. But I also think on the sort of positive side, you might see more of these boutique firms emerging who are, dare I say, not happy working in a PE-backed business or nights. And given the potentially transformative stuff with generative AR, you could have a boutique firm doing what 50 or 100 lawyers could do with a small group of very specialist lawyers. So, you know, the idea is like you're literally very skilled lawyers with an army of these people gen ai assistance

Neil Rose: 43:22

so you can afford them

Jeff Zindani: 43:23

exactly yeah what i'm seeing with boutique firms because with the work i do you're dealing with more buyers than sellers that's the reality and these boutique firms are very profitable they've left big law neil they've had enough of big law they want to do something else so i don't think that's going to go away

Neil Rose: 43:38

okay i want to ask questions about both consumer and commercial so consumer Obviously, the other thing you have to bear into mind, and nothing much of a professor can do about this, is external shocks. So what's happening in the personal injury market, obviously government reform finally, at about the fifth time of asking, has finally really done for a lot of PI firms. There was the April research that came out at the beginning of the year that there's a 35% fewer PI firms than there were five years ago. So that has driven, and the OIC portal that's driven, been an external force for change in that market, hasn't it? But we're getting these bigger practices to take us all the way back to quality solicitors. The idea of an actual legal brand that is known publicly, if you like. Do you think that's ever going to happen? Because the law front at the moment, they're not all one big law front firm. It's Nelson's part of law front, etc. Is that ever going to happen in the foreseeable future? I

Jeff Zindani: 44:38

could easily see it happening in the consumer. I really can because of the power of these investors. But for me, I struggle a lot with law firms who I'm helping on the sell side because they always tell me they've got a brand. They're not Unilever. I do think they've got to get to a really big scale. I mean, what are we talking? 500 million, a billion, before they start to get? I really don't know. I mean, I suppose in the PI market, you've got the likes of Irwin's and even Simpson Miller, to some extent, who have got a bit of a brand. But I don't think people can say who really is recognisable.

Neil Rose: 45:15

Yeah. On commercial firms, so how high up will this go? So there was a big shock. I know nothing apart from the law. But from what I could tell, when Grant Thornton, the sixth largest accountancy firm, took private equity... Last year, that was a big shock. How far up the food chain, for want of a better word, do you think it's going to go in law?

Jeff Zindani: 45:37

Well, to some extent, I kind of already know a bit about what's happening there under closed doors. Let's just take the market from a segment point of view. Is it going to be magic circle firms? I don't think so. I'd be shocked. Will it be those firms in the top 50, top 100? I think so. I think you could see firms at 100 to 300 million But I just think there's a lot more noise than probably activity. But I do think it's going to happen. I'm fairly confident it will happen, probably in the next 12 months.

Neil Rose: 46:07

And what do you think that would do to the market when that starts happening?

Jeff Zindani: 46:11

I suppose we're back to life-changing sums and competition, aren't we? I mean, you imagine the capital that could be deployed. You could have a firm at 200 million who are acquisitive, ambitious, want to grow in the corporate commercial world. They could be looking at a number of acquisitions. And they'd have, obviously, the capital to do it and all the integration, expertise, everything that goes with it. You know, it literally could be you guys externally just get on with it. I think it would be a very powerful message, really, to those other firms because then they'd be doing what they always do, law firms, and that is, what do we do next? I wouldn't rule it out, Neil.

Neil Rose: 46:50

In summary, we look... For people like you and me, this is great. This is a great time. But also, I guess, for law firms, I mean, it's a scary time to some extent. It's also an exciting time for them potentially. I think one question that I probably should have asked right at the beginning of this, given our focus on private equity, is it doesn't have a great reputation. Equity is an asset stripper, et cetera. But is that something that actually we shouldn't worry about when it comes to law firms which don't really have any assets as strippers?

Jeff Zindani: 47:19

That's interesting because I've seen a pushback from firms who've said, we're not selling out because they're asset strippers. And that applies to consolidators as well. We're not going to do it. I never forget there was a partner in a really good boutique firm. He turned around on a call and said, Jeff, we're not going to sell the soul of the firm or our souls to anybody. To some extent, people... outside can look at the profession and say, you know, the sort of greedy robbing lawyers and the rest of it. But I think there's that strong ethical side, particularly with staff. They want to look after their own staff and lawyers, etc. I don't think they always want to take the money and run, really. That's the point.

Neil Rose: 48:00

But are the asset strippers, when it comes to law firms...

Jeff Zindani: 48:04

I don't think the case for it is there. I think there's

Neil Rose: 48:07

nothing... It doesn't make any sense, does it? With a people business like law, you can't keep the people on side.

Jeff Zindani: 48:12

Yeah, I mean, this is the counter-argument, and there's empirical evidence for it, really, in terms of saying, actually... At the heart of it is the people. I mean, just look at, obviously, what law fronts have done. I don't believe that any of them have gone into it to look at just asset stripping because the truth is, Neil, who are they going to sell it to? So I think that's probably the more interesting sort of question, isn't it? Where is it going to go after they've stripped the business? Completely. I think you might see firms coming in and cleaning up practices and doing that, you know, literally taking firms in distress and doing it on scale.

Neil Rose: 48:44

Didn't work for Metamorph, did it? No, it didn't, no. And perhaps the flip side is we are seeing this still small but continuing trend of firms choosing employee ownership instead or owners choosing to exit companies. slowly through employee ownership. And we're seeing with some large-ish firms, two, three hundred people have done it, also some small firms, but there definitely does seem to be a movement.

Jeff Zindani: 49:10

Yeah, you saw a few days before this had been recorded, really. Tolbert's, they're actually interesting. They've been acquiring smaller practices.

Neil Rose: 49:18

Quite substantially.

Jeff Zindani: 49:19

Yeah.

Neil Rose: 49:20

They've turned over as more than double. Oh, yeah.

Jeff Zindani: 49:23

I know they're not employer-owned, but the MAPD group, who... I am fascinated by because of their real focus on the people. To me, perhaps... where the real action is really doing a lot of work around the people within the business and you know if you are making these acquisitions and integrating and doing that so maybe whether it's employee owned or doing what MAPD group are doing is perhaps that some people are missing a trick really that's all

Neil Rose: 49:49

people listening don't know MAPD stands for make a positive difference you have to back it up it's all very well saying that that we do that from what I can tell they do and they are genuine commissions. But this is perhaps a good place to finish. There are lots of options out there now.

Jeff Zindani: 50:04

Yeah, you see, my concern is always, and I had this with a mid-market firm recently, where I think the firm's almost been seduced by an investor, yeah? But PE or an investor is not the only option. I think that's the critical bit, and I think kind of my role is really to say, hold on a second, what works for you and your firm? Because remember, Neil, some of the investors are contacting law firms, Every day. And firms have been blindsided by the whole thing, aren't they? They're not sure what to do.

Neil Rose: 50:33

Toby at Harper James, he said that he'd had 20 to 30 PE conversations or approaches before deciding the age he was going to do it.

Jeff Zindani: 50:42

Oh, God, yeah, yeah. And they're all different sizes, different things. I mean, we're compiling. It's not out there. It won't be public. We're compiling a directory of investors and PE houses just for our own benefit. We're just losing track on who's who, really.

Neil Rose: 50:53

I think it's easy to figure out. I think it's a Bill Gates quote that this happens in two years and more happens in 10 years. Actually, if you were to look back at how things were before October 2011, which was when the very first ABS was licensed by the Council for Licensed Competitors, and look at what it's like now is very, very different. What's coming up after this?

Jeff Zindani: 51:18

Yeah, we've got the podcast series is leading the deal. So what's behind all this is to really interview, I suppose, key dealmakers or decision makers in law firms and investors as well to try and get under the bonnet a bit more really about what has been driving it, some of the issues, even failures arguably we know what is happening to some extent but we don't know why it's happening so I think that's what we're trying to do to almost get under the surface a bit and hopefully people will open up Neil people will start having conversations like this and it all becomes a bit more interesting doesn't

Neil Rose: 51:55

it anyway good I enjoyed

Jeff Zindani: 51:57

that