Why ABS spells a new dawn for legal M&A
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The Alternative Business Structure (ABS) licence granted to private equity-backed Parabis could herald many more marriages between buy-out houses and law firms.
Until now, the traditional partnership structure of law firms and the regulations that govern them have kept private equity at arm's length.
This is changing. The Alternative Business Structure (ABS) licence granted this week to the private equity-backed insurance specialist, Parabis, shows the potential for buy-out firms to get involved in a new and potentially very lucrative market.
To recap: the ABS legislation, enacted this year, allows certain legal activities to be carried out by firms where a non-lawyer is a manager, or an outside body has an ownership-type interest in the firm. For journalistic convenience, it has been referred to as the 'Tesco Law' reform, because it would allow supermarkets, for example, to offer some legal services.
Tesco itself has announced no plans to take advantage of the law, but the Co-operative Group already has a legal services arm.
What's interesting about the Parabis news is that the group is backed by private equity firm Duke Street, which has already stated that it hopes Parabis will be at the forefront of consolidation within the legal services industry.
Up to now, interest in ABS has mainly focused on how it could shake up the market for many legal services. But it could also have a big impact on the UK's M&A landscape. Expect to see more private equity-backed law firms in future.