Dragons' Den star Caan invests in Midlands firm Knights

The Newcastle under Lyme-based firm, which draws much of its business from work outsourced by City firms, claims the deal with London’s Hamilton Bradshaw (HB) is the UK’s first private investment into a commercial law firm.

Knights managing partner David Beech declined to disclose the value of the investment from HB but said the firm aimed to use the cash to expand its headcount and invest in IT.

Through the deal, which is subject to SRA approval, the firm also aims to strengthen its core practice areas of corporate, real estate and commercial and carry out more work outsourced from the City.

“For 11 years the firm has successfully worked with Hogan Lovells on the Mexican Wave project for the Prudential,” Beech told The Lawyer, adding that it would continue to work on similar real estate and commercial assignments for firms wishing to outsource matters to lower-cost regional outfits.

He added in a statement: “We met with several investors to work with us on our future expansion. What stood out about HB was the fact that they don’t just bring capital, they also bring an incredibly talented team on board who will support our business to achieve its ambition to become a leading regional law firm and cost solution to London.”

Beech said the firm first considered outside investment in December, with the SRA accepting its first applications for conversion to an alternative business structure under the Legal Services Act in January.

Knights hopes to clinch SRA approval within three to four months, although the delay to private equity house Duke Street’s investment in insurance firm Parabis Group earlier this year has put the process in the spotlight (19 March 2012).

The 23-partner firm, which turned over £9.2m in the 2010-11 financial year according to its latest LLP filings, current sits in roughly 180th position in the UK by annual revenue. It said it aims to reach the top 100 within three years.

It has 150 staff across offices in Staffordshire, Cheshire and Gloucestershire, with the firm planning to expand both its partner and employee headcount, although it has not announced any fixed targets.

Caan, famous for his former role on BBC investor panel television show Dragons’ Den, will join the firm’s management board, which is also set to include Beech and could include non-executive members from HB. Beech said the board structure would be “slim”.

Unlike Duke Street’s investment in Parabis earlier this year, in which the private equity house created a new top company with a board staffed by its own representatives, the Knights deal sees the firm retain its structure with one single LLP.

HB CEO Caan said in a statement: “David [Beech] has an excellent track record in law firm management as well as a unique understanding of private equity, having managed a fund himself [while a fund manager at Richardsons Capital]. HB backs talented management and I’m confident David will execute his strategy for growth.

“The legal sector is undergoing significant change and consolidation. Knights is an excellent firm which has proven management and financial backing to scale its business and position itself in the top 100 UK law firms.”

Both parties claim this is the first private investment in a pure commercial law firm, with previous cases such as the Parabis deal and Quindell Portfolio’s £19.31m acquisition of Liverpool firm Silverbeck Rymer (24 January 2012) constituting investments in firms with significant consumer practices.

The focus of HB’s investments to date has been on the recruitment and human capital markets.