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Capita is to enter into the legal market through the acquisition of volume outfit Optima Legal Services, three years after the SRA ordered the firm to sever its relationship with the outsourcing giant.
The SRA is yet to approve the planned deal and an ABS application was filed on Friday. As part of the deal Capita will also acquire Optima subsidiary Cost Advocates.
Under the plans staff from Optima’s offices in Glasgow, Bradford and Newcastle will transfer to Capita Legal Services, a wholly-owned subsidiary of Capita.
The combined entity will be home to a 600 person strong legal services team, with 150 legally qualified personnel and 50 solicitors.
In 2010 the SRA told Optima to sever links with Capita Volume powerhouse Optima Legal Services after it found their relationship breached rules governing non-lawyer investment in firms (8 August 2010).
Optima had been under investigation by the SRA since May 2007, but was only told at the end of 2009 that it had gone too far in its relationship with Capita and had to reorganise its structure.
Optima’s lead litigation partner Philip Robinson and lead property partner Anthony Ruane only escaped being summoned by the Solicitors’ Disciplinary Tribunal (SDT) because they took legal advice, including an opinion from a silk, before entering into the arrangement with Capita.
Optima was found to have set up an alternative business structure (ABS) before the regulations allowed, with Capita providing a series of loans to the firm amounting to £35m. These were used to fund acquisitions, including the buyout of Dickinson Dees’ volume arm D3 Legal in November 2009.
The firm topped The Lawyer’s debt chart in 2011/12 with borrowings of £36.2m against turnover of £22.85m. This improved marginally at the latest year end to £35.99m but revenues fell for the fifth consecutive year to £20.58m. When Optima entered The Lawyer UK 200 in 2008/09 turnover stood at £30m and average profit per equity partner (PEP) £307,000.
The loan was supplied by Capita when Optima launched in May 2006, in return Optima outsourced its administrative, payroll, HR and IT services to Capita, meaning that 234 staff were effectively employed by the company, which then recovered the cost from Optima.