Capita’s entrance into legal market “imminent” as Optima granted ABS

Capita is days away from entering the legal market after the SRA granted volume outfit Optima Legal Services an ABS licence, ahead of a takeover by the outsourcing giant.

A spokesperson said Capita’s acquisition of Optima is “imminent” and will be completed within the next 10 days. As part of the deal Capita will also acquire Optima subsidiary Cost Advocates, with the move seeing a total of 300 staff transfer to Capita Legal Services (16 September 2013).

The outsourcing company has been eyeing up the legal market for some time. In 2010 the SRA told Optima Legal Services to sever links with Capita 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 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 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 legacy Dickinson Dees’ volume arm D3 Legal in November 2009.

In March The Lawyer published a feature exploring how cash-strapped local authority legal teams could potentially end up on a collision course with FTSE 100 outsourcers (24 March 2014). “We have noted with interest the appetite in local government to explore the ABS as a means to deliver and receive legal services,” said a spokeswoman for Capita at the time. “An ABS licence will allow Capita to provide regulated and non-regulated legal services to a variety of markets, including the public sector.”

Local authority legal teams have subsequently pressed the SRA over delays in their ABS application process (24 March 2014). “We’re effectively being judged like any other business, it’s like they’re trying to licence a bank,” said one source.

Capita is not the only multimillion-pound outsourcer eyeing up the public sector legal market. CapacityGrid, launched by outsourcing provider Liberata in 2011, paired up with North West Leicestershire District Council’s legal team in March after the council was hit with budget cuts of 40 per cent. The partnership will enable Leicestershire council to market its legal service to some of CapacityGrid’s 140 local authority clients across the country.

Outsourcing giants have been running much of Britain since the Thatcherite privatisations of the 1980s. The London Fire Brigade now outsources its 999 calls to Capita, while Serco has contracts involving British prisons, speed cameras, Ofsted, the armed forces, the UK Border Agency, the Docklands Light Railway and even London’s ‘Boris bikes’ scheme.

Capita Legal Services transformation director David Ashcroft said: “This journey will involve significant investment in people, process and technology, a journey that started by establishing our presence in Leeds – an obvious choice given the city’s reputation as the leading legal centre outside of the capital.”