The sale of the various parts of the Parabis group as part of a pre-packed administration hasn't warranted the comment in the legal press I was expecting.
To recap, Plexus (the defendant insurance part of Parabis) was the first law firm to receive external investment from a private equity firm - Duke Street. Recently, Duke Street wrote down its £21.4m investment to zero, starting the sell off process.
Back in 2012, external investment was seen as a great thing for the legal market, enabling firms to invest in better infrastructure, particularly IT (which Plexus and Keoghs in particular did - another firm to have private equity investment).
However, many law firm clients I've spoken to since then have voiced concerns about the model. They like the investment but are worried about one big risk in particular; what happens when the backers walk away? Where will that leave us as the client?
Well, that's just what's happened with Parabis and Plexus. Obviously this is only one firm with external investment, but it will be interesting to see the ramifications and impact on the appetite of other firms to secure extra financial backing...
Plexus was the first firm to receive backing from a private equity investor after receiving its ABS licence in 2012. The firm was backed by Duke Street, which later injected a further £13m into the firm. Recently it emerged that Duke Street had written down its €30m (£21.4m) investment in the business to zero. Business advisory firm AlixPartners advised Parabis on the restructure and administration. In a statement joint administrator Peter Saville said Parabis had been in discussions with its lender and Duke Street for “a prolonged period”.
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