Expect the usual bunch of postings about “Ten LPO Predictions for 2013″. For me it is pretty easy.
- Continued Growth
- The start of the M&A Trend
The sector has proven itself, the economy is not improving, law firms are waking up to the real vale from Strategic Legal Process Outsourcing, GCs are changing who they buy from. Shear common sense does the rest – and that is how and why the market will grow. Prediction Number 1 = Easy!
But what will be new is the arrival growth by acquisition.
I said in the 2012 Global LPO Study that I’d been surprised by the lack of M&A activity in this space. Despite the scarcity of such events in the last few years, what has been happening is a huge growth in the number of suppliers, covering almost every possible niche you can imagine.
Add to that new suppliers providing plain old LPO but in a different geography, and you have a strong pool of potential acquisitions, that may be small in size but will provide any acquirer with a growth conveyor belt.
I’ve seen other sectors stymied by excessive valuations and investors who had bought at too high a price, setting all the wrong expectations for exit prices. That danger is a potential issue in the LPO space, but any firm with zero or very low involvement of external investors is free of that issue.
Which is why it is worth looking at today’s announcement from Elevate Services (see below) from a number of different angles. In summary, they have acquired Med Legal Consulting Source, Inc., a U.S. firm specializing in medical claims and litigation.
Elevate’s founder, Liam Brown, has a record of having been very early to the LPO space, getting out, and then has chosen to get back in again. So he certainly has a great perspective on the sector, and one worth watching. By choosing to combine organic growth with tactical acquisitions in key sectors, he is showing where and how he sees the market evolving.
Acquisitions are difficult. Getting them right at any size is a challenge. But an LPO supplier making tactical acquisitions now will learn so much about how to get them right and what to do better with the next (potentially larger) one.
That skill will become as key an internal resource as the actual delivery of resources. From a purely investment perspective, any firm that cracks the combined organic/acquisition route will become, or remain, a Global Top 5 LPO Supplier.
Here’s the press release in full: