Dacre: Entering next phase of growth
Private equity business Inflexion has made its latest investment in legal services by acquiring one of the largest employment law businesses in the country.
As well as buying WorkNest, Inflexion is also entering the world of legal training and compliance as VinciWorks and The Compliance Office are part of the deal with listed company Marlowe.
The £430m cash deal adds to Inflexion’s existing investments in conveyancing group Movera – rebranded last year from the ONP Group – international law firm DWF, which it took private last year, and legal and compliance data subscription platform aosphere, in which it has taken a majority stake from City giant Allen & Overy.
Marlowe, which was only created in 2015 and describes itself as “the UK leader in business-critical services and software which assure regulatory compliance”, is an acquisition machine that has done more than 80 deals since.
It expanded rapidly into employment law, HR and health & safety support services, and has 40,000 clients under the brand WorkNest.
In December 2019, Marlowe spent £6.3m – rising to a possible £10.3m over three years – to acquire Law At Work, a Glasgow-based national employment law business that originally spun out of what was then Scottish law firm Maclay Murray & Spens.
In 2020, it acquired Ellis Whittam, a large unregulated employment law, HR and health & safety business set up by a solicitor, for £61m before spending £3.2m the following year to buy specialist alternative business structure ESPHR and another £2.25m on Oxfordshire-based employment law firm Cater Leydon Millard.
Other related businesses are also part of WorkNest, whose main offices are in Chester and Glasgow. Its 400-strong team includes more than 75 employment law solicitors, 45 qualified HR consultants and over 50 qualified health & safety consultants.
Also in 2021, Marlowe bought VinciWorks, a compliance technology and training company well known in the law, for £54m, and followed it up with specialist law firm compliance business The Compliance Office in 2022.
Several other governance, risk and compliance software and services businesses are also included in the deal with Inflexion, which said in a statement that the standalone business would pursue “an ambitious organic growth strategy through cross-selling of services, launching new software and investment in sales and marketing”.
This would be complemented by more mergers and acquisitions “to broaden the product offering and support international growth”.
Flor Kassai, partner and head of buyout at Inflexion, said: “This governance, risk and compliance business operates in a fragmented, high-growth market and has the potential to scale into a global leader.
“We look forward to utilising our strong sector experience and working with the management team to accelerate its growth both organically and through M&A.”
In a stock exchange announcement, Marlowe said the enterprise value of the divestment, which accounts for approximately 20% of group revenues and 40% of its adjusted EBITDA, represented 121% of Marlowe’s market capitalisation.
Marlowe’s two continuing operations comprise its testing, inspection and certification division and occupational health business. It said the proceeds would be used to “retire in full” its current debt facility and return in excess of £150m of surplus cash to shareholders.
Marlowe boss Alex Dacre will transfer with the divestment and continue to lead the business, resigning as chief executive of the company he founded.
Mr Dacre said: “This divestment represents a significant premium to our market capitalisation and clarifies the group’s forward strategy to focus on the highly attractive and regulated compliance service markets…
“We are excited to be partnering with Inflexion to take our GRC business into its next phase of growth. Inflexion’s strong sector experience will be invaluable as we look to grow the business in both the UK and internationally.”
Inflexion specialises in European mid-market businesses and advises funds that have £8bn under management.