Happy Friday. Here’s what we’ve got today…

• A look at private equity interest in legal practices

• Plus, Bill Ackman struggles in latest fundraising

The legal opportunity:

Last week, Dutch firm Waterland Private Equity announced an investment in Beyond Law Group, a 100-person collection of UK specialist legal practices, including Beyond Corporate, McAlister Family Law, and Home Property Law. With Waterland's backing, Beyond Law plans to launch a series of additional practices as well as kickstart an inorganic growth effort.

It sounds like the typical private equity-backed playbook, but the legal industry, traditionally dominated by partnership-led firms, has remained largely insulated from the type of widespread investment seen in areas like medical provider practices or other professional services verticals.

In the last few years, however, that's started to change in a handful of geographies: Sun European Partners acquired UK-based consumer law firm Fletchers in late 2021, Allegro Funds acquired a stake in Australian firm Slater & Gordon in 2022, and Australian investor Straight Bat purchased a 30 percent stake in insurance law firm Wotton + Kearney, also in 2022.

Facilitated by a peeling back of regulations governing non-lawyer ownership in Australia and parts of Europe, investors now have access to a large, fragmented market that has been cut off from outside growth capital.

Though it still has greater regulatory hurdles than other geographies, the $400 billion U.S. legal services market may be headed in a similar direction. Most U.S. jurisdictions prohibit non-lawyer ownership of law firms under American Bar Association Rule 5.4, which attempts to preserve lawyer independence from outside influence. A growing number of states, however, are relaxing these restrictions: more than 30 states now allow some form of Alternative Business Structures (ABS), a non-lawyer ownership arrangement.

In Arizona, which enacted ABS legislation in 2021, as many as 40 percent of newly approved legal businesses are backed by private equity or hedge funds, according to one state administrator's estimate provided to the WSJ. Around one-third of the new firms specialize in personal injury claims and mass tort litigation, areas which have historically received the most investor attention thanks to their embrace of litigation financing. Many of Arizona's new law firms have also launched national marketing campaigns to recruit potential clients, partnering with law firms outside the state via fee sharing or co-counsel arrangements.

As more opportunities for investment open up, some general themes have started to emerge. The most attractive targets are likely to be mid-sized firms with strong regional footprints or niche practices. Without the scale of their Big Law peers, there’s a perception that these firms may present the best opportunity for tech-driven productivity gains and operational improvements. They may also have less key-person risk than smaller boutique practices.

The founding partner of a similar firm shared his thoughts at the International Legal Finance Association annual conference: “Outside investment in terms of growing a firm and in helping you to deliver upon your vision and strategy at times will be really important. For example, if I want to make some star lateral hires it will enable me to do that sooner . . . rather than having to wait a number of years. If I want to make a particular investment in technology, again which is really important for a modern law firm, access to capital will be important.”

Another attractive industry trait for would-be financial backers is legal’s relatively non-cyclical nature. Some practice areas, such as personal injury, are particularly well-insulated from broader economic conditions (though self-driving cars may prove a novel headwind at some point in the future).

Opponents of non-lawyer ownership question whether outside backing raises the risk of lapses in client confidentiality (e.g. non-lawyers have board seats) or other ethical concerns. Some jurisdictions that allow ABS have imposed strict firewalls and safeguards, but no standardized guidelines exist. For now, the American Bar Association has formed a working group to study the issue, while state bar associations have been developing their own ABS-specific licensing and compliance rules.

Sponsors with the stomach to participate as an early market entrant may notch the biggest wins, though there's every chance that an investment could end up on the wrong side of uncertain licensing or regulatory developments. Absent regulatory risk, there's always the question of exit planning — if other investors remain on the sidelines and competitive law firms don't have the scale, ability, or appetite to get a deal done, what options are left at the end of the hold period?

In the UK, at least, plenty of firms seem to be actively pursuing new legal deals. Speaking with industry publication Legal Futures, Beyond Law founder Matt Fleetwood shared that multiple other private equity buyers had approached him with acquisition interest, though he turned down those offers in favor of Waterland's financing deal.

For the twelve-month period ending March 31st, Beyond Law booked £13.8 million in revenue (up from £10.5m the year before) and £4.0 million in EBITDA (up from £2.5 million)—figures Fleetwood says he hopes to double within the next couple of years.

• Apollo Global Management agreed to simultaneously acquire the gaming and digital business of International Game Technology (NYSE: IGT) and slot machine business Everi Holdings (NYSE: EVRI) for a combined $6.3 billion in cash.

• T-Mobile plans to spend around $4.9 billion for a 50 percent stake in a joint venture with KKR to acquire the residential business of Metronet, an Indiana-based fiber provider, from Oak Hill Capital, which will retain a minority stake.

• Apollo Global Management agreed to acquire UK package delivery company Evri from Advent International for around £2.7 billion, per the FT.

• American Industrial Partners acquired AGCO Corporation's (NYSE: AGCO) Grain & Protein unit for $700 million in cash.

• Blackstone and ArcLight Capital Partners are considering options for coal-fired power generator Lightstone Generation, which could include an ArcLight purchase of Blackstone’s stake or an outright sale.

• Carlyle Group is preparing to exit Cogentrix Energy Power Management, a North Carolina-based power generation business, with bids received from Capital Power and Energy Capital Partners, among others, per Peakload.

• PAI Partners agreed to acquire Nutripure, a French supplements and sports nutrition, from Ardian.

• Mimecast acquired Code42, a provider of insider threat management and data loss prevention solutions.

• AEA Investors acquired Nations Roof, a commercial roofing contractor, from Acacia Partners.

• Morgan Stanley Capital Partners acquired American Restoration, a provider of residential and commercial property restoration, from Soundcore Capital Partners.

• Mankind Pharma agreed to acquire Bharat Serums and Vaccines, a biotech focused on women's healthcare and critical care, from Advent International for around $1.64 billion.

• STS Metals is in exclusive talks to acquire Brown Europe, a Tikehau Capital-owned producer of alloy wires and bars for aerospace fasteners.

• TSG Consumer Partners invested in Summer Fridays, a Los Angeles-based skincare and hybrid makeup brand backed by Prelude Growth Partners.

• Bone Health Technologies acquired Wellen, a provider of personalized exercise programs for osteoporosis designed for women over 50, to complement its FDA-approved Osteoboost vibration therapy belt.

• FreshEdge, backed by Wind Point Partners, acquired Frontier Produce, a Tulsa-based produce distributor.

• Tropolis, backed by Unity Partners, acquired 360 Risk Management, Modi Benefits, and Fishman Agency, three insurance agencies in Southeastern Michigan focused on commercial P&C, benefits, and risk management.

• Lineage, a temperature-controlled warehouse REIT, raised $4.4 billion in its Nasdaq IPO.

Tech, Vertical SaaS, & Misc. Enterprise

• IntelePeer, an AI-enabled communications automation provider, raised $140 million in new equity and debt financing co-led by Savant Growth and VantagePoint Capital Partners, with participation from Coller Capital, Hollyport Capital, Manulife Investment Management, Achmea, and Vector Capital.

• Chainguard, a software supply chain security startup, raised $140 million in Series C funding co-led by Redpoint Ventures, Lightspeed Venture Partners, and IVP, with participation from Amplify, Mantis VC, Sequoia Capital, and Spark Capital.

• Level AI, a Mountain View-based customer experience intelligence platform, raised $39.4 million in Series C funding led by Adams Street Partners, with participation from Cross Creek, Brightloop, Battery Ventures, and Eniac Ventures.

• Archera, a cloud purchasing platform, raised $17 million in Series B funding led by HighSage Ventures, with participation from Ridge Ventures, Amplify Partners, and PSL Ventures.

• DocketAI, an AI-powered revenue enablement startup, raised $15 million in Series A funding led by Mayfield and Foundation Capital.

• Fractile, a UK-based AI chips startup, raised $15 million in Seed funding co-led by Kindred Capital, NATO Innovation Fund, and Oxford Science Enterprises, with participation from Cocoa and Inovia Capital.

• Noded AI, a note-taking and task management platform, raised $4 million in seed funding led by Boldstart Ventures, with participation from Bessemer Venture Partners, 20VC, and First Hand Ventures.

Fintech

• Cowbell, a provider of cyber insurance for SMEs, raised $60 million in Series C funding from Zurich Insurance Group.

• Payt, a Dutch accounts receivable platform, raised €55 million in new funding from Partech.

• Strive Enterprises, a wealth management firm, raised $30 million in Series B funding led by Cantor Fitzgerald, with participation from Deason Capital Services and Narya Capital.

• GeoWealth, a Chicago-based asset management platform, raised $18 million in growth funding led by BlackRock, with participation from Kayne Anderson Growth Capital and J.P. Morgan Asset Management.

Healthcare

• Kestra Medical Technologies, a developer of wearable cardiac monitoring devices, raised $196 million in new funding co-led by Andera Partners, Ally Bridge Group, Longitude Capital, and Omega Funds, with participation from T. Rowe Price Investment Management, Eventide Asset Management, Gilmartin Capital, Bain Capital, and Endeavour Vision.

• deepc, an AI-enabled radiology workflow platform, raised $13 million in Series A extension funding co-led by Sofinnova Partners and Bertelsmann Investments, with participation from KHP Ventures, SwissHealth Ventures, and Winning Mindset Ventures.

Industrials, Greentech, & Other

• Astranis, a maker of geostationary communications satellites, raised $200 million in Series D funding co-led by Andreessen Horowitz and BAM Elevate, with participation from Blackrock, Fidelity, and Baillie Gifford.

• Addionics, a developer of 3D Current Collectors for improved battery performance, raised $39 million in Series B funding co-led by GM Ventures and Deep Insight, with participation from Scania.

• InnerPlant, a seed tech company focused on early detection of crop stress, raised $30 million in Series B funding led by an alliance of North American farmers headed by Coutts Agro, with participation from Systemiq Capital, Deere & Company, and Bison Ventures.

• Micropep, a developer of biological micropeptide-based agricultural pest solutions, raised $29 million in Series B funding led by Zebra Impact Ventures and BPI Green Tech Investment, with participation from Fall Line Capital, FMC Ventures, Supernova Invest, Sofinnova Partners, and IRDI Capital Investissement.

• Star Catcher Industries, a developer of a space-based energy grid for satellites, raised $12.25 million in seed funding co-led by Initialized Capital and B Capital, with participation from Rogue VC.

• Pershing Square, Bill Ackman’s hedge fund, is expected to raise between $2.5 - $4 billion for its latest closed-end fund, falling short of its $25 billion target, per Bloomberg.

• Agellus Capital raised $400 million for its debut lower middle market buyout fund.

• Galaxy Asset Management raised $113 million for a new crypto-focused venture fund.

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