Dispersed firm Keystone Law has received a £3.15m cash injection from private equity house Root Capital in return for a 35 per cent stake in the firm’s shares.
Root was founded by investor Simon Phillips in 2003. The funds are provided by Phillips, fellow Root founder Mike Danson and an institutional investor.
Phillips will hold a seat on Keystone’s board alongside managing partner James Knight, directors Will Robins and Mark Machray and IT director Maurice Tunney.
The investment is partially an exit strategy for Keystone’s founding partner Charles Stringer, who is retiring as IT and finance director and moving in to a non-executive position, retaining a small equity interest.
The rest of the capital will be invested in expanding the firm’s infrastructure, office and marketing activities.
According to Root’s website, the firm makes equity investments of between £0.5m and £6m in companies with revenues of between £1m and £50m.
Root specialises in turnarounds for distressed businesses under £10m turnover, fragmented sectors in which there is potential to buy up several related companies, and enterprises that fail to meet normal investment criteria and are seeking less than £3m.
Keystone managing partner James Knight said the firm was not Root’s usual market but had appealed because of the new opportunities in legal and professional services.
Keystone has already filled Stringer’s operational roles, hiring former Fieldfisher IT head Maurice Tunney as IT director last month and securing a new financial director from the legal sector to start at the end of the year.
Keystone converted to an alternative business structure (ABS) in October last year, clear the path for external investment (19 August 2013).
It kicked off its international expansion drive last year with the opening its first overseas office in Guernsey (16 July 2013) and went on to open in Australia earlier this year.
Keystone joins a growing number of ABSs to have taken private equity backing. The list now includes Brilliant Law (24 September 2013), virtual firm Excello Law (6 February 2013), Keoghs (2 November 2012), Knights (12 June 2012), Parabis (22 August 2012), and industrial disease firm Roberts Jackson (25 July 2014).