Beech: Funding provides additional headroom
Listed law firm consolidator Knights has added the North-East to the parts of England it covers after striking a deal to acquire a Teesside firm from its four equity partners for £5.2m.
The firm has also unveiled new bank funding to support its growth ambitions – it has now made 15 acquisitions since listing three years and fourth months ago.
Archers Law, based in Stockton-on-Tees, is a full-service firm with 38 fee-earners. It had revenue of £4m in the year to 31 March 2021, with a corporatised profit before tax margin of 20%.
Knights told the stock exchange that, following “full integration and realisation of all synergies”, it expected to increase this to 30%.
The firm’s strategy has been to target largely secondary legal centres outside of London, and Stockton is its 17th location.
Speaking to Legal Futures in July [1], chief executive David Beech identified the North-East beyond Yorkshire as one of the holes it was looking to fill in its increasingly national coverage.
The others included Cardiff, the south coast around Southampton, the eastern counties and cities like Norwich and Cambridge.
Archers’ four equity partners will be paid an initial £3.7m – made up of £2.1m in cash and £1.6m in shares – along with deferred cash of £1.5m paid in equal instalments over the next three years.
Mr Beech said the North-East was currently benefiting from “significant public and private investment”.
He continued: “The acquisition allows us to build on the existing strong presence we have established in Yorkshire in recent years and provides a compelling platform for future organic growth in the North-East, as we cement our position as the leading legal and professional services business outside London.”
Archers partner Chris Todd added: “After over a century of growth to become one of the leading law firms in Teesside [the firm was founded in 1860], we are delighted to join Knights, whose culture is closely aligned to ours.
“We look forward to executing on the significant growth opportunities in the North-East as part of a larger group, which will allow us to offer greater resources and capabilities to our clients in the region and beyond.”
Knights also announced that it has agreed a new extended revolving credit facility with HSBC UK, Allied Irish Bank (GB) and Lloyds Bank, with each providing funding of £20m until October 2024.
It replaces the group’s existing £40m facility with HSBC and Allied Irish.
Mr Beech said: “The facility will provide us with additional headroom to build upon the critical mass achieved this year, continue to scale our business across the UK organically and through selected acquisitions, and execute our strategy to become the leading legal and professional services business outside London.”
The acquisitions meant Knights hit the £100m turnover landmark in the year to 30 April, with revenue increasing by 39% to £103m.
But its share price has fallen recently – having hit an all-time high of 490p in September 2020, it was at 442p a month ago but dipped sharply since to close yesterday at 390p.