AIM-listed financial services business agrees £15m deal to buy Simpson Millar

Watson: innovative move

An AIM-listed consumer financial services business is to acquire national law firm Simpson Millar – which had last year looked like being bought by Slater & Gordon – for £15m.

Fairpoint Group plc is focused on serving “financially stressed” consumers, and specialises in individual voluntary arrangements, debt management plans and claims management.

Subject to receiving approval by the Solicitors Regulation Authority, it will pay an initial £9m in cash and shares for the firm, with a further earn-out of up to £6m over the next two years.

Fairpoint said the transaction was in line with its stated strategy to diversify its income streams into new sectors, and would be “immediately earnings” enhancing.

Simpson Millar has more than 250 staff in 11 offices around the country, and in the financial year ended 30 June 2013 turned over £16.9m.

Fairpoint estimated that the firm’s consolidated earnings before interest, tax, depreciation and amortisation, adjusted to account for agreed partner salaries and bonuses, would have totalled £1.5m.

Simpson Millar had consolidated gross assets of £10m and is being acquired on a cash free/debt free basis.

Upon completion, Simpson Millar will continue to be run by the current management team using its existing trading brands and operating as a business unit within the Fairpoint Group. It will be on the acquisition path following the deal.

Last year Slater & Gordon announced a deal to buy Simpson Millar but it was put on ice; it is thought that the two sides could not agree terms.

In a statement to the Stock Exchange this morning, Fairpoint said that Simpson Millar will be able to “accelerate its focus on improved customer service and value whilst enjoying greater access to capital, which is expected to enable the firm to increase its consolidation activities in the legal services market”.

Further, “the combination of the two business will yield synergies to further drive growth, principally in the following areas: overlapping consumer franchises; separate routes to market in order to cross-sell services, for example via Simpson Millar’s strong business stream with trade unions; applying technology to improve processes; sharing supporting services in finance, HR, marketing and IT; and optimising the group’s scale and competitive advantage in these rapidly evolving and consolidating regulated markets”.

Fairpoint is funding the initial cash consideration from its existing resources, but “to ensure appropriate funding for the enlarged group following completion”, it has credit approved terms for new five-year £20m facilities.

Chris Moat, Fairpoint’s chief executive, said: “The proposed acquisition of Simpson Millar presents us with an opportunity to accelerate the diversification of our income streams into the legal services market place, in line with our stated strategy.

“Simpson Millar has already made significant progress in developing a powerful consumer offering, through the combination of strong legal skills with the innovative application of technology and legal processes.  Our shared vision and approach is a solid basis upon which to further develop the consumer-focused legal services business and to help buyers of legal services make their money go further.”

Simpson Millar’s managing partner, Peter Watson, said: “We see this as a really innovative move in the market, which will allow us to reach more customers, continue to improve our value proposition for customers and to leverage each other’s capabilities in areas such as strategy, marketing, the efficient delivery of professional services at scale and business acumen.

“This is an investment in growth and a commitment to help us realise our existing long term strategy. With the support of Fairpoint, we are able to expand significantly the numbers of products and services on offer from a portfolio that is already highly complementary. Meanwhile the firm can approach discussions with potential new partners armed with the added incentive that Simpson Millar is now part of a diversified financial and legal services business.”

Mr Moat said Fairpoint spent “a considerable amount of time finding the right partner” and used Jepson Holt as its search agent. Zebra Legal Consulting provided Fairpoint with technical legal due diligence. Its solicitors were Eversheds, with financial advice from KPMG.

Simpson Millar was advised by Lupton Fawcett Dennison Till and accountants Sagars LLP.

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