Beech: Nobody’s buying firms like us outside London
Fast-growing listed law firm Knights is moving into Yorkshire this month as its chief executive says he is receiving an increasing number of approaching from potential acquisitions.
David Beech said he was also eyeing up growing the non-legal services it offers in the medium-term.
Knights’ results for the six months to 31 October 2019, released yesterday, showed a 34% increase in revenue to £32m, including 13% of organic growth. Underlying profit before tax rose by 20% to £5.3m.
At the start of the month, Knights unveiled the sixth acquisition [1] in its 18 months as a listed firm – ERT Law – to boost the presence it established in Birmingham in November by buying Emms Gilmore Liberson [2].
Knights’ strategy is to target the corporate/commercial market outside of London – which it estimates to have a value of £2.6bn – and has frequently entered secondary regional markets, such as Chester, Derby, Leicester and Stoke.
However, the firm does not just acquire – it is establishing an office in York this month and has recruited 19 fee-earners before the doors have opened, said Mr Beech.
He told Legal Futures that “our approach is go where the pool of talent is to recruit from”; in the same way that Knights’ Wilmslow office – which opened three years ago – draws on staff who might otherwise travel into Manchester and now has 75 fee-earners, the York office could recruit from the talent pool for Leeds.
“If you can find the first partner or two… you’ve got a chance to get a really good group together without having to sort out a business [that’s been acquired],” he said.
Yesterday’s results said it was recruiting an increasing number of fee-earners from top-50 law firms. “Many of these new colleagues have been attracted by a move from dysfunctional partnerships to a highly collaborative work environment in which they can focus on delivering quality work to their clients unburdened by the risks of partnership.”
Mr Beech said there were still plenty of areas for Knights to explore – it does not have a presence in East Anglia, the North-East or South-West, for example – and that there had been an increase in the volume of firms approaching him in recent months.
“Nobody’s buying firms like us outside London,” he pointed out.
While the number of opportunities meant he was concentrating on legal services for the next couple of years, Mr Beech said the plan was then to add to the non-legal services Knights offered; tax and town planning are among the areas it has already covered.
“These will allow us to get into relationship with clients earlier and make them stickier,” he said, citing fields like property and corporate finance.
The results put net debt at £17.1m as at 31 October 2019 – compared to £9.5m a year earlier – which was mainly due to the payment of deferred consideration on various acquisitions. The firm announced an interim dividend up 83% to 1.10p.
A Legal Futures analysis [3] showed that Knights performed better than any other listed law firm last year, with its share price nearly doubling in 2019. It closed yesterday at 366p, just short of its all-time high.
Meanwhile, shareholders of listed accident management firm Redde plc – which owns NewLaw Solicitors and Principia Law – yesterday approved the planned merger with Northgate, a listed light commercial vehicle hire business, whose shareholders also gave the green light.
Subject to regulatory and court approval, the merger is planned to take effect by the end of March.