Cross: Significant growth potential
Listed law firm consolidator Knights announced its 16th acquisition in three and a half years yesterday and adding Lincoln to its locations in an £11m deal.
It is buying York and Lincoln firm Langleys, which had revenues of £14m in its last financial year and a profit-before-tax margin of 5%, a figure Knights said it expected to increase to 20% following full integration.
The deal means 72 new fee-earners for Knights, but the future of 69 others – 64 who work in Langleys’ volume residential conveyancing business, Home Property Lawyers Ltd, and five in its legal aid child law team – is uncertain.
In its stock exchange announcement, Knights said: “These businesses are included in the transaction perimeter but are non-core to Knights and as such the strategic options for them will be reviewed.” They represent about a third of Langleys’ revenues.
Knights said Langleys’ real estate and corporate offerings were “closely aligned with Knights’ existing services”, while there was “significant growth potential” in its private wealth focus.
The new Lincoln presence also fits Knights’ strategy of targeting secondary legal locations. It already has an office in York.
Langleys’ four equity partners are being paid an initial £8m – made up of £5.25m in cash and £2.75m in shares – along with deferred cash consideration of £3.5m to be paid in equal instalments over the next three years. Completion is expected to take place on 25 March.
Knights chief executive David Beech said: “The acquisition sees us become the leading law firm in York and provides a strong base for organic growth in the East of England through Lincoln, as we continue to strengthen our position as the leading legal and professional service business outside of London.”
Langleys partner Tim Cross said: “Having built a strong reputation over a number of years, now is the right time to join Knights, whose growth journey we have followed in York and elsewhere across the regions.
“We believe Knights’ scale, ambition and ability to invest will enable us to unlock significant growth potential and we look forward to achieving this as part of a larger group.”
Earlier this month, Knights reported that its revenue increased by 29% to £60m in the six months to 31 October 2021.
Of this increase, £9.1m came from the four acquisitions completed in the previous six months, with £4.4m (9%) relating to organic growth.
Its gross margins increased to from 46.4% to 48%, with underlying profit before tax up 26% to £7.6m. But the underlying profit before tax margin fell slightly to 12.6%.
