Listed law firm Knights has returned to the acquisition trail and its strategy of targeting secondary legal locations by striking a deal to move into Exeter, while also reporting “robust” trading.
OTB Eveling is a commercial firm with 17 fee-earners which Knights is buying from its two owners for £2.1m, the same amount as OTB’s turnover for the year to 30 April.
Knights’ first office in the South-West, it had a corporatised profit before tax margin of 16%, which the AIM-listed firm expect to increase to 20% once OTB has been integrated into the wider group.
Knights will pay an initial £1.4m, made up equally of cash and shares, with the rest to be paid in instalments over the two years following completion, subject to certain conditions being met.
It made five acquisitions in the first two months of this year alone, and OTB makes 11 in total since going public in June 2018.
Headquartered in Stoke, Knights now has 14 offices across the country, including less high-profile legal locations like Cheltenham, Chester, Crawley, Leicester, Maidstone, Oxford and York.
Chief executive David Beech said: “We are delighted to enter a sizable market for regional law today with the acquisition of OTB Eveling, an independent law firm with a strong cultural fit.
“The acquisition will provide us with a platform for future growth in the South-West as we continue to build our position as the leading legal and professional services business outside of London.”
OTB partner James Eveling added that the deal “enables us to accelerate our growth plans”.
In a trading update for the six months to the end of October, Knights recorded revenue of £46m, a 44% jump on the same period last year in light of the acquisitions.
Underlying adjusted profit before tax was up 13% to £6m. Gross margins stayed at 45%, despite a 15% impact on revenue from “Covid-related disruption to our clients”. A focus on lock-up meant net debt fell from £15.9m last year to £14.4m this.
Knights said trading were close to pre-Covid levels by the end of the period, and reintroduced full salaries for employees from 1 November. It was one of the first firms to announce costs reductions in the wake of the first lockdown, reducing the salaries of all staff earning £30,000 or more by 10%.
The group recruited 28 senior fee earners during the first half, compared to seven last year.