Listed compliance and risk business snaps up another law firm

Dacre: We plan to deepen our presence in our existing markets

Listed company Marlowe has continued the rapid expansion of its employment law business by acquiring Oxfordshire-based law firm Cater Leydon Millard for £2.25m.

Marlowe – which describes itself as the UK leader in business-critical services and software which assure safety and regulatory compliance, whilst managing risk for businesses – has made clear that it plans further growth, both organically and by acquisition.

It said the Cater Leydon deal “deepens Marlowe’s employment law compliance offering and will offer attractive synergies with Ellis Whittam, our leading platform in the provision of recurring, fixed-fee HR, employment law and safety services & software”.

Cater Leydon’s clients include Serco, Smeg and various public sector organisations – the firm is a preferred supplier for employment law through the Crown Commercial Service’s wider public sector legal services panel.

For the year ended 30 November 2020, the nine-lawyer firm generated an operating profit of £650,000 on revenues of £1.7m. Marlowe is paying £1.75m upfront with a performance related contingent consideration of around £500,000.

The deal comes on the heels of Marlowe buying specialist alternative business structure ESPHR for £3.2m in March and the £61m acquisition last October of Ellis Whittam, a large unregulated employment law, HR and health & safety business set up by a solicitor.

In the company’s recently published annual results, Marlowe chief executive Alex Dacre – who only set up Marlowe in 2015 – said the acquisition of Ellis Whittam “transformed the scale and scope of our employment law, HR compliance & safety advisory activities”.

He went on: “The business, which delivers subscription-based consultancy services, supported by software, operates in an attractive and underserved market where we see significant growth opportunities.

“The deal represented a major step in strengthening our position as the UK leader in regulated safety and compliance services to organisations of all sizes.”

He described this market has having “a range of attractive characteristics, including a highly scalable model, non-discretionary spend and high barriers to entry”.

In December 2019, Marlowe spent £6.3m – rising to a possible £10.3m over three years – to acquire Law At Work, a Glasgow-based national employment law business that originally spun out of what was then Scottish law firm Maclay Murray & Spens.

Marlowe is an acquisition machine, completing 13 bolt-on deals during the year to 31 March 2021 and eight in the months since.

It is split into two divisions: governance, risk and compliance, and testing, inspection and certification.

Mr Dacre told investors that its medium-term growth strategy would see it deepen, broaden and strengthen its offerings, and integrate them with technology.

“We plan to deepen our presence in our existing markets both organically and through further M&A. Each of our markets offers significant scope for consolidation and in broad terms we can see a path to doubling the size of each of our businesses.”

He explained that the idea behind acquiring Ellis Whittam was to use it “as a platform into which we would integrate our existing activities, digitise the business and displace third-party software and provide a platform for fast-paced growth whilst deepening and broadening our capabilities within this market”.

Within six months of the acquisition, he went on, many of these goals had already been achieved: the integration of Law At Work into Ellis Whittam was “proceeding to plan”, with at least £2m of synergies identified and being implemented, and the subsequent acquisitions.

“The scale and breadth of capability that we now have in this market will allow us to improve the efficiency with which we can manage each client and reduce the cost to acquire new clients. We expect to see continued strong organic growth in this highly attractive market.”

Marlowe’s revenue was up 15% to £192m in the year to 31 March, with EBITDA of £28m and profit before tax of £17m. Mr Dacre said he was confident the growth strategy would see turnover reach around £500m by the end of the 2024 financial year, with EBIDTA at £100m.

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