The shareholders who sold national law firm Simpson Millar to Fairpoint Group plc in June 2014 have received their full £3m earn-out after the practice exceeded its first-year financial targets.
Fairpoint paid an initial £7m in cash – on a debt-free, cash-free basis – and 1.4m shares in the group. In addition, there was provision for the payment of an earn-out of up to £6m based on the financial performance of Simpson Millar for two 12-month periods ending June 2015 and June 2016, with a maximum of £3m payable in each year.
This additional consideration is payable in 50% cash and 50% shares.
In a statement released to the stock exchange today, Fairpoint said: “Simpson Millar’s financial performance has exceeded the challenging financial hurdles set for the first earn-out period ended 30 June 2015 triggering the maximum earn-out for the period.
“Accordingly, the group has today paid £1.5m in cash and issued 1,061,647 earn-out Shares at the previously agreed price of 141p per share to the vendors of Simpson Millar. The vendors will be restricted from dealing in the 1,061,647 earn-out shares issued until after 30 June 2016.
At the time of acquisition last year, the shares were priced 134p; as of this morning, they were 180p.
Fairpoint has since acquired Bristol-based family law firm Foster & Partners and, last month, Colemans-ctts, meaning legal services now accounts for 62% of the company’s revenue. It recently announced that revenue for the first half of 2015 was up 64% to £23m, with gross profit up 21% to £4.1m.
Legal services accounted for £11.3m and £1.4m of the profit, which amounted to single-digit growth compared with Simpson Millar’s performance in the first half of 2014 pre acquisition.
Fairpoint said its “mission within legal services is to make law more accessible to consumers” and as part of this it has introduced fixed fees for over 70 “legal products”.
The company told investors when issuing the results that it was in a “strong position to continue to develop the legal services platform organically and through further acquisition supported by an enlarged £25m financing facility”.