Listed UK law firm Knights expands again with £11.5m South East acquisition
Bolt on of Portsmouth-based Coffin Mew adds 102 fee earners and follows recent acquisitions in York and Sheffield
Listed UK regional firm Knights is set to expand in the South East through the acquisition of Coffin Mew for £11.5m, one of its largest deals to date.
The transaction, which is expected to be completed in July, will see Knights gain just over 100 fee earners as well as four new bases across the region.
Knights will acquire Coffin Mew from the firm’s 12 equity partners for an initial £5.5m in cash and new shares worth £1m, followed by three deferred payments over the next three years adding up to £5m. The firm said the cash to finance the deal would come from its existing facilities.
The move follows recent acquisitions in Sheffield and York and is line with Knights’ strategy of growing through regional mergers that provide entry into new markets. It also sends a reassuring signal to the market after Knights’ stock price slumped by 45% in March off the back of a profit warning when it said the Omicron Covid variant had had a greater impact on the firm's performance in its fourth quarter than expected.
In a trading update today, the firm said its performance was in line with its March statement with expected profit before tax (PBT) for the year ending 30 April 2022 to be £18.1m, down from £18.4m the previous year. The fall contrasts with the firm’s revenue, which has increased by 22% to hit £125.5m.
Portsmouth-based Coffin Mew reported revenue of £11.3m for the year ended 31 March with a PBT margin of around 8%. Knights said it expected that margin to double following full integration of the two firms which, ‘combined with a typical level of revenue churn post-acquisition, means the acquisition is expected to be immediately earnings enhancing’.
Coffin Mew also has offices in Southampton, Brighton and Newbury, significantly expanding Knights’ presence in the South East, which the firm described as an attractive growth market for legal and professional services.
The deal will also boost Knights’ private wealth and real estate offerings, areas in which it said Coffin Mew has particular strength.
Knights CEO, David Beech, pointed to the “strong cultural fit” of the two firms.
“The acquisition allows us to expand our presence in the South East by entering a number of key new locations, as we progress in achieving our ambition to become the leading legal and professional service business outside of London," he said.
Commenting on the trading update, Beech added: “The group has performed as anticipated in our update in March and we are encouraged by the positive trading momentum we are seeing in the current year.”
Knights made a similarly large investment in January when it bought York independent Langleys for £11.5m, in a move that saw the firm add 72 fee earners and also gain entry into Lincoln.
Last May the firm also acquired independent Sheffield firm Keebles for the same amount, gaining 138 fee earners in the process.
In the interim, the firm launched a debt advisory business in response to mounting demand for debt advice, claiming it was the first legal services business in the UK to do so.
Knights also announced today that Richard King will step down from his role as chief operating officer and leave the business at the end of the month. The firm thanked him for putting in place ‘strong operational infrastructure to support the scaling up of the business, both organically and through acquisition’.
Although still well below the 420p recorded earlier in the year, shares in Knights were up by 33% by 1PM today to 125.5p.