A firm that listed on the stock exchange in the summer has made the first of its promised acqusitions in a deal eventually worth more than £8m.
Knights plc today announced to the London Stock Exchange it had bought the equity membership interests of Spearing Waite LLP, an independent practice based in Leicester with 59 fee earners.
Under the terms of the acquisition, Knights has paid £5.25m in cash and issued 97,208 new shares in the business. Further cash payments coming to £800,000 will be paid in instalments over the next three years sellers remaining in employment with a member of the Knights group. Knights will also discharge a maximum of £2m of debt in Spearing Waite on completion, and grant restricted stock awards equivalent to a maximum value of £265,000.
The firm went public in June this year, raising the expected £50m from its placing. It was the fifth English law firm to float on the stock market in its own right, and Knights said in the summer it would spend the money raised on acquisitions. The cash for this deal will be available from Knights’ existing facilities, and the company said it expects the acquisition to be ’materially earnings enhancing’ in the first full year.
For the year ending 31 March, Spearing Waite reported revenue of £7.1m and profits distributable to members of £3.2m. Restating this to reflect the fact that the current members of Spearing Waite will become employees of Knights at completion (and therefore deducting their employment costs), this equates to profits of £1.1m, a margin of 15% of revenue.
The Knight board said it expects Spearing Waite to deliver an earnings before interest, tax, depreciation and amortization margin of 20% once the transfer is complete.
Spearing Waite, founded in 1993, will keep its branding for a short period before being formally rebranded as Knights from 1 January.
Tom Bower, senior partner at Spearing Waite, said: 'We have grown Spearing Waite to be the best firm in Leicester through brilliant people acting for quality clients. To continue our growth strategy we have decided to join Knights plc, a larger business and perfect cultural fit. Knights has the ambition and the financial clout to enable the combined force to continue to thrive in Leicester.'
This becomes the eighth Knights office for a firm which focuses on regional markets, claiming to offer ‘big city’ quality expertise from a regional cost base.
Knights shares fell by 1.26% to 195p on the news.