Leaitherland: Delivering on our IPO promises
Listed firm DWF has again leveraged its new purchasing power by spending £14.2m to acquire a US-based legal and managed services business, adding 360 people to its staff complement.
Mindcrest Inc provides litigation support, contracts, compliance and legal analytics for large international corporate clients.
Headquartered in Chicago, most staff are located in Pune, India, along with a small presence in New York and London.
DWF is paying £1.8m in cash and £6.5m in shares at completion, with £5.9m in deferred cash phased over six months. It will also be assuming £1.6m of net debt, including £1m to be paid to Mindcrest shareholders on completion.
There is a 24-month clawback on post-tax cash from Mindcrest management in the event they resign of their own volition during that period, which is consistent with the DWF partner clawback arrangements from its listing.
The shares will also be subject to a two-year lock-in, while further clawback provisions protect against any material reduction in revenue in that time.
In its 2019 financial year, Mindcrest is expected to have sales of £9.2m and normalised EBITDA of £900,000, with gross assets of £2.3m.
The deal comes on the heels of DWF’s £40m purchase of Spanish law firm Rousaud Costas Duran (RCD) last month, the biggest acquisition by a listed law firm to date.
In a statement to the market, DWF said the acquisition was consistent with its objective of “developing its managed services business across a global platform”.
It explained: “Mindcrest’s business model is focused on assembling the right talent in the right locations at the right price. Their services are delivered through a unique methodology combining project management, process, workforce management, technology, analytics, reporting and metrics on every project.
“Mindcrest’s operations are supported by a high quality people proposition delivered through ‘Mindcrest University’ which underpins their service and helps ensure recruitment, retention and development of its people in addition to being able to rapidly initiate and deploy new contracts and types of work.
“This complements DWF’s managed services delivery platform and provides significant potential profit upside from the combined operations, geographies and capabilities.”
As a result, the firm expects the deal to deliver around £2.9m in annual recurring cost savings by the 2022 financial year.
The deal will mean DWF has offices in 33 locations with approximately 4,200 people.
DWF chief executive Andrew Leaitherland said: “Mindcrest is an excellent fit for our business, allowing us to rapidly expand our managed services offering in both existing and new areas, accelerating growth in this key offering that remains central to our strategy. Managed services continues to be a real differentiator for DWF…
“Following the recent RCD acquisition, the Mindcrest deal further highlights our M&A strategy and the attractiveness of our business model, as we continue to deliver on our IPO promises and grow our international offering in targeted locations and disciplines that complement our existing business, while attracting and retaining the best talent.”
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