Beech: Strong platform for growth in the South-East
National firm Knights yesterday announced its 23rd and biggest acquisition since listing nearly seven years with a £30m deal for South-East practice IBB Law.
IBB had a turnover of £23m and profit of £5.5m before member remuneration for the year to 30 April 2024 but its chief executive said the changing legal market made greater scale more important.
Headquartered in Uxbridge, North-West London, with offices in Beaconsfield, Reading and Ascot, IBB has 140 fee-earners delivering a wide range of business and private client services. Knights said IBB brought in new specialisms, such as franchising.
However, Knights indicated that it would look to move on IBB’s criminal law department, which it described as “non-core” for its own practice, despite accounting for around 10% of IBB’s revenue.
Knights is paying IBB’s 29 equity partners an initial £21m, with the remaining £9m to be paid in equal instalments on the next three anniversaries of completion, which is expected next month, subject to “certain conditions” being met.
The £20m deal for Leeds firm Shulmans in 2020 was the previous biggest acquisition, while the most recent was the £12.5m purchase of West Midlands firm Thursfields Legal, which completed last September and was the first for over a year.
The stock exchange announcement said IBB’s locations “provide proximity to areas of inward investment, major corporate clusters, affluent communities and existing Knights offices in Oxford, Weybridge and Newbury, further enhancing our scale in this market”.
“Prudently assuming” a 20% revenue churn post-acquisition and excluding the crime business, and following “full integration and realisation of synergies”, Knights said it expected IBB to contribute a profit before tax (PBT) margin of around 26%.
Investors were told: “As part of Knights, IBB will be able to accelerate growth through the team being able to offer clients a wider range of services and utilising the strength and resources of Knights’ well-invested central infrastructure, without the increasingly onerous regulatory and technology burden faced by independent firms.”
Knights chief executive David Beech said the deal would “significantly” increase the firm’s scale in the South East.
“IBB’s premium service offerings in corporate, real estate and private wealth are an excellent fit, and their culture and operational model are very aligned to Knights. We are confident that the acquisition will provide a strong platform for organic growth in the region.”
Joanna DeBiase, managing partner of IBB, added: “We are excited about joining Knights at a time of structural change in our industry, where being part of a business of scale with a premium, national reputation is ever more important for all of our stakeholders – allowing us to provide broader services to our clients, strong career opportunities for our people, and to capitalise on our momentum, with the benefit of strong central support.
“We look forward to working closely with the team to unlock the significant market opportunities in the South-East as part of the larger group.”
In its half-year results, issued in January, Knights’ underlying PBT in the six months to 31 October 2024 increased by 26% to nearly £15m, with the margin up three percentage points for the second year running, this time to 18.4%. The gross profit margin increased similarly to 50.5%.
Revenue grew 5.4% to more than £79m, driven predominantly by acquisitions.
Knights’ share price has been becalmed over the last couple of years, with our review of listed legal businesses showing it ended 2024 at 105p, 6p lower than where it started, but it has started this year strongly and closed yesterday at 138p.
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