Legal Business Blogs

Firepower: £100m revenue a ‘natural target’ for acquisitive Gordon Dadds

West End firm Gordon Dadds has its sights set on becoming a ‘nine-figure’ business after making its fourth acquisition since its public float in August last year .

Gordon Dadds announced yesterday (19 February) it had acquired Cardiff-based Thomas Simon for £1.875m, paying £187,500 up front with 20 quarterly instalments to come thereafter, plus a further amount related to net assets. The vendors of Thomas Simon, which had a fee income of just over £2m for the year to 31 July 2016, have warranted fee income will be not less than £12.5m over the next five years as part of the deal.

Gordon Dadds recently moved its Cardiff business into new offices, where it will be joined by Thomas Simon and the support functions of each brought together. Thomas Simon’s main business areas are property, corporate, dispute resolution, private client and family.

The acquisition is the fourth Gordon Dadds has made since its listing following a reverse takeover by Work Group last year, and the third in 2018. The business raised about £20m when it went public, and its business model seeks to consolidate the ‘fragmented’ legal services market in England and Wales.

Gordon Dadds managing partner Adrian Biles told Legal Business the firm was attracted to the quality of Thomas Simon’s people, which is its main criteria for every acquisition. There are more potential add-ons in the pipeline but Gordon Dadds will now take time to properly integrate the businesses it has.

‘As a business grows you get growth pains but our job is to try and manage those,’ Biles said. ‘It’s a good opportunity for us to take stock.’

He added that Gordon Dadds has ‘plenty of firepower’ left, as many of the acquisitions were structured the same way, staggering payments over time and not being particularly draining on cash up front. It would only need to go back to the market for more money if a deal came up that needed more cash up front but Biles is confident investors support the business and have plenty of appetite. The firm has reported revenue for the six months to 30 September 2017 as £12.89m, up 14.5%.

Biles sees Gordon Dadds targeting further firms outside the top 50, an opportunity he says represents about 950 firms with £5bn of annualised fees. Many face the problem of a lack of investment needed to ensure their future, particularly in areas such technology. On how big Gordon Dadds could get, Biles commented: ‘I don’t how big you can make it if you’re facing a £5bn fee income market. We have debates with shareholders and with ourselves whether a 2.5%, 5%, or 7.5% market share is a reasonable goal – certainly nine figures strikes me as being a natural target.’

The Thomas Simon acquisition follows a £2m deal for Bristol firm Metcalfes Solicitors, announced 24 January, and London-based legal and professional services business White & Black for £3m earlier that month. In November last year, it acquired tax advisory business CW Energy for £4m.

Biles added: ‘We want them to go on doing what they are good at. It’s what they’re not so good at we want to help them with, which tends to be the good-old business management.’