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‘We continue to look’: Listed Gateley eyes more opportunities after first legal acquisition

The boss of AIM-listed law firm Gateley is confident investors would support further acquisitions after its third in three years, citing a return to the capital markets as an option, for the right opportunity.

Earlier this week, Gateley announced it was making its first legal acquisition since its landmark £30m listing in 2015, entering an agreement to buy Surrey-based GCL Solicitors for £4.15m.

The payment for the firm, which specialises in legal advice for residential developments and has been trading since the 1970s, is made up of £2.3m in cash and £1.9m in new shares. GCL’s revenue for the year to 31 March 2018 was £6m, generating earnings before interest, tax, depreciation and amortisation (EBITDA) of £0.6m.

It is Gateley’s third and largest acquisition since it listed, after it bought tax adviser Capitus in a similarly structured deal worth £2.72m and property consultancy Hamer Associates for £2.05m.

Gateley’s initial public offering (IPO) strategy was to acquire legal and non-legal businesses which complement the listed firm. Buying GCL adds 6 partners and 79 staff to its property group, which already has 119 staff.

Gateley chief executive Michael Ward (pictured) told Legal Business the GCL acquisition follows recent expansion into Reading and a broader strategy of advising residential development in the south of England. The firm acts for 18 of the top 20 national housebuilders and, after GCL joins, will be advising on about £2.5bn of plot sales a year.

He added: ‘It was an industry-specific play. The government’s policy is to increase house building across the UK, and demand is only going to continue. We have 10 years of history in this area, so we already had market penetration, but this adds greater geographic capacity.’

Gateley’s strategy was to make one acquisition a year but, despite meeting this target, is looking at other opportunities, both in legal and professional services. Ward was confident there were no strains on the company’s ability to make larger plays should those opportunities present themselves.

He commented: ‘We haven’t really got a war chest but if we did have the right acquisition opportunity we are confident our investors would support it. It’s all about the quality of the acquisition. We haven’t gone back to the capital markets yet but it’s an option.’

The firm also provided a trading update for the year to 30 April 2018, saying revenue would be not less than £84m, up 8% on last year, while EBITDA would be above £16m, up from £14.9m last year. Revenue growth has slowed from a 16% increase between 2016 and last year, but was still ahead of the IPO target of 7.5%.

Ward said it was difficult to break the growth down between organic increases and revenue tacked on with lateral hires and business acquisitions. Revenue in both property and corporate was up 15%, while Ward said there had been 21 lateral hires in the first two years post-IPO.

‘We have invested in people and made more laterals than we would have pre-IPO, partly because more opportunities have presented themselves post-IPO and we’ve executed.’

Since Gateley’s pioneering 2015 float, Gordon Dadds, Keystone Law and earlier this month, Rosenblatt, have all listed. Rosenblatt raised £43m in what was the biggest law firm IPO to date, talking up the launch of its own third-party litigation funder in the next few years.

Ward said the listing was an interesting development in the listed market, and expected more would follow.

‘Investors have a choice, none of the listed firms are the same.’