Legal Business

Another legal IPO? Simpson Millar’s new owner advances £50m to law firms in two years

Another legal IPO? Simpson Millar’s new owner advances £50m to law firms in two years

As expansive West End firm Gordon Dadds talks up its ambition to become a £100m business after going public last year, the new owner of Simpson Millar – which recently axed 91 jobs and had £17.7m in debt written off after its publicly-listed owner went bust – is not ruling out an initial public offering (IPO) after putting more than £50m into law firms over the last two years.

Following the administration of listed finance company Fairpoint Group last year, its former legal subsidiary, Leeds-based Simpson Millar, this week made 91 roles redundant following a consultation launched in December. Managing partner Greg Cox said Monday (26 February): ‘This was necessary to stabilise the firm after significant under-investment by Fairpoint Group during the period it owned the firm, which had resulted in a fall in revenue in 2017.’

Simpson Millar was acquired by Fairpoint in mid-2014 in a deal worth up to £15m and funded by a loan from Allied Irish Bank (AIB). At the time, Simpson Millar had more than 250 employees based in 10 offices throughout the UK, generating £16.9m in revenue.

By August 2017, however, administrators RSM were called in. A month earlier, Doorway Capital – a risk capital provider for law firms – had been assigned AIB’s debt and provided Simpson Millar with a £5m facility. The Fairpoint board said this provided Simpson Millar a lifeline from which it could take advantage of ‘the size and highly fragmented nature of the consumer legal services market-place’.

Doorway Capital founder Steve Din – now the new owner of Simpson Millar – said his firm acquired AIB’s £24m outstanding debt for a price he could not disclose. Simpson Millar’s company accounts for the year to 31 December 2016 said Doorway Capital acquired Fairpoint’s total legal debts of $29.6m from the administrator and agreed to waive them, of which £17.7m was in respect of Simpson Millar.

Din, formerly a managing director at Morgan Stanley’s fixed income division, said writing off Simpson Millar’s debt meant its only bank borrowings were the £5m agreement with Doorway, an ‘evergreen credit facility’ which had no scheduled payments of principal or interest. He added that the package ‘now improves, very considerably, the financial strength of Simpson Millar.’

The accounts show Simpson Millar’s turnover was £38.9m, but it made an operating loss of £11.8m as staff costs rose to £18.6m in the year, when employee numbers rose to 517 from 391.

Fairpoint’s legal services arm, which included another acquired firm – Coleman CTTS – had recorded more in turnover than established LB 100 firms such as Wedlake Bell, Kingsley Napley and Russell-Cooke as recently as 2015. It had actively talked up multiple potential acquisitions .

Din commented: ‘Simpson Millar is an outstanding firm that enjoys a history of over 170 years, which few law firms can claim to have. Doorway Capital recognises that it needs to invest the capital required by Simpson Millar, both in the short-term and long-term, to scale up its marketing effort.’

Doorway has advanced nearly £50m to various law firms over the past two years and acquired a further £50m in defaulted debt although Simpson Millar, which it owns 100% of, is its only direct investment. Doorway is authorised by the Solicitors Regulation Authority (SRA) to own firms and aims to invest ‘considerably more’ this year.

Din has not ruled out an IPO, although conceded this was unlikely before 2020. He added: ‘Ultimately, as part of our longer-term goal, we expect to drive consolidation across the UK consumer legal services market through a combination of acquisition of law firms as well as very significant organic growth.’

Earlier this month, the managing partner of recently listed firm Gordon Dadds, Adrian Biles, floated ‘nine figures’ as a natural revenue target after the business made its fourth acquisition since going public last August. The business raised about £20m with its IPO, and its model seeks to consolidate the ‘fragmented’ legal services market in England and Wales.

hamish.mcnicol@legalease.co.uk

Legal Business

62% of revenue from legal services: Fairpoint adds Colemans-ctts to law firm stable

62% of revenue from legal services: Fairpoint adds Colemans-ctts to law firm stable

Having entered the legal services market in 2014 by buying Simpson Millar, Eversheds-client Fairpoint group has added a second law firm to its holdings with the acquisition of Colemans-ctts for £9m.

The consumer-focused Colemans, which has 67 fee earners, particularly covers volume personal injury, conveyancing and travel law and owns CT Support Services and Holiday TravelWatch – fitting alongside the similarly-focused Simpson Millar with Fairpoint hoping to take advantage of economies of scale.

For the 2014/15 financial year Colemans generated revenues of £19m with pre-tax profits of £2.3m. The firm will be integrated with Simpson Millar with senior management at the firm brought into Fairpoint’s legal services team.

The £9m being paid by Fairpoint is split into a cash payment of £8m plus a further £1m issued in shares. There is also an extra £7m that will be paid out, depending on the success of the purchase, over the next two years with 50% in cash and 50% in shares.

Colemans, which had assets worth £18.4m and offices in Manchester, Kingston and Acton, is being acquired on a cash free/debt free basis. Fairpoint is using existing resources to fund the purchase that is expected to complete on 14 August and will see legal services, on a pro forma basis, make up 62% of Fairpoint’s revenues.

Colemans’ managing partner, Janet Tilley, said: ‘We share Fairpoint’s vision of a rapidly evolving consumer legal services market and are pleased that this has presented the opportunity for Colemans to become part of a larger and dynamic group, leading the transformation of this industry segment. We expect to take advantage of being part of a larger platform with a strong focus on process. We are delighted to become part of the Fairpoint Group and to join forces with Simpson Millar.’

Fairpoint’s chief executive, Chris Moat, added: ‘The acquisition of Colemans is an important step in the development of the Group’s fast growing legal services platform. It brings particular class leading expertise in the areas of volume personal injury, conveyancing and travel services and gives strong impetus to our agenda of reshaping the Group towards a broader professional services organisation.’

Fairpoint was advised on the deal by Eversheds with a team led by Alistair Cree and including employment partner Naeema Choudry.

Quindell, which made a similar play in the UK legal services market by conglomerating consumer-focused legal brands, recently sold its legal services division to Slater & Gordon in a £637m deal.

Michael.west@legalease.co.uk

Legal Business

Keeping up with Kinsella: Slater & Gordon’s slowly but very surely approach to mergers set to continue

Keeping up with Kinsella: Slater & Gordon’s slowly but very surely approach to mergers set to continue

If you had reached the impression that Slater & Gordon’s acquisitive streak had come to a natural pause, if only for breath, that impression would be wrong.

Having last week officially declared it is to acquire leading UK claimant personal injury firm Fentons, its fourth buyout in two years, chief executive Neil Kinsella (pictured) tells Legal Business that the ASX-listed group has no intention of stopping any time soon.

‘We continue to look at acquisitions that might make sense strategically –without rushing,’ he explains. ‘We look at who is right for us [and consider whether] it fixes the geographical gap. It’s not just about personal injury either, it’s [also] about consumer legal services. We’re pretty optimistic. We’ll continue to grow.’

The Australian-listed firm last Wednesday (21 August) announced that due diligence on 120-lawyer Fentons, which generates an annual revenue of £27.7m, is substantially completed and formal business sale agreements have been executed with the London and Manchester firm. The acquisition follows last year’s landmark £53.8m deal with Russell Jones & Walker, followed swiftly by a tie-up with Goodmans Law and Taylor Vinters, although discussions with 10-office national firm Simpson Millar, widely thought to be a done deal after it was announced in May, have been deferred until early 2014. The total annual revenue of Taylor Vinters, Goodmans and Fentons is £35m, with Taylor Vinters contributing £3.9m and Goodmans £3.4m.

The acquisitions are set against a backdrop of a post-Jackson-reforms personal injury market, ripe for consolidation and with a number of even the largest players open to new entrants with deep pockets. But while Slater is undoubtedly making the most of its strong position, the fact that it is not expecting to lay off any staff as a result of its latest acquisition goes a long way to supporting Kinsella’s assertion that the acquisitions have been approached carefully, with time spent working on the integration process and ensuring the compatibility of cultures between the firms.

‘Fentons are very much in our strategic sweet spot,’ he notes. ‘It’s an independent firm specialised in personal injury – so they’re not dependent on any intermediaries for getting work. It’s based upon the brands they’ve begun to develop with direct marketing and the reputation they’ve built on serious injury matters.’

Furthermore, while Kinsella has not ruled out further acquisitions an immediate priority is investment in organic growth. The company is in a good financial position to make that investment, after last week releasing 2012/13 financials that show a 36.7% revenue increase to A$297.6m while total net profits rocketed by 67.6% to A$41.9m.

The next notable announcement from the 1,000-staff firm is likely to be progress on the Simpson Millar talks.

However, with a firm with some cash to spend in a market looking for a solution, you just never know.

Kinsella says: ‘We’re very satisfied – we feel we’ve achieved all the milestones we wanted to, we hit the forecast that we wanted to [and] that’s a very solid platform for moving forward with the acquisitions.’

sarah.downey@legalease.co.uk

Legal Business

UK PI bandwagon – Slater & Gordon buys Fentons and reveals 2012/13 results

UK PI bandwagon – Slater & Gordon buys Fentons and reveals 2012/13 results

Slater & Gordon today (21 August) made further inroads into the UK personal injury (PI) market as it formally announced to the Australian Stock Exchange (ASX) the acquisition of leading claimant firm Fentons, although discussions with earlier merger talks partner Simpson Millar have been deferred until early 2014.

The Australian-listed firm confirmed that due diligence on 120-lawyer Fentons, which has an annual revenue of £27.7m, is substantially completed and formal business sale agreements have been executed with the London and Manchester firm. Macfarlanes advised on the deal, led by corporate partners John Dodsworth and Jessica Adam, opposite Pinsent Masons for Fentons, led by corporate partner Gregg Davison.

Slater & Gordon’s managing director Andrew Grech said of the deal, which was first reported last week: ‘We are delighted to announce today the proposed acquisition of Fentons Solicitors LLP, the largest specialist direct to consumer claimant PI practice in the UK. We expect the transaction to be completed in early October 2013 are looking forward to the integration of Fentons with our existing and growing operations in the UK.’

An earlier deal to acquire the personal injury practice of Taylor Vinters completed on 16 August and the acquisition of Goodmans is on track to complete on 30 August. The Australian firm said the deals are ‘a significant step in building depth of talent and business base required to accelerate UK growth.’

However, discussions with 10-office national firm Simpson Millar, which had widely been assumed to be a done deal after it was announced in May, have been deferred until early 2014 with no further explanation at this stage.

Fentons is by far the largest of Slater & Gordon’s recent UK acquisitions. The total annual revenue of Taylor Vinters, Goodmans and Fentons is £35m, with Taylor Vinters contributing £3.9m and Goodmans £3.4m. They follow last year’s landmark £53.8m acquisition of Russell Jones & Walker.

The news comes as the Australian firm also today revealed a total 2012/13 revenue increase of 36.7% to A$297.6m and net profits up by 67.6% to A%41.9m.

Grech said: ‘FY14 is expected to be an exciting and very busy year as the Group integrates new businesses in the UK whilst continuing to grow the Australian business organically.’

caroline.hill@legalease.co.uk