Knights Group agrees to acquire Langleys Solicitors

The AIM-traded company said it would acquire Langleys from its four existing equity partners on a cash-free, debt-free basis for £11.5m, subject to working capital adjustments at completion.

That would comprise an initial consideration of £8m, made up of £5.25m in cash and £2.75m in 704,515 new Knights shares, along with a deferred cash element of £3.5m to be paid in equal instalments over the three years following completion.

The cash consideration would be satisfied from Knights' existing facilities, with completion expected on 25 March.

Knights said Langleys, established in 1890, would bring a further 72 fee earners to the company, and “significantly strengthen” its presence in York.

The acquisition would also allow the Group to further expand its operations in the east of England by providing entry into Lincoln, which it described as an “attractive growth market” for legal and professional services.

Knights said the acquisition of Langleys was in line with its strategy to accelerate its organic growth through “carefully-targeted acquisitions” which were a strong cultural fit, with the firm's real estate and corporate offerings being closely aligned with Knights' existing services.

Langleys was said to have “particular strength” in private wealth, where there was “significant” growth potential.

It said Langleys also operated a legal aid child law business and a volume residential conveyancing business through subsidiary Home Property Lawyers (HPL), which had five and 64 fee earners respectively.

Those businesses were included in the transaction perimeter, but were non-core to Knights, so the board said it would review its strategic options for them.

In its unaudited accounts for the year ended 31 March, Langleys reported revenue of £14m with a corporatised profit before tax margin of 5%.

About two thirds of revenue was in respect of the core Langleys business.

Following full integration and realisation of all synergies, the directors of Knights said they expected the core business to contribute a profit before tax margin of 20% which, combined with a typical level of revenue churn post-acquisition, meant the acquisition was expected to be immediately earnings-enhancing.

“We are delighted to announce the acquisition of Langleys, a leading firm that has a strong cultural fit with Knights and expertise closely aligned with our existing services,” said chief executive officer David Beech.

“The acquisition sees us become the leading law firm in York and provides a strong base for organic growth in the east of England through Lincoln, as we continue to strengthen our position as the leading legal and professional service business outside of London.”

At 1015 GMT, shares in Knights Group Holdings were down 0.35% at 394.6p.