Knights Group expands into Birmingham with acquisition of EGL

Legal and professional services provider Knights Group Holdings announced on Monday that it has acquired the entire issued share capital of Emms Gilmore Liberson (EGL), a full-service independent law firm in Birmingham.

The AIM-traded firm said the acquisition would take it into a new key market outside London, in line with its strategy to accelerate its organic growth through carefully-targeted acquisitions which it said enhanced the core business strengths and were considered a “strong” cultural fit.

Founded in 2011, EGL was described as an independent full-service law firm with a commercial focus, which would apparently further extend Knights' existing corporate, dispute resolution, real estate and private client service offering.

The acquisition would bring an additional 28 fee earners to the group, and the move into Birmingham would also see Knights expanding to nine offices outside London, realising one of its key targets set at the time of its initial public offering.

In its unaudited accounts for the year ending 31 March, EGL reported revenue of around £4m with a corporatised profit before tax margin of about 15%.

Following integration, including the delivery of cost synergies, the board said it expected EGL to deliver a profit before tax margin of around 20%, with the acquisition set to be immediately earnings-enhancing.

Under the terms of the acquisition, Knights would acquire EGL from its four existing shareholders on a cash free, debt free basis for a total consideration of £4.7m.

That would comprise an initial consideration of £3.034m, made up of £1.367m in cash and £1.667m in 515,057 new ordinary shares in Knights, along with deferred cash consideration of £1.667m to be paid over two years, subject to conditions being met.

Excess cash balances in the business would also be distributed to the sellers, and the company said the cash consideration would be satisfied from Knights' existing facilities.

In addition, restricted stock awards in respect of 30,904 new shares would be issued to EGL's four salaried partners upon completion, and would vest subject to those salaried partners remaining in employment with Knights one year after completion.

The board said application had been made to the London Stock Exchange for the admission of 548,914 new ordinary shares to trading on AIM.

Of these shares, 545,961 represented the consideration shares, and 2,953 reflected the issue of new ordinary shares issued to two former Knights employees following the exercise of their SAYE scheme options.

Admission of the new shares was expected to take place at 0800 GMT on 5 November, with the company's total issued share capital following admission set to consist of 73,875,075 ordinary shares of 0.2p each, with one voting right per share.

“We are delighted to have entered the Birmingham market today with the acquisition of EGL, which is one of the few well-established, full-service independent firms in the city,” said Knights Group chief executive officer David Beech.

“As our fifth acquisition since listing in June 2018, we are delighted to build on our strong momentum with the new team providing us with an exciting platform from which to grow our share in this new market, through both lateral hires and bolt on acquisitions.”

Stephen Gilmore, partner of EGL, added that since formation in 2011, EGL had grown its client base and team “rapidly”.

“Our high calibre team's focus on providing a commercial but personal service to clients is closely aligned to the Knights culture and model.

“We look forward to continuing to deliver on our ambitious growth plans in Birmingham as part of a larger group.”

As at 0800 GMT, shares in Knights Group were up 0.93% at 326p.