Restructuring secures future of legal services firm

LEGAL Marketing Services, the £50m-plus turnover firm which organises lawyer panels for commercial lenders, has been bought back by its management following a restructuring which has involved some group companies being placed into administration.

The company has been bought back by a five-strong management team led by Andrew Knee – one of the co-founders who set up the business in 1991.

Until the financial crisis hit in 2008, LMS had grown rapidly and had been involved in two private equity-backed buy-outs – it was bought by 3i in 2002 before being sold on in a secondary buy-out to RJD Capital in 2006. It organised panels of law firms for lenders to carry out bulk legal services work on mortgages and secured loans. Clients included Nationwide

However, the leveraged debt structure used to complete the deal, coupled with a dramatic fall off in demand for conveyancing and remortgaging work following the onset of the recession in 2008 led to a drop in trade and mounting losses at parent firm LMS Holdings Ltd.

It was placed into administration on January 18 alongside another group company, Energy Reports & Surveys Ltd. Graham Wild, Simon Wilson and Stuart Mackellar from restructuring firm Zolfo Cooper were appointed as joint administrators.

Wild told the business desk that it has since completed a deal to sell Legal Marketing Services – the company’s main trading entity – back to a management team led by Knee in a deal which saved all 100 jobs at the firm. Management have also bought the business and assets of Energy Reports & Surveys.

Knee told TheBusinessDesk.com that the second buy-out had been carried out at the top of the market, with a large debt element put into the business by Barclays.

“Then the financial crisis hit and the remortgaging sector was down by 75% from its peak. The number of transactions also halved from 1.2m a year to 600,000.”

The company had also invested significantly in the market for providing Home Information Packs – an initiative introduced by the last Labour government that was abandoned by the coalition within days of taking office in May 2010.

Despite this, Knee said that the Legal Marketing Services businesss – which was not carrying any of the private equity debt held by its parent – had remained a profitable business throughout and had been able to service its parent company’s senior debt obligations. The last filed accounts for Legal Marketing Services Ltd for the year to March 31, 2009, shows a pre-tax profit of £2.6m on sales of £47.4m.

The sale has effectively meant that RJD has effectively walked away from its investment. The shares are now all held between seven-strong management team including finance director Peter Clarkson, IT director Matt Brown, sales and marketing director Huw Lewis, operations director Sandra Francis and Sarah Ryan, who is managing director of subsidiary Total Conveyancing Services.

“Not everyone is happy with the outcome, but we’ve responded to the challenges very well and we’ve come to what we believe is th best solution given the difficult circumstances we’re in,” said Knee.

He said that trading had been “largely unaffected” by the process as Legal Marketing Services had been purchased as a solvent business.