Acquisitive group swoops for Shulmans in £20m deal
Leeds law firm Shulmans has been sold in a £20m deal to fast-growing Knights.
It is the biggest deal to date by the acquisitive firm which has the aim of building the leading legal and professional services business outside London.
Staffordshire-headquartered Knights has also today announced the purchase of ASB, a law firm in Crawley and Maidstone, in a deal worth up to £8.5m.
The deals will be part-funded by a £20m placing, which will pay the initial cash consideration and the repayment of debt within the acquired businesses.
David Beech, chief executive of Knights Group
Knights has become a disruptive force on the regional legal market with 10 acquisitions since it announced it was going public in 2018. The group’s share price has soared from its IPO at 145p in June 2018 to 455p last night, with its placing being set at 420p.
Its larger acquisitions include Manchester-based Turner Parkinson in June 2018, followed by Leicester’s largest law firm Spearing Waite, Birmingham-based Emms Gilmore Liberson, and then the £8.3m purchase of Nottingham’s Fraser Brown last month. The purchase of Shulmans is by far its biggest deal to date.
Knights will have 900 fee earners across 15 locations when the Shulmans and ASB deals complete, which is expected to happen next month.
Shulmans was founded in Leeds in 1981 by Jeremy Shulman, who left the firm two years ago, and now also has a London office to complement its Wellington Place headquarters.
The firm today has 27 partners and 130 fee-earners. Its latest financial figures, for the year to March 2019, showed annual revenues of £17.6m – a rise of 35% in two years.
Shulmans managing partner Tim Halstead, who has been with the firm since 1985, said: “We have achieved significant growth in recent years to become a leading independent law firm in the North.
“Having worked alongside Knights previously, we believe its collegiate approach, range of services and broad client base will provide an excellent match for us to continue to grow as part of the wider group.”
Shulmans provides Knights with a platform for growth in Yorkshire.
It adds to Knights’ recently-opened office in York and said that “in time, it will offer the opportunity for further bolt-on acquisitions in the region”.
Initially the focus will be on organic growth, with Shulmans having the capacity for nearly 100 more fee earners.
However Knights’ operating model usually results in significant job losses in back-office functions, and it has highlighted Shulmans’ fee earner to non-fee earner ratio of 1.1 to 1 as one of its “opportunities for potential improvement”.
It believes that within two years it can have increased Shulmans’ pre-tax profit margin from 12.3% last year to more than 20.0%.
Knights also plans to improve Shulman’s lock-up days from its current 103 days – representing about £5m of unbilled work in progress.
The £20.1m acquisition will be paid £7.6m in cash – £6.1m of which will go to the equity partners – and a further £6m in Knights shares.
Deferred payments of up to £6.4m, almost all cash, will be paid out over the next two years subject to conditions being met.
