Listed law firms are a rarity; Gateley (GTLY:AIM) is the sole representative on the UK stock market, at the moment. But soon Gordon Dadds will double the ranks. It is an acquisitive legal business that hopes to join AIM in the coming weeks.

To do this it is effectively moving into cash shell Work Group (WORK:AIM).  The constitutes a reverse takeover under stock market rules.

A SUCCESSFUL PRECEDENT

Gordon Dadds will be hoping to emulate the success of full service law business Gateley. In its full year results to 30 April the company revealed a 16% increase in turnover, from £67.1m to £77.6m. Pre-tax profits rose 19% to £13.1m.

On the day (11 July) Gateley's share price stayed flat at 180.5p. Yet that belies the stock's stellar success since joining AIM in June 2015, the share price soaring 85% since its 95p IPO to the current 175.5p.

TODAY'S AGREEMENT

Work Group is issuing 13.4m new shares at a post-consolidation price of 140p each to buy Gordon Dadds, valuing the acquisition at £18.8m. There is also a £20m through a share placing, funds that will be used to provide working capital and healthy acquisitions firepower for the new combined company.

The enlarged group with be called Gordon Dadds.

SNAPPING THEM UP

Gordon Dadds already has a track record as an acquisitive business, buying four operations since 2014. They include West End legal business Davenport Lyons, including its entire client database and majority of its partners. Then there was litigation specialist Harris Cartier, followed by Prolegal and Jeffrey Green Russell, both struggling at the time.

It currently has 140 solicitors, partners and associates on its books.

Most recent trading for Gordon Dadds, for the year to 31 March 2017, show £25m of revenue. Gordon Dadds claims that this represents compound annual growth rate (CAGR) of 70.7% since 2013. Yet profit margins are nothing to write home about, just 8% based on the £2m of pre-tax profit reported for the same period.

Gordon Dadds clearly has ambition and is expected to claim a £40m market capitalisation on admission. If it can match Gateley's performance, a lot more investors may start paying attention.


Issue Date: 13 Jul 2017