Professional services outfit Fairpoint (FRP:AIM) promised its shareholders acquisitions this year in an attempt to grow out of a slump in its core debt management and assistance business. Today it delivered a deal worth up to £16 million to buy Colemans, a consumer legal services business specialising in personal injury, volume conveyancing and travel law.
Acquisitions in legal services are part of an effort to become a top five player in the industry, chief executive Chris Moat says, which equates to a sales target of £60 million.
‘There are two key parts to our announcements today,’ says Moat. ‘First, the trading statement indicates we have made good progress with the Simpson Millar deal we made last year and that’s given us confidence to deepen our position in that market.'
‘Second,' the CEO continues, 'the acquisitions should give us the momentum in the top line we need to start growing profit again.’
Fairpoint’s core Individual Voluntary Arrangement (IVA) and Debt Management Services divisions have been under pressure after six years of UK economic expansion and falling levels of consumer bad debts.
Legal services, a market open to new competition and valued in excess of £10 billion, is a natural complement to these services and will lead to a more diversified business, argues Moat.
The £16 million Colemans deal comes on the back of £14 million spent last year to build a presence in the legal services market. It is being funded by £8 million cash up front, alongside the issue of 755,516 shares to the vendors at 132p, for a £9 million initial payment.
A further £7 million will be paid if undisclosed performance targets are met, split equally between cash and shares. Shares in Fairpoint trade 4.2% higher at 138p.