Shares in Knights Group (KGH:AIM), the acquisitive legal services firm, jumped 4% to 450p after it announced a deal to buy Mundays, one of the south east’s  biggest commercial law firms.

Established over sixty years ago in Weybridge, Mundays is a full-service independent law firm with a strong corporate, real estate and private client offering.

Revenues for the year to last July were £7.9 million compared with Knights Group’s £74.3 million in the year to last April, so the acquisition brings a meaningful increase in business.

MARGIN BOOST

More significantly, Knights expects to be able to increase Mundays’ pre-tax profit margin from around 6% to around 18% which means the deal will be immediately earnings-enhancing once completed.

Knights is paying £5.3 million to the six selling partners, with an initial down-payment of £2.68 million in cash and £1.25 million in shares, followed by a deferred cash amount of £1.38 million payable in instalments over two years.

The acquisition sees 34 fee earners joining Knights, bolstering the group's presence in the south east of England after it bought Aspire, based in Crawley and Maidstone, which was part of ASB Law,  as part of an £8.5 million deal in March 2020.

CONSOLIDATING INDUSTRY

Thanks to its continued consolidation of the sector, including the south west’s OTB Eveling last autumn, Knights is the UK’s fastest-growing law firm in terms of revenue growth over the last four years.

‘The addition of Mundays broadens its geographic reach, provides a new platform for organic growth, and is earnings accretive,’ said Numis analyst Steve Woolf.

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Issue Date: 22 Mar 2021