Gordon Dadds : Acquisition of Metcalfes Solicitors LLP

RNS Number : 7236C Gordon Dadds Group PLC 24 January 2018

24 January 2018

Gordon Dadds Group plc

("Gordon Dadds" or the "Company")

Acquisition of Metcalfes Solicitors LLP

Gordon Dadds Group plc (AIM: GOR), the acquisitive legal and professional services business,is pleased to announce that it has completed the acquisition of the well-established Bristol solicitors firm, Metcalfes Solicitors LLP ("Metcalfes") for a total basic consideration of £2 million, payable in cash over a five year period. Additional consideration will also be payable in the event that the fees generated exceed £20 million over the five years following completion. The acquisition will be funded from existing cash resources.

The acquisition demonstrates Gordon Dadds' ability to grow its existing business through opportunistic, attractively valued deals and will provide significant cross-selling opportunities across divisions.

The board expects that the acquisition will be significantly earnings enhancing in the first full year, to 31 March 2019.

Summary of Metcalfes' business

Metcalfes is a long-established firm of general practice solicitors based in Bristol. Its largest areas of activity are clinical negligence, property, non-volume personal injury, private client and family and dispute resolution work from a generally high net worth individual and corporate client base. Metcalfes recently acquired the goodwill and certain assets of Burroughs Day LLP ("Burroughs Day") from the administrators of Burroughs Day. Burroughs Day was another Bristol solicitors firm with offices very close to those of Metcalfes and with a similar business mix. The enlarged business trades as Metcalfes Solicitorsand is managed by the Metcalfes' team.

For the year ended 30 June 2017, Metcalfes had fee income of £2.69 million and achieved a profit before members' profit shares of £0.67 million. For the six months to 31 October 2017 (following a previous change of ownership), Burroughs Day achieved unaudited fee income of approximately £2 million and a small profit before interest and partners' profit shares.

The enlarged Metcalfes Solicitors should, the directors believe, generate annual fee income of at least £4 million and the cost base will benefit from significant overhead savings including merged offices in Queen Square, Bristol and improved resource management.

Summary of the acquisition terms

The total basic consideration for the business will be £2.02 million payable in cash, of which £0.28 million has been paid upon completion with the balance payable in quarterly instalments over five years. The vendors of Metcalfes have warranted that the fee income of the enlarged Metcalfes' business will be not less than £20.0 million over those five years and any shortfall will reduce the consideration on a £ for £ basis. Additional consideration will be payable to the vendors where such fee income exceeds £20 million. The consideration for the debtors and work-in-progress will be the amount realised therefor payable following realisation less an allowance for the costs of collection. The total consideration is capped at £6 million. This provides a real incentive for the key Metcalfes personnel to remain closely involved and drive growth.

Commenting on the acquisition Adrian Biles, Chief Executive Officer of Gordon Dadds, said:

"Metcalfes is a profitable and very well regarded firm of solicitors in Bristol with whom we have worked to integrate the Burroughs Day business. We are confident that the enlarged business can be developed into a significant as well as a respected and highly profitable business under the leadership of Anthony Heath and his team. Bristol complements Gordon Dadds' other locations and is a fertile area for developing a high quality offering to corporate and private clients."

"This deal closely follows the Group's recent acquisition of White & Black Limited, a growing specialist technology solicitors firm. We continue to have a strong acquisition pipeline which we expect will enhance earnings and the reach of the Group even further."

Anthony Heath, Managing Partner of Metcalfes, added:

"The opportunity to acquire the business of Burroughs Day and to work with their team and clients is an exciting and major step forward for Metcalfes. In addition, being a member of the Gordon Dadds Group will enable our enlarged team to extend the range and depth of the services we are able to offer our clients."

FOR FURTHER INFORMATION, PLEASE CONTACT:

Gordon Dadds Group plc Via Newgate

Adrian Biles, Chief Executive Officer

Christopher Yates, Chief Financial Officer

Arden Partners, Nominated Adviser and [phone] broker to the Company

John Llewellyn-Lloyd

Ciaran Walsh

Newgate Communications

[phone]

Adam Lloyd

Email:[e-mail]

James Ash

NOTES:

Gordon Dadds Group plc is an acquisitive legal and professional services business headquartered in London with a significant back office and technology platform based in Cardiff. It operates through two distinct business channels, Gordon Dadds LLP and Prolegal Solicitors Limited, to integrate law firms seeking to gain scale in the UK.

Gordon Dadds:

Gordon Dadds LLP targets firms with annual fee income of £10m+.

Prolegal:

Prolegal Solicitors Limited acquires and manages firms with £2m - £10m annual fee income. These firms retain their identity and culture and also benefit from the back-office technology platform used by Gordon Dadds which allows Prolegal to target law firms seeking an alternative solution to the regulatory and investment requirements of the UK legal market.

The Gordon Dadds model offers a number of advantages to target firms:

• · Partners are not required to borrow to fund capital contributions and capital is built up over time out of profit share;

• · Each partner receives as their profit share a percentage of his or her personal billings, allowing partners to achieve a significant uplift to what he or she might achieve in a traditional partnership practice;

• · The Gordon Dadds model, with its clear division between management and back office on the one hand, and client acquisition and servicing on the other, allows partners to devote time to their respective practice areas; and

• · Gordon Dadds Group plc's corporate structure enables partners to acquire and retain an enduring investment in the business through equity ownership.

Gordon Dadds LLP has been operating in this way since 2013, successfully integrating firms into its cost efficient platform.

Please visitwww.gordondaddsgroup.com for more information.

This information is provided by RNS

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