Legal Business

‘Impossible to predict’ coronavirus fallout sees Gateley cancel £3m dividend and suspend guidance

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Innovation Gateley

Listed law firm Gateley has withheld more than £3m in shareholder payouts to keep hold of cash with activity dented by the Covid-19 pandemic.

The firm said today (24 March) it would cancel its interim dividend of 2.9 pence a share, which was due to be paid at the end of this month, in order to ‘maximise the group’s short-term liquidity’. The total interim dividend due to shareholders, including the firm’s partners, was about £3.4m, up more than 11% on last year.

That dividend was announced following a 12% increase in revenue to £51.8m for the six months to 31 October 2019. It also followed Gateley surpassing £100m in turnover for the first time in the previous financial year, up an impressive 67% from when it became the UK’s first listed law firm in 2015.

In a trading update released to the London Stock Exchange, the firm said that demand had grown in the second half of the year due to improvements in the economic backdrop and Brexit clarity, with trading until the end of February in line with expectations. But as a result of the disruption caused by the coronavirus pandemic, activity has since reduced. Because of the uncertainty, the board said it was ‘presently impossible to predict the group’s likely trading performance in the short term’, and as such suspended financial guidance for the meantime.

Chief executive Michael Ward (pictured) said: ‘We consider these measures to be in the best interests of all our stakeholders. Gateley is a resilient and well-balanced business and our economic and geographically diversified business model is well-placed to withstand difficult economic conditions.’

Gateley had on 6 March announced the acquisition of advisory, dispute resolution and consultancy business The Vinden Partnership for £6.75m, the firm’s ninth post-IPO acquisition. Ward is due to step down as chief executive from 1 May this year, replaced by the firm’s Manchester office head and leader of its national property team, Rod Waldie.

Shares in Gateley have, like the majority of the market, plummeted in the wake of the unfolding Covid- 19 crisis. Its share price has fallen more than 30% from a March high of 195.5p to 122p.

DWF, the largest law firm to list to date, has similarly dropped from 140p to 102p, and high-flier Keystone from 550p to 370p.

Hamish.mcnicol@legalbusiness.co.uk

Legal Business

MJ Hudson raises £31m as the latest law firm float as Gateley continues acquisition drive

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Financial management Gateley

Despite the relative drought of listings in recent months, former SJ Berwin private equity head Matthew Hudson has raised £31m for his asset management consultancy MJ Hudson (MJH) following a floatation of the business last week. Meanwhile, listed firm Gateley also revealed last week it acquired Cambridge-based management consultancy T-three.

Founded in 2010, MJ Hudson focuses on advising fund managers and investors as well as providing legal services, fund management services and investment advice. Though not exclusively a law firm, MJH is an alternative business structure and is regulated by the Solicitors Regulation Authority, making it arguably the seventh law firm to list.

The Jersey-headquartered business had a market capitalisation of £98m when trading commenced last Thursday (12 December). Shares closed on Friday last week at 59p, with the listing taking place on the London Stock Exchange’s Alternative Investment Market.

MJH’s most recent financials show a turnover of £16.7m for the year to 30 June 2019, with an operating loss of £1.1m. The capital raised following the listing will be used to bolster its core advisory, business outsourcing and data analytics divisions. In total MJH has completed six acquisitions, the last of which came over the summer with the buyout of a Netherlands-based environment, social and governance reporting and consultancy business.

Currently, MJH offers services to over 750 clients, with roughly 500 fund managers and over 200 institutional investors on its books. Its offices span the UK, Guernsey, Luxembourg, the Netherlands, Italy, Switzerland and the US. In terms of legal, the business comprises 12 partners in addition to 22 professionals across five locations.

Though a majority of MJH’s work originates in the UK, Hudson assures there is significant potential for the business to grow in the US following its capital raising, with the country hosting the majority of the world’s alternatives market.

Elsewhere, Gateley – the first of the previous six firms to list– has continued it acquisition strategy by buying business management consultancy T-three. Founded in 1996, T-three’s primary business offers leadership development and behavioural change programmes, as well as people and management development programmes. Its clients include the BBC, NCP, Jaguar Land Rover, Samsung and Transport for London.

The move complements Gateley’s acquisition of Kiddy & Partners in 2018, another provider of leadership development services. Kiddy has generated £3m of fees since Gateley bought the business. Non-legal business at Gateley currently comprises around 7% of revenue, but chief executive Michael Ward (pictured) hopes to lift the figure to 20%.

thomas.alan@legalease.co.uk

Legal Business

Gateley clears £100m ‘psychological barrier’ as incoming CEO pledges more of the same

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Financial results 2018/19 Gateley

The incoming chief executive of the UK’s first listed law firm, Gateley, says he reflects a ‘comforting continuance’ of the strategy which has seen the firm grow to more than £100m in revenue and nearly 1,000 staff.

Gateley today (16 July) confirmed earlier guidance its revenue had surpassed £100m by reporting a 20% increase in turnover to £103.5m in the year to 30 April 2019, up an impressive 67% from when it listed in 2015. Profit after tax lifted 11% to £13m, as fee-earner headcount rose 20% to 610.

Stripping out the impact of three acquisitions during the year – legal business GCL Solicitors and non-legal companies Kiddy & Partners and International Investment Services – revenue was still up about 10%, in what chief executive Michael Ward told Legal Business was a very pleasing year.

‘£100m is a bit of a psychological barrier, isn’t it? So it’s nice to get that out the way,’ he said. ‘We’ve got another one coming up soon which is 1,000 people, which will probably happen this month or next month.’

Ward said the firm had seen growth across the board but pointed to a resurgence in the corporate recovery team, which this year landed high-profile mandates in the collapses of Patisserie Valerie and Jamie Oliver’s restaurant business.

‘We’ve maintained our investment in that team in what for them has been recessionary times since 2008, we always believed their time would come,’ Ward told Legal Business. ‘It’s nice for them to get their teeth into some administration work as they’ve been few and far between over the last few years.’

Last week, Ward announced he would be stepping down as chief executive next year, in line with guidance given at the company’s listing in 2015. He will be succeeded by the firm’s Manchester office head and leader of its national property team, Rod Waldie, with Ward remaining on the board of directors and leading Gateley’s non-legal businesses.

Ward said Gateley’s non-legal businesses accounted for about 7% of revenue, but his ambition was to lift this to 20%. The firm had a strong acquisition pipeline, of which about 90% were non-legal businesses: ‘Whether we get them all across the line only time will tell, but we’re certainly talking to lots of people at the moment,’ he said. ‘We have to do the right acquisitions as and when they arrive.’

Waldie, meanwhile, is stepping away from client work entirely over the next nine months to shadow Ward before taking on the chief executive title officially on 1 May 2020. Waldie has been on the firm’s strategic board for nine years – both pre and post-IPO – and said his appointment was a message of ‘comforting continuance’, both internally and externally.

‘It will very much be business as usual from 1 May next year,’ he told Legal Business. ‘I’m very evangelical about following the same strategy. It’s important to continue that: our core business is legal services but the mind-set of the people in the business is still that of a partnership and they want to be led by a lawyer.’

hamish.mcnicol@legalease.co.uk

Legal Business

Gateley IPO pioneer Ward to stand down as chief executive

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Leadership Gateley

The man who led Gateley in its pioneering move to become the first UK law firm to float on the public markets is to step down as chief executive next year.

Michael Ward, who has spent over thirty years at Gateley, will be succeeded by the firm’s Manchester office head and leader of its national property team, Rod Waldie, from 1 May 2020. Ward will remain on the board of directors and lead Gateley’s non-legal businesses.

‘When we did the listing I agreed to do five years,’ Ward told Legal Business. ‘That time will be up in 2020, so it’s about being consistent.’

Gateley said its board believed an internal appointment and near year-long succession plan would enable the business to preserve its growth and culture. In May, the company said its revenue for the 2018/19 financial year, due to be announced next week, would be no less than £102m: up an impressive 67% from when it listed in 2015.

Despite standing down as chief executive, Ward will remain a significant shareholder in the firm, currently owning approximately two million shares, and hopes to use his experience to bolster the Gateley’s non-legal arm in his new remit.

‘We want to make non-legal about 20% of the business with legal making up the remaining 80%,’ Ward added. ‘It won’t be a new emphasis but it will be a greater emphasis, and I’m actually really looking forward to that role.’

Chief executive in waiting Waldie joined Gateley in 2010 following the firm’s acquisition of the Manchester office of Halliwells. He has been involved with the integration of Gateley’s post-IPO acquisitions, including Gateley Capitus, Gateley Hamer, and GCL Solicitors, and will shadow Ward until his official appointment next year. As leader of the property team, Waldie currently oversees a vital component of Gateley’s business, something Ward believes increases his suitability for the top position:

‘He’s been on the board since 2010; he is the head of property which makes up about 40% of our business and he’s a thoroughly nice and competent bloke.’

hamish.mcnicol@legalease.co.uk

thomas.alan@legalease.co.uk

Legal Business

Deal watch: Seats at the table for Travers, Skadden and Gateley as Pret acquires EAT and Oliver’s chain collapses

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Dealwatch Clifford ChanceFreshfields Bruckhaus DeringerGateleySkadden, Arps, Slate, Meagher & FlomTravers Smith

Two opposite developments in the UK high street have seen City and US firms advise as food chain Pret A Manger acquired rival Eat and high-profile British chef Jamie Oliver’s restaurant business went into administration.

Also keeping City insolvency practitioners busy was the news today (22 May) that British Steel has been put into compulsory liquidation.

Skadden, Arps, Slate, Meagher & Flom advised Pret as it agreed to acquire all of Eat’s 94 shops for an undisclosed sum, with plans to turn most into ‘Veggie Prets’.

The US firm’s team was led by London corporate partners Richard Youle, Katja Butler and Linda Davies. Freshfields Bruckhaus Deringer partner Alex Potter is advising Pret on antitrust.

On the other side of the table, Travers Smith’s head of private equity and financial sponsors Paul Dolman led the team advising Ardian, Horizon Capital and the other selling shareholders of Eat.

‘I acted for Horizon when they acquired Eat [in 2011] and we have acted for them ever since, so we were the logical people to advise on the sale,’ Dolman told Legal Business. ‘Travers has in-depth expertise in this sector.’

The deal sees Travers’ and Pret’s paths cross again after the City firm advised previous owner Bridgepoint on the £1.5bn sale of the food chain to JAB Holding Company one year ago, with a team including Dolman and private equity partner Ian Shawyer.

Under Bridgepoint’s ownership the company, founded in London in 1986, expanded its presence in the UK and US, and launched in France, China, Dubai and Singapore, quadrupling its revenues to £879m. It now counts over 500 shops in nine countries.

Eat was founded in 1996 and bought by Horizon in 2011 with plans to build hundreds of shops. But it has struggled in recent years and reported pre-tax losses of £17.2m in the year to end of June 2018.

Meanwhile, Daniel French, an insolvency partner at listed firm Gateley, is leading the team acting alongside administrator KPMG after Oliver’s business became the latest victim amid difficult times for the UK high street.

Jamie Oliver Restaurant Group will see 22 of the 25 eateries it operates close, resulting in 1,000 job losses.

This is the second prominent high-street insolvency Gateley has acted on this year. The firm also advised KPMG on the administration of Patisserie Valerie in January.

Elsewhere, Clifford Chance (CC)’s insolvency team is advising as British Steele entered compulsory liquidation, putting its 5,000 employees at risk of redundancy.

The government’s official receiver has taken control of the company and together with Big Four accountancy firm EY is looking for a buyer, while it continues to trade normally.

CC’s restructuring head Philip Hertz and partner Iain White are leading the team advising on the process.

The Magic Circle firm was previously among the advisers in one of the largest UK insolvencies to hit the construction industry in recent years, when construction giant Carillion collapsed in January last year.

marco.cillario@legalease.co.uk

Legal Business

‘We continue to look’: Listed Gateley eyes more opportunities after first legal acquisition

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Innovation Gateley

The boss of AIM-listed law firm Gateley is confident investors would support further acquisitions after its third in three years, citing a return to the capital markets as an option, for the right opportunity.

Earlier this week, Gateley announced it was making its first legal acquisition since its landmark £30m listing in 2015, entering an agreement to buy Surrey-based GCL Solicitors for £4.15m.

The payment for the firm, which specialises in legal advice for residential developments and has been trading since the 1970s, is made up of £2.3m in cash and £1.9m in new shares. GCL’s revenue for the year to 31 March 2018 was £6m, generating earnings before interest, tax, depreciation and amortisation (EBITDA) of £0.6m.

It is Gateley’s third and largest acquisition since it listed, after it bought tax adviser Capitus in a similarly structured deal worth £2.72m and property consultancy Hamer Associates for £2.05m.

Gateley’s initial public offering (IPO) strategy was to acquire legal and non-legal businesses which complement the listed firm. Buying GCL adds 6 partners and 79 staff to its property group, which already has 119 staff.

Gateley chief executive Michael Ward (pictured) told Legal Business the GCL acquisition follows recent expansion into Reading and a broader strategy of advising residential development in the south of England. The firm acts for 18 of the top 20 national housebuilders and, after GCL joins, will be advising on about £2.5bn of plot sales a year.

He added: ‘It was an industry-specific play. The government’s policy is to increase house building across the UK, and demand is only going to continue. We have 10 years of history in this area, so we already had market penetration, but this adds greater geographic capacity.’

Gateley’s strategy was to make one acquisition a year but, despite meeting this target, is looking at other opportunities, both in legal and professional services. Ward was confident there were no strains on the company’s ability to make larger plays should those opportunities present themselves.

He commented: ‘We haven’t really got a war chest but if we did have the right acquisition opportunity we are confident our investors would support it. It’s all about the quality of the acquisition. We haven’t gone back to the capital markets yet but it’s an option.’

The firm also provided a trading update for the year to 30 April 2018, saying revenue would be not less than £84m, up 8% on last year, while EBITDA would be above £16m, up from £14.9m last year. Revenue growth has slowed from a 16% increase between 2016 and last year, but was still ahead of the IPO target of 7.5%.

Ward said it was difficult to break the growth down between organic increases and revenue tacked on with lateral hires and business acquisitions. Revenue in both property and corporate was up 15%, while Ward said there had been 21 lateral hires in the first two years post-IPO.

‘We have invested in people and made more laterals than we would have pre-IPO, partly because more opportunities have presented themselves post-IPO and we’ve executed.’

Since Gateley’s pioneering 2015 float, Gordon Dadds, Keystone Law and earlier this month, Rosenblatt, have all listed. Rosenblatt raised £43m in what was the biggest law firm IPO to date, talking up the launch of its own third-party litigation funder in the next few years.

Ward said the listing was an interesting development in the listed market, and expected more would follow.

‘Investors have a choice, none of the listed firms are the same.’

hamish.mcnicol@legalease.co.uk

Legal Business

‘Selling the crown jewels’ – Gateley partners in £10m share sale

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Legal affairs Gateley

Following Gateley’s landmark listing in 2015 where partners pocketed a combined £25m, some senior partners have taken home almost £500,000 each after a stake in the top 50 UK law firm was sold for nearly £10m in October.

Documents at the London Stock Exchange (LSE) show a sale of 6.21% of the firm’s equity due to a ‘strong demand from new institutional shareholders’.

Legal Business

In the money: Gateley veterans reap six figures in £10m share sale

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Innovation Gateley

For listed law firms, recent months have been a period of brutally mixed fortunes. While Slater and Gordon has suffered a string of high-profile reverses, select partners at fellow pioneer Gateley have taken home almost £500,000 after a stake in the top 50 UK law firm was sold for nearly £10m.

Documents at the London Stock Exchange (LSE) show a sale of 6.21% of the firm’s equity, or 6,641,333 aggregate ordinary shares.

Key beneficiaries are chief executive Michael Ward, chief operating officer Peter Davies, corporate restructuring partner Brendan McGeever and corporate partner Paul Hayward. The four sold 328,900 shares at a price of £1.50 – taking home a total of £493,350 each.

Meanwhile, real estate partner Rod Waldie received £296,010 for 197,340 shares; residential development partner Callum Nuttall received £434,860 for 289,907 shares and corporate partner Nick Smith took home £210,960 for 140,640 shares.

In addition finance director Neil Smith purchased 20,000 shares for £30,000 and non-executive director Suki Thompson purchased 10,000 shares for £15,000. Both Ward and Davies still own almost 2.5% of Gateley’s total issued share capital and over 2,500,000 of ordinary shares

According to the filing, on Gateley’s 2015 admission to the Alternative Investment Market (AIM), partners of the firm held 70% of the enlarged capital at that time. The Gateley partners voluntarily entered into five year lock-in agreements with Gateley which permitted them to dispose of up to 10% of their interest in any 12-month period after the first anniversary of admission.

New and existing institutional investors purchased 6,333,334 shares while 307,999 were purchased by Gateley employees in what the filing said was a result of ‘strong demand’. The freely floated portion of Gateley’s shares that can be publicly traded has now increased from 34.3% to 40.3% as a result of the sale.

In July this year, Gateley posted another strong round of financial results, with a double digit increase in revenue of 16% to £77.6m. In addition, adjusted EBITBA increased 16% from £12.9m to £14.9m, while profit before tax rose 19% from £11m to £13.1m. Net assets grew from £12.7m to £17.4m.

The share sales appears to demonstrate continued momentum for Gateley, whose 2015 float made it the first major law firm to list on the LSE. The closely-watched deal generated £30m in proceeds, with £5m retained by the firm for investment and the remaining £25m distributed to partners.

The prospect for listed law firms has been hotly anticipated for years but, with fellow pioneer Slater and Gordon currently struggling, the profession remains highly sceptical of the benefits of outside investment.

kathryn.mccann@legalease.co.uk

Legal Business

Financials 2017: Gateley posts double-digit revenue and profits rise in another strong year for listed firm

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Financial results 2017 Gateley

AIM-listed law firm Gateley has posted a double-digit increase in revenues for this financial year, with turnover up 16% from £67.1m to £77.6m.

In addition, adjusted EBITDA increased 16% from £12.9m to £14.9m, while profit before tax rose 19% from £11m to £13.1m. Net assets grew from £12.7m to £17.4m and the group free float increased from 30% to 34.3%, following the sale of former shares.

Commenting on the results, Michael Ward, chief executive officer of Gateley said he was delighted with the continued progress with the progress made by the group in the last year.

‘This represents another year of continued expansion for us where we have both grown the business and invested further in it to support our future expansion, Ward said.

‘Trading in the second half of the financial year ended 30 April 2017 was excellent and we are pleased to report that trading in the first two months of the current financial year has continued well,’ he added.

Ward said: ‘We are confident that our business is well balanced and resilient and we remain focused on delivering another year of growth in our core services, whilst continuing to look for complementary acquisitions.’

Operational highlights for the firm included successful acquisition of Gateley Hamer in September 2016, with ‘integration progressing well’ and ‘further investment in group service.’ The group now has a total staff of 717 across all of its offices, including, most recently, its Reading office, which now employs 19 staff including seven legal partners.

In a trading update published this May, Gateley said that the integration of acquired complementary businesses, including tax adviser Capitus, the continued investment in new staff and the development of the firm’s newly opened Reading office were positive focus points for the firm during the year.

This May, Legal Business revealed that Gateley was close to finalising a ‘best friends’ referral arrangement with Scottish Independent Anderson Strathern, following HBJ Gateley’s merger with Addleshaw Goddard in June this year.

kathryn.mccann@legalease.co.uk

Legal Business

Gateley and Anderson Strathern gear up for ‘best friends’ arrangement

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Scotland Anderson StrathernGateley

AIM-listed law firm Gateley is close to finalising a ‘best friends’ referral arrangement with Scottish Independent firm Anderson Strathern, as the merger between HBJ Gateley and Addleshaw Goddard is due to go live this week.

It is understood that both firms have been speaking since February, with Gateley also approaching a number of other firms including other Scottish independents MacRoberts, Morton Fraser and Harper Macleod.

It is likely that there will be no formal, exclusive collaboration between the two firms. The relationship, however, could lead to something more formal down the line.

One partner at Anderson Strathern told Legal Business: ‘If we have this relationship and our partners get to know each other, our clients enjoy this, our staff get something out of this – then I would have thought you would tend to consolidate your relationship.’

‘Whether that would be a merger, it is not on the cards as far as we’re concerned. It might be something that they would be interested in – but we would have to change our strategy. We reviewed it recently and we are very happy to remain independent and Scottish.’

Speaking to Legal Business, Michael Ward, chief executive of Gateley would not confirm or deny that the firm was planning to enter into a ‘best friends’ relationship with Anderson Strathern, but said the firm was planning to make an announcement soon.

‘As you know we are looking for a partner in Scotland when our arrangements with HBJ Gateley come to an end, which is the end of the month. We are not at this point in a position to announce anything. But we hope to be in a position to do that relatively shortly.’

Ward also added that the preferred outcome would be similar or more embedded than the firm’s relationship with HBJ Gateley ‘if that was comfortable to the other party’.

‘It might happen over a number of years rather than immediately. We could consider that. Nothing is off the table and nothing is on. We are keeping an open mind.’

Legal Business revealed earlier this month that Gateley was making approaches to a number of firms regarding a new Scottish tie-up.

Last week, Legal Business reported that Gateley had seen turnover soar 15% for the financial year ending 30 April 2017, from £67m in 2016 to £77m. In addition, adjusted EBITDA also saw double digit growth, increasing 14% from £12.9m to £14.7m.

In a trading update, the firm said that the integration of acquired complementary businesses, including tax adviser Capitus, the continued investment in new staff and the development of the firm’s newly opened Reading office, were positive focus points for the firm during the year.

kathryn.mccann@legalease.co.uk