It has been four years since non-lawyers were allowed to invest in legal practices. Four firms have grasped the subsequent opportunity to tap the stock market, most recently Rosenblatt Solicitors, which was valued at more than £70 million when it listed on Aim this month.
First out of the doors, though, was Gateley, a firm with roots in the 19th century. Three years ago next month, it dropped its LLP moniker to become a plc and it has never looked back. From an initial market capitalisation on its market debut of £100 million, the business is valued today at just shy of £180 million.
A trading update yesterday confirmed what it described as “strong business momentum”, with revenues for the 12 months to the end of April set to be at least £84 million, up from £77.6 million a year ago, while earnings before interest, tax, depreciation and amortisation are expected to have risen by about £1.1 million to £16 million on the year.
Alongside the results came news of an acquisition, the third since its flotation. Gateley said that it would be buying GCL Solicitors, a specialist in land and property law, for £4.15 million. The deal is the first by the company in the legal sector, with previous acquisitions being Capitus, a tax incentives advisory business, and Hamer Associates, a firm of surveyors.
Of course, such deals are precisely the reason why law firms wanted to list in the first place. With access to a publicly tradable share currency, Gateley can use its stock in part to pay for businesses that previously would have been for cash only.
This is not to say that all the company’s resources are going on dealmaking. Gateley has reiterated its stated policy of paying up to 70 per cent of after-tax profits on dividends — and analysts at Cantor Fitzgerald forecast a yield of 4.4 per cent for 2019.
As more law firms go public, there is also the potential for consolidation among operators because of the diffuse nature of the industry, meaning that Gateley could be a buyer or be bought. For now, though, it looks as if it has good growth prospects, particularly with its international push.
