Knights Group Holdings PLC, which is ranked among the top 100 in the UK, has stated its IPO would involve the placing of 20.689,656 new ordinary shares and 13,793,104 existing shares at a placing price of 145p each to raise proceeds of around £50mln.

Big shareholder payday

The placing place will give Knights an expected market cap of around £103.5mln, while the company will receive £30mln of the proceeds raised by the IPO while existing shareholders will net £20mln. Knights stated its shares would be available to trade on AIM from 8am on 29 June. Four of the firm’s shareholders – commercial operations director Mark Beech, facilities director Joanne Beech, Newcastle-under-Lyme office head Karl Bamford and non-executive chairman Balbinder Johal – will split £20m between them as a result of the IPO. Chief executive David Beech will retain a shareholding of around 45.5% and will be subject to a three-year lock-in period in which he will be unable to sell his shares. The other shareholders will hold 1.7% each.

Expanded headcount

Knights has set out plans to expand its fee-earner headcount by nearly 60 per cent in the next two years, as the firm gears up for its £103m listing on the alternative investment market (AIM). In the admission document, Knights states it expects to recruit over 200 additional fee-earners, taking its total to over 550 in the UK. There are also plans for at least three further acquisitions. Earlier this year, Knights announced its proposed acquisition of Manchester firm Turner Parkinson for an undisclosed sum, adding 45 additional fee earners and a seventh UK office. The listing will be used to repay the majority of its existing debt and fees. The firm plans to work towards reducing work-in-progress and debtors days by achieving a 100 per cent cash conversion on client matters.

Key strengths

The Directors believe that the Group has stated what it sees as seven key strengths: An entrepreneurial pioneer following the UK Legal Services Act; disruptive B2B legal services model in a highly attractive, fragmented market; full service operations from secondary markets predominantly outside of large cities; resilient business with high quality of earnings and deep client relationships; highly scalable business model requires lower support costs; multiple organic growth levers driving value creation; and, value accretive M&A strategy underpinned by proven track record and pipeline of opportunities

IPO activity heats up

Knights’ AIM listing follows Rosenblatt this year, and Gordon Dadds and Keystone Law in the second half of last year. Gateley was the first UK firm to go for a list in 2015, raising £30m at a £100m valuation. Knight’s record for the largest UK law firm listing may not stand for long. Top 25 LB100 firm DWF confirmed this month it is also considering a potential float, which standard valuation models would value a listing at between £400m and £600m. Fieldfisher also confirmed recently it had engaged in ‘pilot fishing’, a process of pitching the idea of a float to potential investors, but an IPO anytime soon seems unlikely. The admission document may be read here.