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1:00 am, May 27, 2008
Formation Group looks to acquire law firm
By Claire Shoesmith
Formation Group, the Hale Barns-based wealth management company which advises sports and show-business stars, is seeking to acquire a law firm, which would do work currently carried out by the Manchester offices of Halliwells and DLA Piper.
Speaking to Crain's last week after the release of the group's interim results, chief executive Neil Rodford said adding a law firm would “complete the range of services that clients expect”.
He said the group had about £15m to spend on acquisitions, with the main target being a legal or professional services firm and the second, a sports promotion or public relations company.
Formation, which started out as a footballers' agent and listed on AIM in 2001, has been transformed through acquisitions into a financial and professional services firm for sports stars, entertainers and musicians. Its latest purchase, James Grant Media, bought in February for a maximum of £29m, has added celebrity entertainers such as Ant & Dec and Simon Cowell to the client register, a move that Rodford hopes will in the long run help the group increase its presence in the US.
Daniel Havercroft, an analyst at Investec, described legal services as the “one obvious gap” in Formation's offering and said he expects the company to seek to acquire a business which has a “strong, established client base predominantly composed of sportspeople or persons from the entertainment industry”. This, he said would maximise the potential for cross-selling across the group.
Footballers
The intention to add a legal practice follows a change in legislation — the Legal Services Act 2007, which came into force last October — permitting the combination of legal and non-legal firms. Businesses which spend large sums on legal advice may find it more attractive to have a service in-house, especially if its lawyers paying for a third party by also carrying out work for clients.
Analysts believe, as do Formation's management, that the company is well placed to weather an economic slowdown. “Its clients' significant earnings potential generated from activities that tend not to be economically sensitive, should allow the company to grow both its funds under influence and revenues even in the event of a worsening of the economic outlook,” Havercroft said in a note to investors.
Meanwhile, Rodford cited the group's move away from one particular focus, saying that while football still accounts for about 22 per cent of gross profit, the company is less dependent on it than it was in the past. “It is getting more and more difficult to attract footballers because there are a lot of foreign players in the premiership who come with their own agents and advisors,” he said, adding that there are more opportunities for growth in the music and entertainment industries. “There is also potential in the US, but we are sticking to what they know in terms of soccer.”
Halliwells last month reported a slight drop in turnover to £87m in the year to the end of April and DLA Piper has yet to release its results.
COMMENTS? cshoesmith@crain.com
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