A Longer arm of the law
​Fairpoint has announced the immediately earnings enhancing acquisition of the Colemans-CTTS legal services business for an initial payment of £9m, with further contingent payments of up to £7m, and also published a positive trading update on the first half ahead of the interim results next month. The acquisition is a further major step on the way towards Fairpoint's target of creating a top 5 legal services business through acquisitions and organic growth, and follows the successful acquisitions of Simpson Millar in June 2014, and of the much smaller Fosters, the following month. Including today's Colemans acquisition, on a pro forma basis, legal services is now expected to represent 62% of the Group's revenues going forward. Fairpoint has also released a very strong H1 trading update, saying that "overall group trading for the first half of 2015 has been materially ahead of the same period last year, and is in line with the Board's expectations". With Colemans included for just four and a half months in Fairpoint's current financial year, we upgrade our PBT forecast to £10.5m, and increase our EPS forecast from 18p to 18.5p. For 2016, with a full year's benefit from Colemans, our EPS forecast rises by 7% to 20p. Gateleys, the law firm which recently IPO'd on AIM is on a prospective P/E (to April 2016) of 10.7x. On our increased EPS forecast (to December 2016) of 20p, Fairpoint is on a prospective P/E of just 6.75x, (and yields 5%), and continues to look extremely modestly rated.
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