2 April 2013Print This Post

Now Quindell turns to costs with £14m Compass acquisition

Hodgkinson: share price correction due

Alternative business structure Quindell Portfolio plc has added leading costs business Compass Costs to its long list of acquisitions, with the aim of making it the largest costs firm in the country.

The deal values Compass at £14m, and is being satisfied by the issue of 80m Quindell shares, giving an implied value of 17.5p per Quindell share – although they are currently trading at 11.5p. The shares are subject to lock in of between 12 and 36 months from the date of issue.

In return, Compass Costs has warranted a profit after tax of £2m and operating cash flow of £1.5m for the year ending 31 December 2013. The most recently filed accounts for Compass Costs, for the year to 31 January 2012, showed record turnover of £6.4m and profit before tax of £1.3m.

Quindell said: “The acquisition is expected to be earnings enhancing in the current year and significantly earnings enhancing in 2014 due to the volume of costs work that the group can direct to Compass Costs associated with its legal services volume, estimated at over £20m per annum by 2014, making Compass Costs the UK’s largest costs draftsmen.

Quindell has been working with Compass Costs since October 2012. It said: “During this test period Quindell has validated the quality of the service provided, examined the operational savings, the excellent results obtained and also the strength of the team and business model moving forward that will enable Quindell to maintain its growth in this area, which otherwise would have been difficult to manage organically in the time available.”

Rob Terry, Quindell’s chairman and chief executive, said: “Compass Costs is already one of the UK’s largest cost draftsmen, but with the benefit of our volume, it becomes the largest. Its operation is well respected in the industry for delivering value to its clients, and is both ethical and market leading in its approach…

“Compass Costs operates in such a specialist area, that we could not expect to grow ourselves organically in such a short period of time, particularly as we continue to take on more of our own volume, This, combined with taking into account the proposed Ministry of Justice costs reforms and introduction of LASPO from 1 April 2103 were also key drivers towards the acquisition.”

Compass chief executive Phil Hodgkinson said: “It is clear to the board and shareholders of Compass Costs that Quindell has a winning formula, is gaining significant blue chip clients and has been undervalued by the market. As a result, we are very happy to accept our consideration based on shares at 17.5 pence and look forward to sharing in the benefit of the share price correction that we believe will occur once the Quindell model is more fully understood.

“Following the acquisition, Compass Costs will continue to focus on working with existing clients and commercial partners to provide legal services and costs solutions within the new post-LASPO arena and will be hosting a series of exclusive presentations to its existing client base to include LASPO-compliant funding solutions and documentation over the coming weeks.

“Operational control of Compass Costs will remain within the existing structure, with the Quindell Group supportive of the delivery of enhanced revenue and costs recovery to Compass Costs’ existing client base.”

By Neil Rose

4 Responses to “Now Quindell turns to costs with £14m Compass acquisition”

  1. Seems like a strange move when fixed fee’s are being introduced so attritional income is reduced. If anything I would have expected a reduction in Costs, albeit Cost Budgeting will require some thought.

  2. Joe on April 2nd, 2013 at 1:44 pm
  3. Mutli-track costs will not be affected by the changes, save for the introduction of costs budgets, so it follows that there will still be an active market for costs draftsman / negotiators. also, given that quindell own a solicitors firm that is likely to deal with high end work not only will they make money from dealing with costs for other firms, they will save it by not having to pay full market rate for the negotiation work on the work that compass is supplied from silverbeck rymer.

    we tend to forget that there is other work out there besides fast track RTA, EL, and PL work.

  4. Anon on April 3rd, 2013 at 12:24 pm
  5. Were they in the Multi-track sphere given their NW based background.

  6. anon on April 4th, 2013 at 10:09 am
  7. “The deal values Compass at £14m” but
    80 000 000 shares at 11.5p each actually amounts to only £9.2m and the shares cannot be sold for between one and three years and “in return” for the deal, Compass Costs has “warranted” that its profits will approximately double even though LASPO and the Jackson reforms which started taking effect this week are expected to severely curtail the costs industry!

  8. TimothyP on April 5th, 2013 at 12:02 pm