The $460 million law firm Shine Corporate Ltd (ASX: SHJ) announced its latest acquisition to the ASX this morning, the firm to be bought is Brisbane-based Sciaccas Family Lawyers Pty Ltd.
Shine said it will cost $8.75 million to acquire but will be subject to earn outs linked to ongoing and increased financial performance. Former federal government minister and founder, Con Sciacca, has agreed to an employment contract with Shine and will stay on after the acquisition's completion, which is expected by the end of October. However the acquisition will contribute towards Shine's earnings from 1 July 2014, which is the date the share transfer will take effect.
The acquisition will be funded through cash and existing debt facilities and equates to an FY15 EBITDA multiple of between four and five. It is consistent with Shine's goal to grow exposure to personal injury as well as other areas of litigation.
Managing Director Simon Morrison said: "This acquisition is consistent with our 'inch wide, mile deep' focus on damages based plaintiff litigation, with Sciaccas complementing Shine's existing personal injury businesses and providing access to additional channels to market."
Buy, Hold or Sell
Shine, like its larger peer Slater & Gordon Limited (ASX: SGH) is a very well-run business. It generates good profitability ratios, has managers with 'skin in the game' (One of the 12 critical things I look for when picking stocks), strong balance sheets and plenty of room for growth.
At 18 times earnings with a dividend of just 1.4%, Shine may appear expensive but with the above characteristics, long-term shareholders will be able to mimic what the business is doing intrinsically and could be well on their way to developing superior returns.
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