Australian law firm AF Legal (ASX: AFL), which specialises in family and relationship law, is all set to acquire the contested wills and estates practice of Go To Court Lawyers Pty Ltd (GTC), trading as Armstrong Legal, for a sum of $3.7 million. 

This move comes amidst a backdrop of increasing intergenerational wealth transfers and the growing ageing population. According to Michael Saadie, the Head of NAB Private Wealth and CEO of JBWere, Australia is on the brink of experiencing the most significant intergenerational wealth transfer ever, with an expected $3.5 trillion in assets transferring hands by 2050.

Under this conditional agreement, AFL will purchase the essential elements of Armstrong Legal’s ACWE division, including debtors, work-in-progress, client matters, and direct staff. The total cost of the acquisition is estimated to range between $3 million plus GST and $3.7 million plus GST. This comprises an initial purchase price of $3 million, subject to adjustments, along with two potential earnout payments of up to $375k each. These payments are contingent upon meeting revenue targets and will be disbursed after the FY24 and FY25 accounts have been finalised. 

ACWE operates on the eastern seaboard, with offices in Sydney, Melbourne, and Brisbane. Alun Hill, based in Sydney, leads the ACWE division. Hill and two other lawyers in the ACWE team specialise in wills and estates law. Throughout 2024, teams will transition to AF Legal Group offices. The existing team will be retained pre-completion, with new employment agreements in place, including retention incentives. 

Post-settlement, ACWE’s contribution is expected to be positive but minimal in Q4 FY24. But in FY25, the first full year of ownership, revenue is projected to be around $3 million, with a net profit before tax (NPBT) of $0.8 million.

This announcement follows a profitable half for AFL. In the first half of FY24, the Company reported revenue growth of $10.7 million, marking a $1.9 million (21%) increase from H1 FY23 and a 6.5% rise from H2 FY23. Key drivers of this growth were its brands, Watts McCray and Withnalls. Additionally, newer offices under the Australian Family Lawyers brand in Wollongong, Gold Coast, and Bayside have shown revenue increases since their establishment 12 to 18 months ago, as their client base continues to expand.

AF Legal Group Limited (AFL Group) achieved consecutive profitable halves, with a net profit before tax (NPBT) of $510k for H1 FY24 and $622k for H2 FY23. This turnaround followed two halves of NPBT losses in H1 FY23 ($463k) and H2 FY22 ($407k). The Company did have a softer Q2 FY24, citing seasonal changes.

AF Legal and Armstrong are aiming to complete the transaction by April 2, 2024.