Quantity surveyors should consider flotation by merging - says Roger Knowles

Quantity surveyors who want to release cash but fear that they are far too small to float on the Stock Exchange are being urged to consider a possible solution – which is to merge together.

Roger Knowles and Patrick Lineen are about to contact 12 medium-sized quantity surveyors with a view to persuading a group of three or four of them to link together and create a business with a turnover of £10m-£12m a year and profits of around £1m. With that firepower, the City would be interested.

Roger Knowles is the founder of JR Knowles, the legal services and dispute resolution group, and Lineen is a former finance director. Knowles traded on the AIM (Alternative Investment Market) until recently. It has now been bought by Hill International for £7m.

"I sold up in Knowles and then wondered what should I do next," says Roger, who has a non-compete clause that reins in his activities for six months.

"I just couldn’t sit watching the sun rise and fall," he explains, "and I saw that there is still a market for new companies coming into AIM. People know us. They remember that we did the same thing. That makes us ideally placed to act as the middle-men, well perhaps I should say midwives as we look to help in giving birth to something.

"Quantity surveyors have never been in a better position for 50 years. The boom is going to last until the Olympics and two years after that, which takes us to 2014.

"Fee rates are going up. A lot of QSs were made redundant in the 90s and numbers have not recovered, but demand is higher than ever before. The time is ripe for an infusion of outside capital.

"If you are in a QS partnership you can’t get your money out. Even when you leave, through retirement, you are lucky if someone pays - and even luckier if they pay quickly. It can take years.

"It is a constant moan amongst quantity surveyors that they can’t get working capital out."

By way of example, Lineen points to a QS practice with 1m shares. The flotation would create 250,000 new shares, boosting the group’s working capital, while existing shareholders could choose to sell 400,000 of their shares, generating money to spend as they wished.

Lineen and Knowles are operating on a freelance basis. "We did it before with JR Knowles, that’s our strong point," said Lineen. "A broker has been lined up and he’s confident he can raise the money."

Examples of QS firms that have floated on AIM include Bucknall Austin, High Point, JR Knowles and Drivers. Partners get money in their pockets on flotation but still keep controlling interest in the business.

Extra shares can subsequently be sold through the Stock Exchange after flotation.