Mid-market legal services firm DSW Capital (DSW) warned the Iran war had ‘severely impacted’ UK M&A activity. As a result, the company lowered its full-year financial guidance sending its shares down over 15%.
‘Rapid and significant drop-off’
DSW, which owns the Dow Schofield Watts and DR Solicitors brands, said trading this year had largely been profitable. However, its financial year ends in March which is traditionally an important month for M&A completions ahead of the tax year-end.
The AIM-listed firm said many deals it had expected to complete this month had been aborted or postponed. Companies are now waiting ‘until the long-term economic ramifications of the war are established’.
Following the ‘rapid and significant drop-off in M&A activity’, the firm now expects to report total income of £6.2 million. Meanwhile, adjusted EBITDA is expected to be around £1.6 million and adjusted pre-tax profit around £1.3 million.
Revenue and earnings are typically second-half weighted due to the increase in M&A deals signed in March. M&A represents 32% of network revenue, down from 67% in FY25 thanks to the acquisition of DR Solicitors.
‘Whilst it is very disappointing that the robust performance of FY26 has stalled, the board’s strategic aim continues to focus on growing the business’, said CEO Shru Morris.
‘The group remains profitable and cash generative, despite the current geo-political and economic uncertainties, with a strong pipeline of diversification opportunities’, added Morris.
Given its financial year ends this month, DSW had no choice but to issue today’s warning. In that respect, it probably represents the canary in the coalmine for the advisory sector.
The chances are other firms involved in M&A have experienced the same drop-off in deals but are keeping quiet for now. Without the fees from corporate activity, some are undoubtedly going to struggle, so we will keep a close eye out.
Read the press release here: https://dswcapital.com/investors/
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