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Estate agents’ grip on conveyancing market forces In-Deed sell-off

Very low margins and price sensitivity of online conveyancing push business into selling off its legal practice and exiting the legal market

4 June 2013

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In-Deed Online Plc, the conveyancing service launched by Rightmove founder Harry Hill, is to sell off its legal arm, licensed conveyancer Runnett & Co, and exit the legal market after admitting the business was not sustainable.

According to a statement to the stock market on Friday (31 May 2013), In-Deed said it had agreed to sell Runnett back to its founder Matthew Lewis for £1, including the online conveyancing business.

In-Deed floated on the Alternative Investment Market (AIM) in June 2011 with a pledge to "take the market by storm". A year later, it bought Runnett, a volume licensed conveyancer, which was authorised as an alternative business structure (ABS) by the Council of Licensed Conveyancers in October 2012.

"Margins in this market are low and estate agents have got such a tight grip on distribution," In-Deed managing director Peter Gordon told Private Client Adviser's sister title Solicitors Journal. "Out of a £800 transaction, we see £125; the estate agent gets the rest."

"The conveyancing business is extraordinarily low margin and the profession seems determined to offer its services at bucket-shop prices," Gordon went on. "The web is very price sensitive; nobody appears to value quality of service."

The sale is still to be ratified at a shareholders' general meeting and is expected to leave In-Deed with £900k, no debt, and tax losses of about £2.77m.

Gordon said the meeting will decide whether to reinvest the cash or distribute it back to shareholders. He suggested an investment in the conveyancing market was highly unlikely.

In-Deed's AIM prospectus two years ago revealed the company's ambition to become "a market leader in the highly fragmented £1bn conveyancing market within three years."

It also indicated that the company was considering entering the will-writing and personal injury markets.

But it also acknowledged the company's vulnerability to market fluctuations and the possibility that new entrants taking advantage of the Legal Services Act could undermine its business model.

The news follows a trading update on 23 May which revealed ongoing financial difficulties for Runnett.

"In our half year results, we highlighted that we expected our conveyancing business, Runnett & Co, to show a loss in the second half of the financial year to 31 March 2013 and also its sensitivity to existing and new clients," the statement said.

It went on: "As predicted, the second half [of the previous financial year] proved challenging and the first two months of the current financial year have continued in a similar fashion although we have seen some pick up in May which we expect to continue throughout the seasonally busier summer period."

At the time, the online business saw customer numbers grow but it was still making a loss.

Already In-Deed had warned that "in light of the headwinds we face in Runnett & Co", it would be "reviewing its options over the coming weeks".