Legal Business Blogs

Gordon Dadds in ‘advanced negotiations’ to list on AIM following reverse takeover bid

LB100 firm Gordon Dadds is in ‘very advanced negotiations’ to become an AIM-listed law firm by August this year, following a recent share offer of £18.75m by Work Group.

Alongside the acquisition, effectively a reverse takeover, Work Group intends to raise up to £20 million, with net proceeds of £18m to ‘repay borrowings of Gordon Dadds’ to fund further acquisitions and the working capital requirements of Work Group, once enlarged by the purchase of Gordon Dadds.

In an announcement, Work Group stated: ‘Whilst the negotiations are very advanced at this stage, there can be no certainty that any offer will be made nor as to the final terms of any offer.’

The buyout, a rare move in the legal sector, will provide Gordon Dadds shareholders with a publication quotation for their equity interest in the firm.

Work Group, a human resources provision and management company, is chaired by Simon Howard.

Last financial year, Gordon Dadds posted turnover of £20.2m and profit per equity partner (PEP) of £320,000.

In 2014, the firm entered into a surprise takeover of beleaguered West End firm Davenport Lyons, buying its client database, the lion’s share of its assets and bringing over the majority of Davenport’s partnership in a pre-pack deal, after the firm entered administration. Around 20 staff transferred to Gordon Dadds at the time, including 30 partners.

Davenport Lyons had struggled to grow, recording an 11% fall in revenues from £24.5m to £21.9m in 2012/13, while profit per equity partner dropped 12.5% to £197,000.

At the time of the buyout, Adrian Biles, managing partner of Gordon Dadds said: ‘We are delighted to have the opportunity to work with so many of the excellent people and clients of Davenport Lyons. The additional intellectual capital and depth of expertise will add to our capabilities.’

Gordon Dadds also purchased litigation firm Harris Cartier and since 2016, has been providing consultancy services through a financial markets arm, GD Financial Markets.

Arden Partners will act as sole bookrunner and will be nominated adviser to Work Group.

The move to list the firm is highly unusual. Today, existing AIM-listed law firm Gateley posted a double-digit increase in its revenues for the 2016/17 financial year, recording an 16% increase in turnover from £67.1m to £77.6m. Adjusted EBITDA increased 16% from £12.9m to £14.9m, while profit before tax rose 19% from £11m to £13.1m. The group free float increased from 30% to 34.3%, following the sale of former shares.