Legal Business

Ince & Co administrator reveals partners had ‘no appetite’ to rescue failing firm with £8.5m cash injection

Ince & Co administrator reveals partners had ‘no appetite’ to rescue failing firm with £8.5m cash injection

Ince & Co partners ruled out a £8.5m capital injection that may have saved the firm from financial failure, according to a report from administrators Quantuma.

At a meeting in October 2018, Ince partners were informed that if a sale to a third party could not be hastily arranged, partners would have to agree to a three-year lock in and contribute at least £8.5m to rescue the firm.

But the report, published this week with Companies House, states that partners had ‘no appetite’ to provide the necessary additional capital, and that some salaried partners had also refused to join the equity in order to provide financial support.

Had Ince not ultimately pursued its tie-up with listed firm Gordon Dadds, which materialised later in October, Quantuma’s report insists the firm’s situation would have become ‘unmanageable’ by January 2019. It says ‘it would have led to the uncontrolled break-up of the firm with a heightened risk of an intervention by the SRA.’

Jan Hungar, managing partner of Ince & Co in Germany, said: ‘This demonstrates what we said at the time of the acquisition, that the deal with Gordon Dadds was essential to ensure that Ince continued to operate and to enable us to grow.’

As part of a contingency plan should no merger be agreed, the firm decided that retired partners would not be paid any outstanding capital repayments due on 31 December 2018 in order to manage cash-flow.

According to the document, Ince’s three subsidiaries (the London LLP, the international LLP and the Ince & Co Services subsidiary) collectively owe around £34m to unsecured creditors. The London LLP owes £19.8m to creditors, of which they will recoup 21.8p in the pound.

Creditors of the international LLP, which are owed £7.2m, will only receive less than 1p in the pound. Meanwhile, creditors of the Services branch, which are owed £7.1m, are in line to recoup 3.5p in the pound.

The report also charts the lead-up to the height of financial instability, detailing a sharp reduction in partner headcount: In December 2017 there were 37 equity partners in Ince’s London LLP, by December 2019 the number dwindled to 22.  The costs of repaying capital to the former partners who left during this period was estimated to be around £4m.

For the six month period to October 2018, compared to the same period during the previous year, revenues at the London LLP plummeted 26% to £16.7m.

For its part, Quantuma is expecting to take home just over £800,000 in fees as a result of the administration process.

Macfarlanes advised Ince and the administrator, accruing £134,164 in the process while Pinsent Masons advised the firm on the sale of the business, earning fees totalling £123,717.

tom.baker@legalease.co.uk

Legal Business

‘Fit like a glove’: Gordon Dadds brings Ince into the modern era, says leadership

‘Fit like a glove’: Gordon Dadds brings Ince into the modern era, says leadership

The lack of overlap between Gordon Dadds and Ince & Co made the tie-up an ‘overwhelmingly attractive proposition’, the firms’ leaders say.

Gordon Dadds will be become the UK’s largest listed law firm by revenue after an announcement this morning (29 October) confirmed its acquisition of Ince for an expected £43m. The new firm, to be called Ince Gordon Dadds, will jump into the UK top 40 with revenue of more than £110m, and have 100 partners across offices in nine countries.

Gordon Dadds managing partner and chief executive Adrian Biles will lead the new firm with support from Ince’s chairman, Peter Rogan. It will be headquartered in Ince’s Aldgate Tower offices in London, with the deal for the marine and insurance specialist expected to be completed by the end of this year.

Biles told Legal Business the two firms had been in discussions since June, around the time Gordon Dadds opened its first international office in Hong Kong .

‘It was clear to us that Ince was a firm with the sort of global footprint that we wanted,’ Biles said. ‘It’s also an iconic brand and a business where we do not have practice areas that overlap very much. That made it an overwhelmingly attractive proposition.’

The amount paid for Ince is expected to be £34m, which equates to a percentage of the turnover generated by Ince’s equity partners over the next three years. Gordon Dadds will also settle the £9.1m capital and current account balances due to Ince partners.

Rogan, a former Ince senior partner who returned to leadership following the August resignation of Jan Heuvels , told Legal Business the firm needed 75% of its 75 equity partners to vote in favour. He did not know exactly how many agreed.

‘There were definitely a few partners where this wasn’t for them,’ Rogan said. ‘We’re a pretty traditional, conservative firm, and the concept of being part of a plc group caused people to think. But by the time I got to the last two weeks, I had pretty much overwhelming support.’

Ince had a long-stated ambition of merging for growth, and Rogan said previous discussions had tended to be with firms who were either direct competitors or where a major part was in direct competition. Many have criticised the Gordon Dadds deal for a lack of obvious crossover between the two firms, but Rogan said that was a positive.

‘The more we chatted to Gordon Dadds, the more we realised it was an exceptionally good fit because there was virtually no overlap. When you took the merger as a whole and compared it to most mergers of this size, it actually fit like a glove. It has overwhelming support because there will be no clash internally.’

Rogan added: ‘Clients have been really positive about it. We are seen as conservative and perhaps old-fashioned, and they are quite impressed Ince, of all people, has jumped into the modern world.’

Gordon Dadds shares will remain suspended pending further clarification on the final terms and conditions and financing of the proposed merger. Biles said the exact makeup of the financing was still confidential.

Today’s announcement comes a month after the two confirmed merger talks. Earlier this year, Biles told Legal Business the firm had its sights on becoming a ‘nine-figure’ business after its acquisition of Thomas Simon.

Ince, meanwhile, has suffered a number of setbacks this year. A number of veteran partners have left in recent weeks, most recently the head of its Singapore office . Earlier in the year, it lost a four-partner team to sector rival Clyde & Co in Hamburg, and made 25 business services staff and seven fee-earners redundant.

Ince’s tumultuous year was underlined by a poor financial performance: it fell 6% in revenue terms, falling to £83.4m. Profit per equity partner (PEP) remained flat at £256,000.

As part of the deal, Ince partners will each receive a minimum guaranteed amount in the first year based on budgeted turnover. Both Biles and Rogan declined to specify the amount, while Biles would not comment on what the Ince acquisition was expected to add to Gordon Dadds’ operating profits.

Biles said the firm had no further concrete acquisitions plans and would focus on bedding in the Ince merger. ‘We are a listed company, we are designed for growth, so our shareholders expect us to grow both top line and bottom line. But the most important thing in the short term is to make sure this merger brings maximum benefits to all stakeholders concerned. This is not a destination, this is a journey.’

Hamish.mcnicol@legalbusiness.co.uk

For more on the outlook for listed law firms, see this month’s cover feature, ‘No free lunch – Will law firm IPOs be the next big thing?’

Legal Business

Gordon Dadds to become largest listed firm with £43m acquisition of Ince

Gordon Dadds to become largest listed firm with £43m acquisition of Ince

Gordon Dadds is set to become the UK’s largest listed law firm by revenue after acquiring Ince & Co for an expected £43m.

An announcement to the London Stock Exchange today (29 October) confirmed Gordon Dadds had agreed to acquire all of Ince, including its international LLP. The new firm, to be called Ince Gordon Dadds, will jump into the UK top 40 with revenue of more than £110m, and have 100 partners across offices in nine countries.

Gordon Dadds managing partner and chief executive Adrian Biles (pictured) will lead the new firm with support from Ince’s chairman, Peter Rogan. It will be headquartered in Ince’s Aldgate Tower offices in London. The transaction is expected to be completed by the end of this year.

Ince Gordon Dadds will become the UK’s largest listed law firm by revenue, eclipsing Gateley. The total paid for Ince is expected to be £34m, which equates to a percentage of the turnover generated by Ince’s equity partners over the next three years.

Biles commented: ‘The merger will build upon the complementary strengths of the two firms in terms of industry expertise and range of services. Our management model will also allow Ince’s partners and fee earners to focus even more on providing market leading legal advice to a stellar client base.’

Rogan added: ‘This is an exciting day for us at Ince, with this cutting-edge deal being very much in line with our long-established strategy. I’m proud that the Ince name will continue and am very excited to be moving forward together as part of this innovative new structure with access to new capital allowing us to gain greater competitive advantage in the market.’

As part of the deal, Ince partners will each receive a minimum guaranteed amount in the first year based on budgeted turnover. Gordon Dadds will also settle the £9.1m capital and current account balances due to Ince partners, bringing the total value of the deal to more than £43m.

Today’s announcement comes a month after the two confirmed merger talks. Earlier this year, Biles told Legal Business the firm had its sights on becoming a ‘nine-figure’ business after its acquisition of Thomas Simon. He was seeking a ‘scale transaction’ involving the buyout of an underperforming £20m to £40m firm: a tie-up with Ince has taken that ambition to a different level.

Ince, meanwhile, has suffered a number of setbacks this year. First, the marine and insurance specialist lost a four-partner team to sector rival Clyde & Co in Hamburg in February. Then, in July, Ince made 25 business services staff and seven fee-earners redundant.

The biggest setback came in August, when the firm’s senior partner, Jan Heuvels, stepped down from his position after being relocated to Hong Kong.

Ince’s tumultuous year was underlined by a poor financial performance: it shed 6% of its revenues, falling to £83.4m. Profit per equity partner (PEP) remained flat at £256,000.

Gordon Dadds shares will remain suspended pending further clarification on the final terms and conditions and financing of the proposed merger.

hamish.mcnicol@legalease.co.uk

For more on the outlook for listed law firms, see this month’s cover feature, ‘No free lunch – Will law firm IPOs be the next big thing?’

Legal Business

‘It’s a marriage of convenience’: Gordon Dadds to make its big splash as Ince merger talks intensify

‘It’s a marriage of convenience’: Gordon Dadds to make its big splash as Ince merger talks intensify

Gordon Dadds has emerged as the unlikely rescuer to ailing Ince & Co, with the two outfits in merger discussions to create the UK’s largest listed law firm.

The seismic move will create a £114m turnover firm called Ince Gordon Dadds. Gordon Dadds is currently in the due diligence stage, but a partnership vote is yet to take place.

In a statement to the London Stock Exchange today (27 September), Gordon Dadds said: ‘The boards of Gordon Dadds and Ince & Co are in discussions to merge the two businesses. The precise structure and mechanics of the transaction are also under discussion and the respective boards are working towards a further announcement as soon as possible. There can be no certainty at this time that the merger will proceed and we will update shareholders in due course.’

For Gordon Dadds, the merger will be the culmination of its highly acquisitive strategy following its August 2017 initial public offering (IPO). Earlier this year, chief executive Adrian Biles spoke to Legal Business about the need to engage in a ‘scale transaction’ involving the buyout of an underperforming £20m to £40m firm, in order to make a big impact on the market going forward. A tie-up with Ince would take that ambition to a different level. This proposed merger comes after a string of buyouts since floating, including a £2m deal for Bristol firm Metcalfes and a £3m purchase of legal and professional services business White & Black.

Earlier this year, Biles told Legal Business the firm had its sights on becoming a ‘nine-figure’ business after its acquisition of Thomas Simon. Gordon Dadds raised about £20m when it listed, with its acquisitions to date all broadly structured the same way: staggering payments over time while not being particularly draining on cash up front.

One legal consultant said that while at first blush the market will think the tie-up makes no sense whatsoever, the motivations of the two firms is important to consider.

They suspect Gordon Dadds was likely to have approached Ince & Co, because of the former’s stated acquisition ambitions and tendency to buy distressed firms, alongside Ince’s turbulent recent history.

‘It’s a marriage of convenience, not one of love – as normal mergers would be seen to be,’ they commented. ‘For Ince, this is a life boat.’

Biles told Legal Business earlier this year the firm had developed a technology infrastructure which could support hundreds of millions of pounds of revenue: ‘The duplication of infrastructure is unnecessary… why not consolidate?’

He added: ‘Our mission is to aggregate sufficient revenue in order to help move the market onto a new model. If you have got £1m of revenue the market controls you but if you have got £500m of revenue, you can start to persuade the market that it might be possible to buy a service in a different way.’

The consultant added that Gordon Dadds was more of a legal platform than a traditional law firm, describing it as a ‘cousin’ to fellow listed firm Keystone Law. ‘Gordon Dadds is not necessarily looking for complementary firms. If I were Adrian, I’d be trawling through the list of the UK top 100 now looking for opportunities.’

Rumours of an Ince/Gordon Dadds merger have been swirling in recent months, particularly after Ince suffered a number of setbacks this year. First, the marine and insurance specialist lost a four-partner team to sector rival Clyde & Co in Hamburg in February. Then, in July, Ince made 25 business services staff and seven fee-earners redundant.

The biggest setback came in August, when the firm’s senior partner, Jan Heuvels, stepped down from his position after being relocated to Hong Kong.

Ince’s tumultuous year was underlined by a poor financial performance: it shed 6% of its revenues, falling to £83.4m. Profit per equity partner (PEP) remained flat at £256,000.

It has been a completely different story at Gordon Dadds. The firm has emerged from obscurity after being acquired by Biles who became managing partner in 2013, and since its IPO it has grown revenue to £31.2m, causing it to jump up nine places to 88th in the LB100 rankings. In response to the news, Gordon Dadds’ share price jumped from 173p to 182p this morning.

Ince declined to comment. Gordon Dadds was approached for comment.

tom.baker@legalease.co.uk

For more background on Ince & Co and Gordon Dadds, see ‘Gordon Dadds acquisition sweep continues but breakthrough deal remains illusive‘ and ‘Ports in a storm – Can Ince get back on course?‘ (£)

Legal Business

Asia focus: Gordon Dadds breaks international duck in Hong Kong while HFW adds Korea expertise

Asia focus: Gordon Dadds breaks international duck in Hong Kong while HFW adds Korea expertise

Ambitious listed law firm Gordon Dadds has launched its first overseas office in Hong Kong, as HFW bolsters its Korean capability with a London hire.

Gordon Dadds has been in acquisitive form since listing on the Alternative Investment Market (AIM) last August, and has now turned its mind to international expansion after gaining approval to practise English law in Hong Kong.

The new Asian outpost will be led by Alan Ma, a real estate lawyer who joins from his own practice, Maxwell Alves Solicitors. Gordon Dadds’ London-based managing partner Adrian Biles will also spend time in the new six-lawyer office, which will initially specialise in property and corporate law.

Biles told Legal Business the Hong Kong market suited the firm’s strengths in capital markets, and commented on Ma: ‘He’s an extremely well-qualified lawyer and he has a lot of local contacts. He’s very well-liked in Hong Kong and an all-round nice guy.’

Biles said the firm was also eyeing Bermuda for its next international hub, citing the strength of the region’s insurance market.  The Hong Kong opening is a continuation of an expansion strategy that has seen the firm acquire five businesses in the 2017/18 financial year. Among those were tax advisory business, CW Energy, for £4m, and south London law firm, Alen-Buckley.

Gordon Dadds’ top line grew 25% to £31.2m in the year to 31 March, its first financial results since listing. Profits before tax were up 23% to £3m, while operating profits, which include partner profit shares, were up 19% to £8.8m.

Elsewhere, HFW added to Ince & Co’s recent fee-earner exodus by hiring its construction partner Kijong Nam.

Nam, who had been a partner at Ince since 2011, becomes the eighth construction partner to move to HFW in the last 18 months, following hires in Dubai, Hong Kong, London, Melbourne Perth and Sydney.

While Nam will be based in London, he is a native Korean speaker who will work with HFW’s Korean clients, including contractors, energy companies and project sponsors. His practice is focused on the offshore construction and shipping industries.

Nam commented: ‘My clients will be pleased to know that they can now benefit from HFW’s extensive international network and first-class multi-disciplinary team.’

tom.baker@legalease.co.uk

Legal Business

More growth for global traveller Bird & Bird as post-float Gordon Dadds hikes income 25%

More growth for global traveller Bird & Bird as post-float Gordon Dadds hikes income 25%

Another year of international expansion has seen the 27th consecutive year of revenue growth for Bird & Bird as the firm posted a 6% rise to €382.3m and an 11% hike in sterling terms to £337m, as Gordon Dadds passed the £30m mark in its first results since its public listing.

In what chief executive David Kerr described as ‘strong growth’, Bird & Bird increased profit per equity partner (PEP) by 10% to £550,000 with the number of equity partners growing from 105 to 113.

In local currencies revenue increased 9% in a year in which the City-bred TMT leader opened two new branches and recruited a large team in continental Europe. Lawyer numbers are up from 1,141 to over 1,200 in 29 offices worldwide. Like-for-like growth was slightly slower than last year’s 11% rise .

‘The good thing is that we have seen growth across the board in all jurisdictions and practice areas,’ Kerr told Legal Business. ‘The focus we have is a good one because the world is seeing a lot of changes being brought by tech.’

The firm also nearly halved its borrowings to €26m after its public accounts revealed a €49.3m debt for the 2016/17 financial year . ‘The debt reduction is a combination of factors,’ the firm’s chief financial officer Richard Olver commented. ‘We didn’t raise capital at all, but we have got partners to contribute more quickly than before. We looked at how we chase clients and get them to pay on a reasonable basis. The success is visible in the figures.’

The year’s highlights included acting for Nokia in its global patent and antitrust dispute with Apple and advising on Darktrace’s $75m fundraising. ‘We are seeing more acquisitions driven in some ways by tech, in tech assets or in tech-driven businesses,’ noted Kerr. ‘There was a significant increase in data-related work for understandable reasons. I don’t think it’s just a one off. Data is becoming more important by the day, as is regulation. We have seen a big increase in the whole area of investigations driven by regulation.’

The firm also continued its international expansion over the year, signing a co-operation agreement with China practice AllBright Law Offices, opening its second Dutch office in Amsterdam  and launching a representative branch in San Francisco. Bird & Bird also brought in a 20-strong team from Weil, Gotshal & Manges in Budapest  in a move that saw the US firm shut its local operations.

Gordon Dadds, meanwhile, announced it has grown its top line 25% to £31.2m in the year to 31 March as it disclosed its first financial results since its listing in the Alternative Investment Market last August .

Profits before tax were up 23% to £3m as the firm acquired five businesses in the financial year, including tax advisory business CW Energy for £4m . Operating profits, which include partner profit shares, were up 19% £8.8m.

The group also acquired south London firm Alen-Buckley, legal and professional services business White & Black, as well as Bristol-based outfits Metcalfes and Thomas Simon. Gordon Dadds also recently opened a Hong Kong outpost and received approval to practice as a foreign law firm.

With most of the acquisitions completed towards the end of the financial year, the firm said annualised revenues were £42m.

Chief executive Adrian Biles said the group had ‘exceeded the expectations that we set for ourselves and for our shareholders’. He added that the group expected ‘significant further growth during the year’ and promised other acquisitions: ‘We continuously examine expansion opportunities and are engaged in discussions with firms in a number of other international jurisdictions. In the UK, we have a good pipeline of potential acquisitions with which we are at various stages of discussion or negotiation.’

Marco.cillario@legalbusiness.co.uk

Legal Business

Gordon Dadds acquisition sweep continues but breakthrough deal remains illusive

Gordon Dadds acquisition sweep continues but breakthrough deal remains illusive

Hamish McNicol speaks to chief executive Adrian Biles about tubthumping, going public and frustration

Gordon Dadds managing partner and group chief executive Adrian Biles talks ambitions for nearly an hour before recalling a story about a businessman who never smiled in photos. The reason being those photos were always the ones that would accompany any bad news stories further down the track.

Legal Business

Firepower: £100m revenue a ‘natural target’ for acquisitive Gordon Dadds

Firepower: £100m revenue a ‘natural target’ for acquisitive Gordon Dadds

West End firm Gordon Dadds has its sights set on becoming a ‘nine-figure’ business after making its fourth acquisition since its public float in August last year .

Gordon Dadds announced yesterday (19 February) it had acquired Cardiff-based Thomas Simon for £1.875m, paying £187,500 up front with 20 quarterly instalments to come thereafter, plus a further amount related to net assets. The vendors of Thomas Simon, which had a fee income of just over £2m for the year to 31 July 2016, have warranted fee income will be not less than £12.5m over the next five years as part of the deal.

Gordon Dadds recently moved its Cardiff business into new offices, where it will be joined by Thomas Simon and the support functions of each brought together. Thomas Simon’s main business areas are property, corporate, dispute resolution, private client and family.

The acquisition is the fourth Gordon Dadds has made since its listing following a reverse takeover by Work Group last year, and the third in 2018. The business raised about £20m when it went public, and its business model seeks to consolidate the ‘fragmented’ legal services market in England and Wales.

Gordon Dadds managing partner Adrian Biles told Legal Business the firm was attracted to the quality of Thomas Simon’s people, which is its main criteria for every acquisition. There are more potential add-ons in the pipeline but Gordon Dadds will now take time to properly integrate the businesses it has.

‘As a business grows you get growth pains but our job is to try and manage those,’ Biles said. ‘It’s a good opportunity for us to take stock.’

He added that Gordon Dadds has ‘plenty of firepower’ left, as many of the acquisitions were structured the same way, staggering payments over time and not being particularly draining on cash up front. It would only need to go back to the market for more money if a deal came up that needed more cash up front but Biles is confident investors support the business and have plenty of appetite. The firm has reported revenue for the six months to 30 September 2017 as £12.89m, up 14.5%.

Biles sees Gordon Dadds targeting further firms outside the top 50, an opportunity he says represents about 950 firms with £5bn of annualised fees. Many face the problem of a lack of investment needed to ensure their future, particularly in areas such technology. On how big Gordon Dadds could get, Biles commented: ‘I don’t how big you can make it if you’re facing a £5bn fee income market. We have debates with shareholders and with ourselves whether a 2.5%, 5%, or 7.5% market share is a reasonable goal – certainly nine figures strikes me as being a natural target.’

The Thomas Simon acquisition follows a £2m deal for Bristol firm Metcalfes Solicitors, announced 24 January, and London-based legal and professional services business White & Black for £3m earlier that month. In November last year, it acquired tax advisory business CW Energy for £4m.

Biles added: ‘We want them to go on doing what they are good at. It’s what they’re not so good at we want to help them with, which tends to be the good-old business management.’

Hamish.mcnicol@legalease.co.uk

 

 

Legal Business

Keystone becomes second UK law firm to float in 2017 while Gordon Dadds goes shopping

Keystone becomes second UK law firm to float in 2017 while Gordon Dadds goes shopping

Recently listed Gordon Dadds acquires tax advisory business CW Energy

November saw New Law player Keystone Law become the third UK law firm to float on the London Stock Exchange (LSE), following the trail blazed by Gateley two years ago and Gordon Dadds earlier this year. The mid-market challenger firm, which was granted an alternative business structure (ABS) licence in 2013, saw shares priced at 160p and raised £15m from its initial public offering (IPO). It will be known as Keystone Law Group plc.

Legal Business

Gordon Dadds makes first strategic acquisition following summer AIM float

Gordon Dadds makes first strategic acquisition following summer AIM float

West End firm Gordon Dadds has made its first strategic acquisition since its public float in August, acquiring tax advisory business CW Energy for £4m to ‘further the company’s intention to expand its tax advisory business’.

The sum of £4m will be paid equal annual installments over five years and further consideration may be payable depending on the performance of the business. According to a London Stock Exchange announcement made today (1 November), Gordon Dadds has paid £300,000 upon completion of the deal and expects the acquisition to immediately enhance earnings at the firm.

The announcement also states that CW Energy, which specialises in the oil and gas industry, has three partners and a total of six employees. In the year ending March 2016 the business lost £4,000 after remunerating its partners but the AIM announcement added: ‘If the arrangements for members remuneration had been included on the same basis  as that agreed for the future, CWE’s EBITDA for the year would have been £1.3m. CWE has since then continued to trade at materially the same level.’

Adrian Biles, Gordon Dadds CEO said that since the flotation the business has received ‘a number of approaches to make acquisitions and also for lateral hires’ and has a ‘good acquisition pipeline’.

He added: ‘CW Energy is a highly regarded and highly profitable business which will enhance the group’s activities and will provide further opportunities for cross-selling services.’

The acquisition follows a busy summer for Gordon Dadds, which publicly listed in August following a reverse takeover by Work Group.

Speaking to Legal Business at the time, Biles said that there was £14m of cash on the balance sheet to fund both legal and non-legal acquisitions following the float.

Gordan Dadds posted revenues of £25m for the financial year ending March 2017, up 24% from last year’s figure of £20.2m.

According to Work Group’s announcement, since 2013, Gordon Dadds LLP has grown from £2.7m to £22.8m, equating to an annual growth rate of 71%.

kathryn.mccann@legalease.co.uk