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?‘ (£)
