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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

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?’

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?’