Legal Business

‘Major consolidator’: Work Group raises £20m as it gears up to list Gordon Dadds in August

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Following Work Group’s conditional £18.8m reverse takeover bid for West-End firm Gordon Dadds, Work Group confirmed it has successfully raised £20m, as the firm gears up to publicly list in August.

Work Group said in a statement that it had raised £20m through the conditional placing of new ordinary shares in Work Group, at a post-consolidation price of 140 pence per share, which would give the enlarged group a market capitalisation of £40m, based on the placing price on admission to AIM.

Adrian Biles, chief executive of Gordon Dadds Group Limited told Legal Business that the fundraising was designed ‘to strengthen the balance sheet, to raise £18m net of expenses, £4m is to pay off debt – which on a business with an annualised income of £30m is not very much.’

‘We have spent a lot of money on technology and infrastructure which has been fully expensed through the profit and loss account. Now the firm is well-placed to grow,’ Biles said.

‘There will be £14m of cash on the balance sheet to fund both legal and non-legal acquisition,’ he added.

On the rationale for the buyout of the firm, Biles said the acquisition was a significant opportunity to create a substantial legal practice in the UK and position Gordon Dadds as a ‘major consolidator in this fragmented market.’

Once the purchase has completed, Work Group will change the firm’s name to Gordon Dadds Group plc.

Gordon Dadds aimed to ‘integrate mid-market law firms’ under the Gordon Dadds brand and buy smaller firms through its Prolegal acquisition vehicle, according to a statement.

Biles added: ‘Through the Gordon Dadds and Prolegal business units, the Group will provide an attractive platform for legal practices to gain the necessary scale to compete in the current market environment.’

The takeover will give Gordon Dadds shareholders a total of around 46.9% of the enlarged market share of the listed company.

Biles said the admission to AIM will provide the necessary capital for the Group’s next phase of development. It will also serve to enhance the Group’s profile with clients and potential acquisition targets, he added.

‘We have a clear strategy for creating a strong, fast growing business and we look forward to delivering value to our shareholders and partners,’ added Biles.

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 70.7%.

kathryn.mccann@legalease.co.uk

Legal Business

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

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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.

kathryn.mccann@legalease.co.uk

Legal Business

Super Dadds: West End firm rescues Jeffrey Green Russell from pre-pack administration

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West End firm Gordon Dadds has rescued another ailing firm by acquiring Jeffrey Russell Green (JGR) following a pre-pack administration, creating a full service firm. 

The tie-up brings Gordon Dadds into the last quartile of the LB100, with turnover of £30m.

Under the terms of the deal completed late on Friday 2 October, ‘most’ of the current directors of JGR will become partners at Gordon Dadds and transfer their practices and clients, following a pre-pack deal after the appointment of an administrator to JGR.

The deal follows Gordon Dadds’ rescue of beleaguered Davenport Lyons in late April last year, in which it brought over the client database, the lion’s share of assets and most of Davenport’s partnership, in a pre-pack deal that took place before anyone outside of the two firms or its accountant Baker Tilly was aware that the firm had gone into administration on Friday 25 April.

Having also picked up City-based litigation and corporate firm Harris Cartier in 2013, Gordon Dadds managing partner Adrian Biles told Legal Business it was the firm’s aim to become a top 100 UK firm.

The strategy so far has been to bring into the fold those firms hit harder by the recession and Biles said at the time: ‘As the economy comes out of recession and business increases, the working capital requirement of firms who are building up working processes and as debt increases, it is probably now that the strain will show on firms with cash flow difficulties than a firm at the beginning of the recession.’

On its latest union, Biles said: ‘Our ambition is to provide the very best platform for their many talents, freeing them from the constraints of high-cost central London administration and equipping them with cutting edge technology, systems and processes. This will be our management team’s third integration of a significant team in under two years.’

JGR chair Philip Cohen added: ‘We are well known for our heavyweight litigation, lending, commercial and licensing expertise and see joining with Gordon Dadds as the best way of improving the depth, breadth and coverage of our service to our clients. Our business and our valued clients stand to benefit in a number of ways too from Gordon Dadds’ highly efficient administration and IT centre, based in Cardiff. 

‘Unfortunately, we could not take all our support services staff with us – I am extremely grateful to them for their past services to us – but we are already helping them to find new jobs within a buoyant London economy. Our fee-earners are hugely enthusiastic for this deal and for what they will be able to achieve in their new home.’

sarah.downey@legalease.co.uk

Legal Business

‘It is now the strain will show on firms’: Gordon Dadds MP talks takeovers and strategy after the fall of Davenport Lyons

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After a series of failed merger talks, the surprise takeover of beleaguered West End firm Davenport Lyons by Gordon Dadds is, according to Gordon Dadds’ managing partner Adrian Biles, indicative of the wider strain that firms will start to feel as the recovery kicks in.

The timing of the takeover was swift. Monday 28 April brought the announcement that Gordon Dadds had bought the client database, the lion’s share of assets and brought over the majority of Davenport’s partnership, in a pre-pack deal that took place before anyone outside of the two firms or Baker Tilly was aware that the firm had gone into administration on Friday 25 April.

Interestingly, it was Wikipedia that first gave any hint of the administration, having been updated over the weekend to read: ‘Davenport Lyons was a London-based law firm that entered into administration on 25 April 2014.’

Even Twitter was silent first thing on Monday, save for one question from @keziz: ‘Is it true about Davenport Lyons? Odd new line in their Wikipedia entry – not that that is always reliable!’

In this case, it was. The terms of the sale were agreed in the week running up to 25 April by Baker Tilly as joint administrator. A spokesman from Davenport Lyons confirmed: ‘As of close of business on Friday 25 April, the legal entity known as Davenport Lyons ceased trading and the majority of the company’s client balances, work in progress and client files have been transferred to Gordon Dadds, who will also be collecting debtor balances on behalf of the administrator.’

Davenport Lyons has around 73 fee-earners, in addition to its 42 partners, and 80 staff including 30 partners will transfer to Gordon Dadds.

Chief executive Richard Williams has still not so far agreed to move across to Gordon Dadds, although negotiations are on-going.

Biles said: ‘It would be correct to say that Richard Williams will not be CEO of Gordon Dadds, but whether there is a role for him somewhere in the group moving forward is still in negotiation.’

Davenport’s pursuit of a merger –with Shakespeare’s last December and most recently HowardKennedyFsi – and declining financials were tell-tale signs, and the firm had been dogged by rumours that it faced administration.

The firm that was once famous for acting on behalf of UK publication Private Eye had struggled for growth in recent times, with its revenues down 11% from £24.5m to £21.9m in 2012/13, while profit per equity partner dropped 12.5% to £197,000. It was acknowledged as a first-tier firm by the Legal 500 in the media and entertainment industry, but went onto subsequently get rid of its film and TV group last November.

In July last year it moved into new offices in the West End, taking 31,500 sq ft over three floors at 6 Agar Street in Covent Garden – with the cost of too much expensive real estate understood to have contributed to its downfall.

The timing of the collapse is almost counterintuitive, with the firm having just about ridden out one of the worst recessions in history, however Biles, who is careful in his responses, says: ‘As the economy comes out of recession and business increases, the working capital requirement of firms who are building up working processes and as debt increases, it is probably now that the strain will show on firms with cash flow difficulties than a firm at the beginning of the recession.’

With an objective to spend the next three to four months planning the integration, Gordon Dadds, which last year merged with City-based litigation and corporate firm Harris Cartier, hasn’t yet made any decisions on premises in the short term and is currently in talks with the landlord at Agar Street.

The Mayfair firm needs to upsize and Biles adds: ‘We wanted a firm in particular that had too much space. It obviously wasn’t able to utilise the space that it had. That was a great opportunity for us.

‘The minimum size or critical mass for a law firm keeps getting larger. What might have been feasible to generate £1m ten years ago is now not feasible. And the critical mass size keeps increasing as the regulatory burden increases. As competition increases you have to be larger to be profitable and to survive.’

The combined firms’ growth strategy, Biles says, is to become a top 100 UK firm, which on current figures it falls just short of. Early estimates put the combined revenue of the firms at £20m, which is less than Bristol-based Veale Wasbrough Vizards generates at LB100, with a turnover of £22.4m.

Biles is optimistic: ‘People are increasingly positive despite massive disruption over negotiations over the last few months. It’s been very difficult for people at Davenport. The mood in the enlarged firm is positive. As the personnel becomes resolved, the direction of the firm becomes clear, and everybody feels comforted by that security.’

Sarah.downey@legalease.co.uk

Legal Business

Davenport Lyons goes into administration as Gordon Dadds takes on business

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After two rounds of failed merger talks Davenport Lyons went into administration at the end of April, with Mayfair firm Gordon Dadds confirming that it had taken on the client database, the majority of assets and secured nearly all of the partners of the West End firm.

The terms of the sale were agreed the week before by joint administrator Baker Tilly. A spokesman from Davenport Lyons said: ‘As of close of business on Friday 25 April, the legal entity known as Davenport Lyons ceased trading and the majority of the company’s client balances, work in progress and client files have been transferred to Gordon Dadds, who will also be collecting debtor balances on behalf of the administrator.

Legal Business

Davenport Lyons goes into administration as Gordon Dadds takes on clients, assets and partners

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After a series of failed merger talks Davenport Lyons has gone into administration, with Mayfair firm Gordon Dadds confirming today (28 April) that it has taken on the client database, the majority of assets and secured nearly all of the partners.

The terms of the sale were agreed last week by joint administrator Baker Tilly. A spokesman from Davenport Lyons said: ‘As of close of business on Friday 25 April, the legal entity known as Davenport Lyons ceased trading and the majority of the company’s client balances, work in progress and client files have been transferred to Gordon Dadds, who will also be collecting debtor balances on behalf of the administrator.

‘Gordon Dadds has entered into arrangements with the majority of the partners of Davenport Lyons to enable them to continue to care for their existing clients and a number of Davenport Lyons staff will also be joining Gordon Dadds.’

Davenport Lyons has around 73 fee-earners, in addition to its 42 partners, and the spokesman for Davenport Lyons said approximately 80 staff will transfer to Gordon Dadds, including 30 partners. Chief executive Richard Williams has not so far agreed to move across to Gordon Dadds, although negotiations are on-going.

The West End firm had struggled for growth in recent times, with its revenues down 11% from £24.5m to £21.9m in 2012/13, while profit per equity partner dropped 12.5% to £197,000.

Davenport Lyons, which last November got rid of its film and TV group, had so far this year engaged in merger talks with both HowardKennedyFsi and Shakespeares, amid growing speculation over its finances, although it has so far previously denied publicly it was in financial difficulty.

HowardKennedy called off the talks at the end of February, just weeks after Shakespeares took the same decision.

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.’

Biles added that the combined firm will be a UK top 100 firm, operating out of offices in Mayfair and Covent Garden.

‘It will benefit current and future clients and enable us to expand our activity across new disciplines, helping us to achieve our goal of positioning Gordon Dadds LLP as a centre of excellence for all aspects of corporate, commercial, real estate, dispute resolution, employment, intellectual property, media and technology and private client and family law. The new team is very excited by the synergies and capabilities as we move forward as what will be a top 100 law firm,’ Biles added.

david.stevenson@legalease.co.uk