Merger vital to saving ‘unmanageable’ Ince business, says Quantuma
Newly-merged listed firm Ince Gordon Dadds saw its share price dip to an all-time low of 130p in March, following a damning creditor’s report from administrator Quantuma on the legacy Ince & Co business.
The share price was the firm’s lowest since it floated on the London Stock Exchange in 2017, when it listed at 140p. It reached a high of 190p on 2 January 2019 in the immediate aftermath of the Ince acquisition. But following the Quantuma report on 11 March, which found that Ince’s equity partnership had ‘no appetite’ to collectively contribute £8.5m in additional capital to save the firm, Ince Gordon Dadds’ share price fell to 130p on 15 March, remaining at that amount at press time (26 March).
Quantuma’s filing also revealed that Ince’s situation would have become ‘unmanageable’ by January 2019 had it not sought a merger: ‘[It] would have led to the uncontrolled break-up of the firm with a heightened risk of an intervention by the SRA [Solicitors Regulation Authority].’
In response to the report, Jan Hungar, Ince’s managing partner in Germany, commented: ‘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 enable us to grow. Since the merger, the combined firm has already demonstrated that we are able to service existing clients better and offer new clients a greater range of products.’
As part of a contingency plan had no merger been agreed, the firm decided that retired partners would not be paid any outstanding capital repayments due on 31 December 2018 in order to manage cashflow.
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, who are owed £7.2m, will only receive less than 1p in the pound. Meanwhile, creditors of the Services branch, who are owed £7.1m, are in line to recoup 3.5p in the pound.
The report also charted 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 2018 this had reduced to 22. The costs of repaying capital to the former partners who left during this period was estimated to be around £4m.
‘The combined firm has already demonstrated that we are able to service existing clients better and offer new clients a greater range of products.’
Jan Hungar, Ince Gordon Dadds
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 and Pinsent Masons were enlisted to provide legal advice during the administration, with the former accruing £134,164 in fees and the latter totalling £123,717.
Despite the share slump, Ince Gordon Dadds has embarked on its first significant post-merger expansion, building its Gordon Dadds International network with a triple-partner hire in Asia. The new partners will bring with them a total of 25 extra staff. Eric Lui joined the Hong Kong office in March, bringing experience in banking, corporate finance and initial public offerings, across Hong Kong and mainland China. He arrives from local firm ONC Lawyers with a team of over ten fee-earners, including senior disputes associate Alfred Lau, who will join as a partner in April.
Ian Lo, who heads up ONC’s construction and arbitration team, will also join as a partner in May. He will create a new construction practice, using his experience in high-value disputes arising from construction projects in the region.
David Beaves, head of Ince’s Hong Kong Office, said that the new trio will ‘immediately be servicing new clients’ as well as ‘providing our existing clientele with an expanded range of expertise, practice specialisation and intellectual capital.’
Legacy Ince has a long history in the region, becoming one of the first firms to open in Hong Kong in 1979, before launching in Shanghai in 2000 and Beijing in 2012.