Ince Gordon Dadds has defended its strategy of buying up firms in administration.
It has been criticised for acquiring Ince & Co on New Year's Eve in what was revealed to have been a pre-pack administration deal, under which the listed firm left behind Ince & Co's debts and most of its international network.
Last week sources close to Ince Gordon Dadds defended the move, claiming that Ince's accounts were in such a mess that cleaving off unsecured creditors via a pre-pack was the only way to give comfort to Gordon Dadd's investors. In a sign of how nasty it's got, Ince Gordon Dadds went on the record trashing the legacy firm. A spokesman said, "Ince & Co could not agree the balances with their international offices – all Gordon Dadds wanted was certainty as to what the balances were. That situation definitely contributed to the advice they received in terms of protecting investors, which was followed".
But a source close to Ince & Co told RollOnFriday that Ince's accounts were not particularly problematic, and suggested that Gordon Dadds' preferred method of acquisition was to acquire firms via pre-pack deals to avoid paying unsecured creditors. A spokesman for IGD said that was "not the strategy" and that Ince & Co was the only firm it had placed into a pre-pack. He also pointed out that Gordon Dadds was open about seeking to acquire firms which were in difficulty due to poor management, but aside from Ince, "in every other case" the firms acquired via pre-packs "were already in the hands of an insolvency practitioner who became the administrator". He said that Gordon Dadds was always "one of a number of firms negotiating to acquire the business assets of those firms".
A potted history:
- In 2014, Gordon Dadds purchased Davenport Lyons after it made a loss of £547,000 in the first 10 months of 2013/14 and went into administration. Davenport Lyons’ administrator, Baker Tilly, said in its report that the SRA backed the pre-pack sale to Gordon Dadds because it avoided the need for statutory intervention which might have meant that creditors received nothing. Nevertheless, the unsecured creditors, who were owed £13.6m, are understood to have received just 10p in the pound.
- In 2015, Gordon Dadds purchased Jeffrey Green Russell in a pre-pack after the firm struggled to meet its insurance bill. The administration was handled by Quantuma, whose partner Andrew Hosking acted on the Davenport Lyons administration while at Baker Tilly. JGR's unsecured creditors are understood to have lost over £7m. Hosking explained, “The sale to Gordon Dadds not only preserves jobs and the interest of the firms’ clients but also represents the best return to creditors".
- In 2016 Garrynasillagh Ltd, a subsidiary of Gordon Dadds, acquired Prolegal Solicitors via a pre-pack. The administration was handled by Quantuma. Discussing the administration at the time, Hosking said the firm's over-leveraged nature caused cashflow issues. Prolegal is understood to have left unsecured creditors approximately £7m out of pocket.
- In 2018, Gordon Dadds worked closely with Metcalfes solicitors as it made a pre-pack acquisition of Burroughs Day, whose administration was again handled by Quantuma. Gordon Dadds acquired Metcalfes Solicitors a week later. "Metcalfes is a profitable and very well regarded firm of solicitors in Bristol", Adrian Biles, chief executive of Gordon Dadds, said, "with whom we have worked to integrate the Burroughs Day business".
A spokesman for Ince Gordon Dadds said that Gordon Dadds may have held conversations with some firms about becoming a bidder if they went into administration, but cited Davenport Lyons as an example of how, practically, the firm was not involved prior to an administration. When it became clear that Davenport Lyons was in trouble, he said, Gordon Dadds approached the firm, but it turned down Gordon Dadds' advances. It was picked by the administrator on the strength of its bid.
Last week the firm stressed that it fully intended to settle all its debts and that the pre-pack was not a device to enable Gordon Dadds to escape Ince's obligations. Things seem to have changed in a few days. "Will the creditors be repaid in this case, with Ince?", said a spokesman for Ince Gordon Dadd. "That's a question for the administrator. And in each other case, it's not Gordon Dadds' job to repay creditors".
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