That negotiation in full.
Plexus has filed a notice of its intention to appoint administrators.
Staff have blamed the firm’s private equity backer for destroying the business after it u-turned on its decision to provide emergency funding.
Last Thursday a source provided RollOnFriday with a running account of an internal meeting at which it was revealed that Origin Equity had withdrawn its promise to provide £5m, and that the firm was being put up for sale. “Interpath and Pinsent Masons instructed. They’ve just mentioned ROF ha ha”, said the mole.
Earlier that week a source claimed that Chief Operating Officer Adam Nabozny, the Financial Director, and the Head of HR were all leaving the firm, and that a dozen partners had also jumped, while a recruitment freeze had been put in place.
It is the second time that a private equity business has arrived to save the firm and then failed to do so. In 2012 Duke Street purchased Parabis - the larger company of which the firm was part – but three years later Parabis collapsed into administration as well.
A group led by original founders Andrew McDougall and Tim Roberts bought out the defendant PI business and rebranded it as Plexus.
It was heading the same way as Parabis until Origin Equity invested £15m in 2019. A few months later, Plexus CEO McDougall and Roberts were out, and Origin partner Olivia Roberts was in as the firm’s new CEO.
But a hefty red flag appeared in January this year when the firm's 2020-21 accounts arrived almost a year late containing an admission that the previous filings had understated the firm's creditors by more than £3m, overstated profits, inflated equity partner's average earnings by £40k, and failed to discount £2m of bad debts. It also disclosed a series of multi-million payments to and from its former owners.
Plexus had previously insisted that the business was in “robust financial health with a strong balance sheet”, but when rumours of crisis talks reached ROF, the firm admitted in a statement in March that it was seeking an emergency injection of capital from Robert's other gig, Origin, “to put the business on a stable footing for the long term”.
It insisted that “claims that Plexus is about to become insolvent are false” and laid the blame for its difficulties squarely on the McDougall era, alleging that the “extremely serious multi-million pound financial irregularities” were "hidden from new management for more than a year” and had been intended to "increase profits artificially”.
In March a source close to the former owners told ROF that Origin was trying to shift the blame from its own failures: “Plexus is where it is now as a result of the management style and behaviours of the PE owners from late 2019 onwards which has seen the firm haemorrhage lead partners, lawyers and clients”, he said, branding it a “Typical PE approach”.
Origin’s subsequent conduct appeared to chime with the worst stereotypes of high finance when the firm confirmed to ROF (after much wiggling on a hook) that Origin had u-turned on its promise of emergency funding, plunging the firm's 700-odd staff into uncertainty as the business was put up for sale and, now, placed on the path to administration.
In a statement it said, “Plexus was successful in securing additional funding from its investors in March 2023." [Translation: is there any way we can we get the word ‘successful’ into this confirmation of total disaster?]
“This funding was needed due to the ongoing impact of serious financial irregularities discovered by management after Plexus was acquired in 2019." [Blame the last lot, not us!]
“The terms of the new investment were subject to a number of conditions." [When we said the investment was ‘secured’, what we meant was, 'in no way secured'.]
“Unfortunately, after a period of negotiation, we have been unable to broker the necessary agreements to meet all of those conditions." [Our CEO's negotiations with herself did not go well.]
“As a result, investor support has been withdrawn." [We’re doing a runner. Good luck, bye.]
“Up until this point, the business’ underlying trading has been running in line with its forecast." [Token appeal to potential purchasers.]
“In these circumstances, we are now looking to raise fresh funds for the firm from a new investor. This may involve a sale or merger of part or all of the business with another firm." [We're going to file for administration.]
When ROF broke the news of the intention to sell, staff expressed their dismay.
“Origin have destroyed the firm and once they took control this was unfortunately always the inevitable outcome given how they treated key partners and clients who voted with their feet. They were never fit to run a law firm”, said one. “They will probably still be blaming others but everyone knows the truth and all paths lead to them.”
“Did their CEO not tell RoF a matter of weeks ago that they had secured funding and the future was rosy. How can it go from that to telling staff today that they cannot guarantee being paid this month?!” said another.
“Saw this coming as soon as I met the CEO and realised she was a carbon copy of the Duke St one. History repeating itself. No lessons learned”, said one.
Some took aim at Plexus partners for failing to fight when they had the chance. “You should all hang your heads in shame too for being hugely complicit in the destruction what was a good, profitable and friendly firm. You failed to question any ridiculous decisions that Origin took including sacking key partners and alienating others, and blindly supported and backed them”.
Referring to the company’s overdue 2021-22 accounts, one person called on the firm to “Post the accounts! Companies House is waiting and we want to see how much debt (Origin money) has been repaid in the last 12-18 months. No doubt that’s why there is no money left and staff are told they need work 24/7.”
Former Plexus staff expressed sympathy for those now facing difficult times.
“As a ex-employee of the company who left last year after the current CEO shafting employees for their TUPE payment - I feel extremely sad for those that were again fed the fairytale of the company being in a rosy position, etc, and stayed”, said an ex-employee.
“Origin have come in and bled the company dry and then cut them loose with no regard whatsoever...Hopefully, karma will bite them in the ar*e bigtime. Shame on you.”
“The very first sniff of Origin was enough for me to bail, and I am very glad I did", said another: "once PE are involved on the board it’s ultimately Duke Street all over again and curtains. Many good people will now be going through very uncertain and worrying times and that’s awful”.