'Ignore that. That's burning old money. This new money's perfectly safe.'
Plexus Law’s private equity backers have agreed to inject millions of pounds into the business after it was blindsided by "extremely serious multi-million pound financial irregularities” and client losses which were "hidden from new management for more than a year”.
The defendant PI firm was originally known as Parabis until it collapsed in 2015 and a group led by original founders Andrew McDougall and Tim Roberts bought it out and rebranded.
Plexus appeared to be heading the same way as Parabis until a private equity group, Origin Equity, invested £15m in 2019. A few months later, Plexus CEO McDougall was out the door, as was Roberts.
Alarm bells rang in January when RollOnFriday pointed out that the firm's accounts were almost a year overdue.
When the accounts finally arrived they contained an admission that the previous year’s filings contained “several errors”.
Those mistakes comprised tiny little things like understating the firm's creditors by over £3m, overstating profit, inflating equity partner's average earnings by £40k, and failing to discount £2m of bad debts.
The accounts also revealed that Plexus paid £13.5m to a company owned by McDougall and Roberts for their shares in the business, and paid another £3m to two Plexus partners, Damon Burt and Anthony Baker.
In January 2022, Baker, Burt, and the company owned by McDougall and Roberts repaid £4.7m to Plexus.
A source with knowledge of Baker and Burt’s position told RollOnFriday that the pair received their £3m windfall on the basis that they were lead lawyers in the firm with major client contacts, whose condition for staying with the business was appropriate remuneration. The source said "a repayment of some monies was made” as a result of "warranty claims" but that Baker and Burt “contributed a nominal amount”.
Plexus had previously insisted that “the business is in robust financial health with a strong balance sheet”. But after rumours of emergency talks reached ROF, the firm said in a statement this week that “the knock-on effects of the legacy issues" had led it to "seek a further injection of capital from its investors to put the business on a stable footing for the long term”. However, it said that “claims that Plexus is about to become insolvent are false”.
The additional funding, understood to be £5m which frazzled private equity backers agreed on Thursday to provide, “represents a continuation of support for the firm by its investors over the past 3 years”, said Plexus.
Using far stronger language than in the past, Plexus laid the blame for its difficulties squarely on the McDougall era.
“The current management team, put in place shortly after the 2019 investment by Origin Equity and Access Capital, discovered extremely serious multi-million pound financial irregularities”, it said.
Those irregularities comprised issues with how WIP was recorded, rental invoices being received but not posted, and the loss of a key insurance client, Ageas, which was "hidden from new management for more than a year”, according to the firm.
An independent investigation by Grant Thornton determined that the intention of the errors was to "increase profits artificially", it said, and as result of the auditor's 18 month investigation Plexus took legal advice and investigated matters itself.
The firm concluded that there was evidence of misconduct, ROF understands, and a source close to current management said that Plexus "complied with all regulatory obligations in relation to this".
Plexus has previously said it was not being investigated by the SRA, although it clarified this week that it “has been in regular communication" with the regulator about its "legacy issues".
The irregularities did not comprise the £13.5m payment to McDougall and Roberts, or the £3m payment to Baker and Burt, said the source close to current management.
While the new bosses have started to slate the old bosses, sources close to the former regime have begun to point fingers at the new lot. One told ROF, “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...Typical PE approach…”.
McDougall could not be reached for comment and Roberts did not respond to a request for comment.
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Comments
146
44
Origen continue to blame legacy issues yet take no responsibility for the loss of key lawyers and clients during their abysmal leadership.Desparate and shameful.
49
36
Reads like some of the ancien regime at this firm played stupid games. They belatedly appear to have won stupid prizes.
88
40
A great example of "sunk cost fallacy". The investors will never see that money again. Expect Plexus to sit on the discount shelf of the M&A supermarket until it picks up an inch of dust or just goes mouldy and is swept away with the rest of the trash.
96
52
For the love of god, what are you still doing there? Admittedly, I am only judging based on what I see on RoF - but how do you think this will end? GET THE F OUT NOW!
And trainees considering applying there - if you have not Googled the firm prior to applying and seen this car crash - please do NOT expect the Law Society to ring around to transfer your training contract when this firm folds. I will be vociferously arguing against my firm taking any of you on - despite your CV cover letters boasting of your "commerciality".
One of the pillars of journalism, as I understand it, is that its duty is to expose private wrongdoing where there is a greater public interest. Given the comments above from the GT report, it suggests that RoF has completed a magnificent public service by keeping the public pressure on this firm.
138
45
Origin are like the Tory Government. Despite being in power for a lengthy time, still banging on about how its all the previous regime’s fault. At least Boris finally fell on his sword…. Come Liv give it up love….
131
37
Never Origin’s fault….as people who work at Plexus know.
they spent £2m on financial due diligence of a good profitable firm but then find excuses to blame others when things go wrong due to their gross mismanagement of the firm….what a waste of further investment. More lawyers and clients leaving no doubt
131
34
How many good lawyers and how many clients have been lost post private equity coming in?
48
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Plexus bots out in force this morning I see.
53
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Can't get over the fact Baker and Burt sounds like the first draft of Bert and Ernie - either way everyone's a muppet
57
138
Again sad bitter ex employees sitting behind keyboards and are bitching about Plexus AGAIN!
Why are you so bothered? Think of those that still work for the company your one time EX colleagues some further down the pecking order that need their jobs pouring scorn shameful and darn right NASTY!
131
42
Why the outrage that those who saved the business by buying it out of administration, made a few quid?
Green eyed monsters.
Look what’s happened since they left.
Do you trust those managing the business to turn it around? I wouldn’t.
30
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Couldn't have happened to a nicer lot. Unfortunately had plenty of dealings with them during my TC.
118
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To anyone with an ounce of common sense, Origin’s decision to make comment now is simply interference to distract from what is actually happening in the business. Why do they need emergency funding now? You’re all being gaslighted. Simple.
41
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Bert and Earnie didn’t buy Plexus out of administration
They were gifted millions by McDougall for going along with his plan to sell to Origin
Ageas disclosure, anyone?
127
29
If they were gifted millions then there’s a reason for that. Look at what’s happening to the business. It’s going backwards and blaming people who’ve left when you’ve been running the business for years is rather pathetic.
123
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I’d rather be Burt & Ernie than Fergie & Andrew.
133
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If anyone buys that the injection of cash is for business reformation they should see a doctor. That money is to keep it afloat whilst there is a fire sale.
130
35
£5m emergency cash injection will merely paper over the cracks. Business has been grossly mismanaged for three years and nothing will change. The best thing about the senior management is that there are no lawyers involved apparently... would never work for a law firm in an industry driven by industry relationships. Classic narcissist PE.
37
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Nothing says clean hands like being silent lol
111
31
When other insurers and clients leave, which they inevitably will, will Origin blame that on decisions made years ago. It’s as credible as Conti blaming Spurs current form on Christian Gross.
89
39
DD before signing in 2019, did not discover the alleged “irregularities”. It took an 18 month (?!) investigation by GT to discover the alleged “irregularities”, after which “Plexus” took legal advice and launched their own investigation into the alleged “irregularities”. Something doesn’t add up …..
94
26
The moment PE got a hold of it, it was doomed.
103
24
FSMs capital will be lost and the tax will go unpaid. That is down to the loss of key people and key clients. Those losses are not down to the previous management team. They are down to the current one.
It is unedifying to blame others for the mess the PE two have created.
45
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I dont think clients leaving was the problem. They were doing the work for terrible fixed fee rates or hrly rates as low as £75 an hour in the hope that better paid work followed. It never did. The whole model is doomed to fail. Try n make money on a claim worth 125k damages but insurer pays u a fixed fee of a £1250. Plexus lawyers are responsible for this rush to the bottom so dont be surprised the business fails.
82
29
Buckle up, this is going to be a rocky ride.
Look around you, look at who is left and who is leaving. Look at the muppets now running the show. Think about your tax and capital.
Think about whether you want to be sitting there at the end.
61
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Hi Plexus, you do realise this isn’t a private group chat don’t you?! Their employees and clients must be cringing. Top entertainment though 🍿
89
28
Origin’s story is as believable as Russia’s claim that Ukraine started the war.
36
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A lonely place. Plenty of money but no mates of old. No respect from anyone who knows about the misdeeds. How are the SRA not involved? A clear breach of the principles.
78
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Who wants green eyed monster mates?
Who wants to be caught up in a law firm needing emergency funding?
Clearly, there’s no breach of the Principles and the SRA isn’t interested.
It’s all pish by the sounds of it.
94
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If emergency funding has been secured, it must surely come with some onerous conditions attached. For those remaining, check the small print before you sign up for it!
26
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The merchants of doom predicting imminent insolvency for Plexus seem to have gone a bit quiet.
didn’t play out as they expected last week.
tick tock 😂
51
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the problem with "get out now" for some of them is that the market is flush with BLM lawyers looking to escape so its a bloated jobs market and I cant see some of the Plexus people having the edge. If they do not have a decent client following - that seems to be most of them - then they will have to accept a lower grade or pay. Some of the egos in Leeds and Manchester will not like that so they will have to stay until the bitter end. They did last time!!
Agreed - it is going to get very rocky.
The more junior lawyers should walk away now and secure pastures greener.
65
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You are a muppet who hasn’t got a clue.
39
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Another massive financial red flag. No doubt someone else’s fault again….
All quiet now is all quiet now 🤣🤣
31
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Here we go again! Why are people still there? Do people not realise all the partners are pulling out and firm is going under. You’ve been warned
25
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I worked for Andrew for 16 years and never had a reason to complain and was thankful that he saved my job in 2015 - shame on the new lot trying to shift the blame
17
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Word reaches me that the CEO packed up and shipped off as soon as news broke that administrators were being appointed. I think that says it all.
And as for Aviation Boy now attempting to rally the troops, it’s laughable if it wasn’t so duplicitous. He was OER’s right hand umbrella man for goodness sake!
Comments