Disarray: The story behind the Davenport Lyons "reverse takeover" by Gordon Dadds
29 April 2014 | By Lucy Burton
5 May 2014
28 April 2014
28 April 2014
8 May 2014
16 May 2014
As Davenport Lyons enters administration, The Lawyer relates its final days.
The mood at Davenport Lyons is as low as it could be. Staff were told the firm was going into administration last Friday (25 April). That day those offered a job - mostly partners - were called one by one into a meeting with the firm’s acquiror, Gordon Dadds. By the end of the day, those not called were left in the dark.
There are about 50 people in this group, mostly support staff and associates. According to sources it was this bracket - primarily the junior end - that had long been kept out the loop, despite Gordon Dadds and Davenport Lyons starting to talk back in February.
For everyone but the equity partners, the situation has been hazy. Even the firm’s PR team had to double check yesterday morning (Monday 28 April) that its client had gone into administration. This is probably excusable, seeing as only a month ago the firm’s CEO appeared remarkably bullish.
“The only reason we’d go into administration is if it was planned as part of a deal with a much larger firm,” CEO Richard Williams told The Lawyer just weeks ago (11 March 2014). “There is no creditor, lender or landlord putting pressure on us.”
It is unusual, then, that Davenport Lyons ended up being acquired by one that’s half its size. Indeed, market sources claim the deal, which amounts to a reverse takeover, is “unprecedented” in the legal market context.
Around 30 Davenport partners (all but four) have now moved over to eight-partner Gordon Dadds, with each signing a long-term incentive plan that will become effective in January 2015. The details, as yet unknown, are likely to be the smaller firm’s carrot for any of those with a wandering eye.
Davenport’s six trainees, part of a reduced intake (29 November 2013), have also transferred to Gordon Dadds, as well as around 50 other staff members. The rest are understood to be facing a redundancy consultation.
This can hardly be Williams’ desired outcome, especially given that he is not included in the deal himself, at least not so far. He had been adamant that the firm would merge with a larger firm, having been in talks with several larger firms including a US operation (11 March 2014). This may explain why, after being introduced to Gordon Dadds back in February, the firm sniffed out the tie-up options with Shakespeares (30 January 2014) and Howard Kennedy FSI (27 February 2014).
Sussex-based Thomas Eggar is thought to have been the most recent name in the frame, but a deal is thought to have fallen through because not enough partners would have transferred.
But who is Gordon Dadds? The Mayfair-based firm is no stranger to the pre-pack deal, having acquired London-based Harris Cartier (with PI firm Neil Hudgell) after it went into administration last October. The firm then opened up an office in Cardiff last month, following a £200,000 investment backed by the Welsh Government to create 14 jobs.
With big plans to grow, Davenport Lyons’ 15-year lease of its 31,500 sq ft building is likely to be a burden.
“The 15-year lease will probably fall away,” confides one insider, adding that negotiations were under way at the time of writing.
Gordon Dadds managing partner Adrian Biles says the main thing for now is post-deal integration.
“We have complementary practices, and our firms are similar in outlook and culture,” he adds. “Dadds just has more rigorous financial management.”
The firm has ambitions to be in the top 100, perhaps echoing a warning Williams made to The Lawyer last month.
“Being a £20m-£22m law firm in this market isn’t going to work,” he stressed. ”The only genuine solution is critical mass.”
For the record, Baker Tilly partners Andrew Hosking, Richard Brewer and Matthew Haw are the administrators of Davenport Lyons, with legal advice coming from Pinsent Masons partners Steven Cottee and Jonathan Jeffries.
Davenport Lyons did not comment.