Cobbetts seeks buyer as administrators are called in
Manchester firm Cobbetts is set to enter administration and is looking for buyers after filing a notice to appoint administrators on Monday.
Michael Shaw
The firm, which has 242 lawyers and more than 551 staff, informed its employees of the news this morning, according to The Business Desk, which broke the news.
In a statement, a spokesperson for the firm said: “Having regard to the difficult trading conditions in the professional services sector we’ve reluctantly concluded that the appropriate course at this time is for the firm to obtain the protection of an interim statutory moratorium to enable a sale of the business and assets of the firm to be concluded in a short time frame.
“We’re also working closely with our regulator, the SRA, with all stakeholders and our professional advisers to achieve the best outcome for creditors, clients, employees and members. We remain confident that we’ll be able to provide a further positive update in the very near future.”
Cobbetts turnover was £45.4m in 2011/12, up from £44.5 in 2010/11, while average profit per equity partner was £323,000. In May 2012, the firm elected litigation head Nick Carr to replace Michael Shaw as managing partner. Shaw had been in the role for 16 years.
The firm had also come close to merging with DWF, but talks broke down in January 2012 with both parties citing uncertain market conditions (31 January 2012).
In December 2012, the firm released its figures for the six months to November 2012, when it said that turnover was more than £20m, in line with the previous year.
At the time, Carr said in a statement: “We’re pleased with our results, operating in what continues to be a challenging economic environment. As forecast, there’s been no real growth in the UK legal market over the last six months. Considering the prevailing market conditions, we set and met a prudent but still challenging budget, forecasting fee generation in line with the market and seeking to align expenditure to anticipated income.
“Our half-year results ensure we remain on target, and new client wins mean that trading predictions for the next six months are strong. We expect to meet our financial targets by year-end.”
Cobbetts is the first major UK law firm to file for administration since fellow Manchester firm Halliwells collapsed in 2010 (25 June 2010). In March 2012 another, smaller Manchester firm, Donns, filed for administration with Irwin Mitchell among the number to pick up its work in progress (23 March 2012).
Cobbetts’ LLP accounts for the 2010/11 financial year, filed last January, show that the firm refinanced with its lenders, Lloyds Banking Group, during the year and had a total of £7.5m in loans in addition to a £2.5m overdraft facility, all due for renewal on 29 June 2012. The facilities comprised a £1m revolving loan, a three-year £3.25m revolving loan and a three-year £3.25m term loan.
At the time the accounts were filed, the firm had not sought written commitments from the bank that the overdraft facility would be renewed. It had, however, held discussions with lenders about its future borrowing needs and had received no information suggesting that the loans could not be renewed under “acceptable” terms, the accounts state. The accounts were drawn up on a going-concern basis despite this.
The 2010/11 LLPs also revealed a £400,000 payout for the firm’s top earner, a 37 per cent increase on £292,500 for the recipient of the biggest profit share in 2009/10.
Cobbetts’ next LLP accounts were due tomorrow (31 January), nine calendar months after the firm’s 30 April year-end.
On 22 January the firm filed a document at Companies House detailing a change in its agreement with Lloyds, signed off by Leeds law firm Walker Morris. It reveals a debenture securing lender Lloyds TSB against all outstanding and future debts, filed just eight days before the firm announced it would appoint administrators.
The filing also gave the bank the power to appoint an “administrator and/or receiver”.
For details on the firm’s path to administration, click here.
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Readers' comments (70)
Roy Rollings | 30-Jan-2013 5:47 pm
What terrible news. A bad day for all employees, especially trainees.
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Anonymous | 30-Jan-2013 5:54 pm
Having managed to escape Cobbetts several years ago I am surprised it has managed to survive so long. It was incredibly badly managed by dull uninspiring 2nd rate wannabee under achievers. I remember sitting in a partners meeting during which a Manchester Cobbetts partner was exhorting a double in turnover for the Birmingham office with no thought as to how this was going to be achieved other than putting bums on seats. This was so typical of Cobbetts divisive and incompetent management.
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Anonymous | 30-Jan-2013 5:56 pm
Good but expensive building, mid-ranking firm, lack of strategic direction etc etc - I hate to say it but there are firms such as Lawrence Graham who may go the same way.
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Anonymous | 30-Jan-2013 6:08 pm
@5.34
There is enough quality in that firm that most people transferring should be less worried about fallout than the incumbents of the successor firm.
Hopefully a deal won't be stitched up by the same small group of time servers who looked at their pension pots a few years ago and decided it wasn't quite time to go yet, losing a lot of talent and ambition in the lower ranks in the process, to protect a couple more years of earnings. Or so I hear...
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Anonymous | 30-Jan-2013 6:19 pm
Sad for those involved but amazed that it has come as a surprise to some as Cobbetts collapse has been on the cards for years, just a matter of when. Lots of decent lawyers there, so the surprise really should be why more didnt jump ship sooner. Makes you wonder what the internal spin machine was doing..
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Anonymous | 30-Jan-2013 6:20 pm
I spent a number of years at Cobbetts and the people there were first class. The firm had a number of successes and if it had not been for the expensive offices the firm would blossom. All the best to the people there, I hope somebody comes in quickly to take you on.
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Anonymous | 30-Jan-2013 6:32 pm
Poor old Michael Shaw - that photo gets wheeled out any time Cobbetts is in the press. He looks positively demonic!
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Anonymous | 30-Jan-2013 6:38 pm
A buyer? Really?
What would they get? Surely the best lawyers will now be cherry picked by the big firms with the remainder going to struggling mid-tier practices.
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Anonymous | 30-Jan-2013 6:53 pm
Maybe the timing was right to avoid a significant tax payment that is due on 31 jan? TIming is everything!
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Anonymous | 30-Jan-2013 7:20 pm
Cobbetts is a great firm full of great people that have now fallen on hard times, and they're far from alone in a hostile market. Nick Carr in particular is a class act and deserves a better legacy - anyone making fun of the situation should remember that the careers of a lot of very talented lawyers have just become way more uncertain. Sarcastic comments are in bad taste here - just because the market conditions haven't affected you yet doesn't give you the right to laugh at those less fortunate; bad decisions may have been made but I've seen far worse.
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Anonymous | 30-Jan-2013 10:37 pm
Can't quite understand the more vitriolic comments of some. The fact is a lot of people could lose their jobs here - and anyone who can gloat about that needs to take a long hard look at themselves.
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Anonymous | 30-Jan-2013 10:47 pm
although surprised at the news today, it’s hardly unexpected from the stories in the legal press over the years. I’ve dealt with many of the lawyers in their Leeds property dept in the last few years and always thought there was something good about them. hopefully the good people there will find something quickly.
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Anonymous | 30-Jan-2013 11:14 pm
Very sad to see. The firm has some fantastic people and, speaking as an ex-employee, was a genuinely nice place to work. Good luck to all at the firm.
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Anonymous | 31-Jan-2013 6:39 am
This is an absolute financial HOWLER. Gee-whiz. What a RANCID state of affairs. Truly awful.
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Anonymous | 31-Jan-2013 10:22 am
Before all the nasty comments about DWF continue, I wonder whether people should pause and think if it weren't for DWF the vast majority of Cobbetts staff would be out of work in a difficult market. I think people should stop being judgemental and downright nasty and realise that a bad thing has happened here and if something can be salvaged and people can stay in work that should be celebrated not criticised.
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Anonymous | 31-Jan-2013 10:24 am
Agreed that there are some excellent lawyers and teams there who should and will be snapped up. I have to agree with the comment about The Lawyer loving any chance to wheel out that awful photo of Michael Shaw, which given he stood down some time ago, seems rather odd. Good luck to all there.
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Anonymous | 31-Jan-2013 10:35 am
I worked at Cobbetts for several years. I hope they find a buyer, and that jobs and training contracts are saved.
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Anonymous | 31-Jan-2013 12:08 pm
I can't help but wonder whether this was the plan all along. DWF are likely to pick up a pre-packed Cobbetts, free from debt and with a not unreasonable client list.
This instead of taking on Cobbetts, warts and all, in the proposed merger last year.
I'm sure there won't be any way of proving the above, but I have no doubt that talks to this effect took place.
It will be interesting to see who lands where and we will be better able to put the pieces of the jigsaw together.
I'd also like to offer my wishes to all those who will find themselves out of work in a tough market. A horrible situation and not a great start to the year.
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Anonymous | 31-Jan-2013 12:34 pm
My girlfriend works at Cobbetts. I rate her.
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Anonymous | 31-Jan-2013 12:39 pm
It's also interesting to compare and contrast the general sentiments posted here with those posted at the time of Halliwells demise.
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