Firm identifies insurance and litigation as post-administration saviours
Hextalls partners have spent the Easter weekend locked in discussions with Begbies Traynor administrator David Hudson to identify the core group that will take the firm out of pre-packed administration tomorrow (14 April).
Litigation partner Matthew Hennessy-Gibbs said the insurance firm will emerge from the process as a smaller outfit focusing on insurance and litigation.
The Lawyer understands that the firm’s financial director Stephen Akers walked out last week, following in the footsteps of corporate partner Nick Cockcroft and commercial partner Robert Brooks, who are launching a second London practice for Cramer Pelmont.
Former chairman and chief executive Matthew Clark has left for partnership at Elborne Mitchell, while last week insurance giant Kennedys took a team of eight from the firm, including personal injury partners Joe McManus and Charles Martin.
Hennessey-Gibbs said that although the firm had embarked on a growth mission, its plans had been hampered by the downturn.
According to the latest accounts filed with Companies House, the firm’s operating profit fell by 67 per cent, from £2.8m to £946,000, in the 2006-07 financial year. Over the same period the total amount it owed to creditors increased from £1.3m to £2.5m.
One source close to the firm said: “They’ve grown too quickly, partners have left and those that have stayed have been left to pick up some big bills.”
It is understood that the firm’s financial backer, private bank Hampshire Trust, asked the administrators to take control of Hextalls.
Although entering pre-packed administration can be beneficial because it offers the new company protection from creditors, Addleshaw Goddard head of professional practices Richard Linsell said law firms choosing that route could risk not being paid for work in progress.
“When a professional services firm gets into distress its value can walk out the door at the end of a day’s work and not return the following day,” he said. “If that happens, the value of debts due to the firm and work in progress evaporate.”