Cobbetts’ wind-down costs: £1.7m, including a £352k legal bill

The total cost of the Cobbetts administration stands at £1.7m, a report by administrators KPMG reveals, with Pinsent Masons taking the bulk of a £352,289 legal bill.

A special administrators’ report published last week by partners Mark Firmin, Brian Green and Howard Smith at KPMG details the fees related to the firm’s collapse between 6 February and 5 August this year.

Almost half of the £352,289 legal fee went to Pinsent Masons, which billed £169,367 in preparation for the firm’s sale.

Time costs of £110,000 relating to an investigation into the conduct of the firm’s partners also emerged in the filings (4 April 2013). A spokeswoman at KPMG said this “refers to the administrators’ fulfilling their statutory duties of investigation”.

The Manchester firm went into administration in February with the bulk of its business taken over by DWF in a pre-pack deal (6 February 2013).

The report confirms that the firm of 73 partners and 439 staff across four offices suffered a signifcant downturn in trading performance in 2009 due to the economic climate and the drop in corporate and real estate deals.

It says the LLP had entered into expensive new leases in 2006 and 2007, which combined with the trading downturn led to a decline in profitability, cash pressure and an over-reliance on short-term funders.

In January this year the firm’s board concluded it would be wrong to take any more short-term funding and also cancelled the £2.5m cash call, instead investigating a merger or sale. Short-term cash-flow forecasts suggested the firm could only trade until 1 February 2013.

On 17 January KPMG,  initially appointed to review Cobbetts’ cash-flow forecasts in June 2012, was instructed in relation to the sale process. Seven parties were identified as potentially having the ability and desire to embark on a takeover. The firm’s management also contacted DWF about reviving talks over a solvent sale after calling off merger talks in 2012 (31 January 2012).

However, DWF made an offer demanding a period of exclusivity to complete the transaction and said it would withdraw its offer immediately if a marketing process was formally kicked off. This prompted Cobbetts’ leaders to put the marketing process off. Several law firms then contacted Cobbetts and KPMG about a potential deal following press reports of the impending administration, but most were related to a potential acquisition of elements of the business rather than a full takeover.

DWF’s managing partner & CEO Andrew Leaitherland said:  “We acted quickly to do the deal because we could see that there were some great quality clients being supported by great quality people. This fitted entirely with our strategy as it enhanced our go to market approach through sectors particularly in real estate and retail. Perhaps more importantly though, we provided a solid platform for 373 people, their careers and clients.”

See Cobbetts’ path to administration to look back at the events that led the firm from a merger-hungry North West leader in 2004 to a firm on the verge of collapse in 2013.