Linder Myers’ demise shows how buying firms cheap can be costly
Manchester’s Linder Myers has spent the past few years acquiring distressed assets, but now the firm is on the hunt for a rescue merger to pull it back from the brink.
On 6 February Linder Myers filed its intention to appoint administrators at Manchester District Registry Court.
In many quarters of the North West the demise of Linder Myers came as no surprise, not least because the region has already seen its fair share of firm collapses.
In 2010 Halliwells was the first to topple, sending shockwaves through the profession. It was followed last year by Cobbetts, swallowed by fellow Manchester firm DWF. By the time news broke of Linder Myers’ demise the reaction was one of knowing resignation rather than shock and awe.
The firm’s strategy of finding a foothold in Manchester’s surrounding market towns by buying up struggling firms via pre-pack deals has long aroused the suspicion of local lawyers.
“They say it was a tough quarter,” says one Manchester lawyer, “but was there money for tax? What was in their capital accounts? There was a focus on growth but had they adequately considered the due diligence on those mergers?”
The tie-ups trail started in 2008 when Linder Myers merged with Shropshire’s Scott Lister. It followed this in 2009 with a tie-up with Lancashire’s Rostrons, before heading back to Shropshire to hoover up Moss & Poulson then back to Lancashire for Apfel Carter.
At the end of 2011 the firm turned its attention to distressed assets, acquiring Rowlands Field Cunningham (RFC) out of administration as it put in place plans to more than double turnover, from £10m to £25m, in three years. According to a statement at the time, RFC, which was a QualitySolicitors firm, had been suffering cashflow difficulties, but the acquisition would boost Linder Myers’ turnover by £5.4m and create a firm with some 270 staff, including 43 partners.
However, without a cash injection to ease the legacy firm’s problems or some hefty rationalisation it is hard to see how inheriting a load of additional lockup would ever have built a strong foundation.
Still, Linder Myers plodded on with the growth plan. It bought Manchester’s SNG Commercial Law out of administration in 2012 and went on to complete two further mergers that year – Chester’s Drummonds and Lancashire firm Senior Calveley & Hardy Solicitors.
The obvious appeal of these moves is the chance to buy up work-in-progress and debt at a reduced rate, along with a strong infrastructure and brand. Chances are with the right management in place, a return can be made on such an investment. However, the extra property costs – which in this case appear to have been a pivotal issue – and overheads associated with staff and integration mean it is not always such a money-spinner.
In Linder Myers’ case there were mounting issues. The firm had been placed with a distress team at the bank, was being crippled by property costs and, when the January tax bill arrived, was too squeezed to find the funds.
The firm is now on the hunt for a rescue merger of its own, proving perhaps, that you can have too much of a good thing.