Legal Services Business ‘Safe’, as Listed Fairpoint Enters Administration

In edition 107 of BC Disease News (here), we reported on Fairpoint Group’s £9 million acquisition of personal injury firm, Colemans-CTTS, increasing its number of fee earning staff by 67. This week, we consider the fate of Fairpoint’s legal operations, subsequent to the announcement that the Board would be appointing administrators by 18 August. Indeed, on 10 August, Fairpoint officially appointed RSM Restructuring Advisory LLP to carry out the administration process, ‘in order to try and preserve any remaining stakeholder value’.[1]

Fairpoint, listed on the London Stock Exchange, previously specialised in personal debt advice and debt management, before acquiring Simpson Millar LLP in June of 2014. Then, Fairpoint, now an ABS, acquired Foster & Partners,[2] Colemans-CTTS[3] and Abney Garsden,[4] in order to strengthen Simpson Millar’s business presence. Upon completion, Fairpoint’s legal services arm represented 67% of the Group’s revenues, which was recorded in its latest annual accounts (here).

Last year Fairpoint’s share price ‘plummeted’ to 10p from 192p, on the basis of ‘downgraded’ profit projections in a ‘turbulent’ 2017.[5] Facing obvious financial difficulties and withdrawn support from its bank, on 28 June 2017, Fairpoint suspended trading.[6] In an announcement to the London Stock Exchange, on 4 August 2017, Fairpoint stated that:

... ongoing support for the Group's subsidiaries outside of the Legal Businesses is made more difficult due to the existence of the onerous lease on the Group's head office which has an annual commitment of £1m per annum for a further 4 years’.[7]

Nevertheless, Doorway Capital Limited, which was assigned the debt of former creditors, AIB Group (UK) plc, has provided a ‘Receivables Funding Facility’ of ‘up to £5 million’ in working capital to Simpson Millar (and its subsidiaries) to ‘take advantage of the growth opportunity presented by the size and highly fragmented nature of the consumer legal services market-place’.

In a separate statement, Simpson Millar emphasised that:

Whilst we are saddened that this has been a difficult time for Fairpoint Group, it is business as usual at Simpson Millar and we do not anticipate any significant changes as a result of Fairpoint Group’s announcement’.[8]

Yesterday, in their latest announcement to the London Stock Exchange, Fairpoint gave assurance that:

The appointment of administrators to Fairpoint Group Plc will have no impact on the day to day running of these businesses [Simpson Millar et al.]’.

Reflecting on its current position, comparisons may logically be drawn between Fairpoint Group plc and Slater and Gordon Limited, both of which are, or have been, listed on stock exchanges; both of which demonstrated an opportunistic approach towards expansion in the wake of legal reform, introduced in 2013; and both of which, albeit for contrasting reasons, have struggled to adjust to increases in corporate size. Slater and Gordon are currently undergoing strategic review of its legal services, ‘which may lead to “dozens” of its lawyers being shown the door’.[9]

 

 

[1] ‘Appointment of administrators, Directorate Change and Resignation of Nominated Adviser and Broker’ (10 August 2017 RNS) <http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/FRP/13326195.html> accessed 11 August 2017.

[2] ‘Foster & Partners Acquired By Simpson Millar’ (1 July 2014 Simpson Millar) <http://www.simpsonmillar.co.uk/news/foster-partners-acquired-by-simpson-millar-2776> accessed 9 August 2017.

[3] ‘Simpson Millar Completes Colemans-CTTS Acquisition’ (15 January 2016 Simpson Millar) <http://www.simpsonmillar.co.uk/news/simpson-millar-completes-colemans-ctts-acquisition-3250> accessed 9 August 2017.

[4] ‘Leading Law Firm Specialising In Representing Victims Of Child Abuse Joins Simpson Millar LLP’ (31 May 2016 Simpson Millar) <http://www.simpsonmillar.co.uk/news/leading-law-firm-specialising-in-representing-victims-of-child-abuse-joins-simpson-millar-llp-3675> accessed 9 August 2017.

[5] John Hyde, ‘Fairpoint enters administration - but Simpson Millar safe’ (4 August 2017 Law Society Gazette) <https://www.lawgazette.co.uk/practice/fairpoint-enters-administration-but-simpson-millar-safe/5062377.article> accessed 8 August 2017. 

[6] ‘Suspension of trading on AIM pending publication of annual accounts’ (28 June 2017 RNS) <http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/FRP/13275655.html> accessed 9 August 2017.

[7] ‘Notice of intention to appoint Administrators’ (4 August 2017 RNS) <http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/FRP/13319175.html> accessed 9 August 2017.

[8] ‘“Business as usual” insists Simpson Millar as listed parent company faces administration’ (4 August 2017 Legal Futures) <http://www.legalfutures.co.uk/latest-news/business-usual-insists-simpson-millar-listed-parent-company-faces-administration> accessed 8 August 2017.

[9] Sol Dolor, ‘Slater & Gordon reviews UK operations after insurer woes’ (8 August 2017 Insurance Business) <http://www.insurancebusinessmag.com/uk/news/breaking-news/slater-and-gordon-reviews-uk-operations-after-insurer-woes-75384.aspx> accessed 9 August 2017.