Bennett: Firm grew through acquisition
Axiom Ince’s history of consolidating law firms with financial issues saw its turnover quadruple in just three years even before last year’s deals for Ince & Co and Plexus Law, its joint administrators have revealed.
Leonard Curtis said the administration was likely to cost around £2.2m and highlighted multiple difficulties in establishing the business’s financial position.
This included the fact that Neil Bennett, Alex Cadwallader and Andrew Poxon were appointed more than three weeks after the Solicitors Regulation Authority (SRA) shut down Axiom Ince, meaning many key employees had already left.
Further, “little work” had been done to consolidate the various IT systems that operated across the different parts of Axiom Ince, “which led to complexities in continuing to trade and manage the company”. There was also a “paucity” of company records.
In their report and statement of proposals, delivered just before Christmas, the administrators provided scant detail on the background to Axiom Ince’s collapse, citing the ongoing SRA and Serious Fraud Office investigations.
What was Axiom Stone became Axiom DWFM in 2021 following a merger with DWFM Beckman and then Axiom Ince last May.
“The company largely grew its trade from the purchase of business and assets of law firms, many of which had financial issues,” Mr Bennett wrote, of which the pre-pack acquisitions of Ince and Plexus – completed on 28 April and 7 July 2023 respectively – were the last ones.
In the year 31 March 2021, the firm recorded a turnover of £5.9m and gross profit of £2.8m (with an operating profit of £248,000), rising a year later to revenue of £12.7m and gross profit of £5.4m (and an operating loss of £139,000).
The management accounts for the year to March 2023 showed turnover up sharply again, to £21.3m, and gross profit more than tripling to £17.9m – but an operating profit of just £399,000.
The joint administrators reckoned that, had the SRA not intervened, the Ince and Plexus deals would have tripled Axiom’s turnover.
The directors of Axiom Ince have yet to lodge a statement of affairs but the joint administrators estimated that the firm has approaching £33m in debtors and more than £19m of work in progress. But they did not put a figure on how much of this they hoped to realise.
Barclays holds a fixed and floating debenture in respective of outstanding loans or facilities, which the report estimated at £1.2m, while HM Revenue & Customs as secondary preferential creditor is owed around £4.5m, plus another £1.4m as an unsecured creditor. Trade creditors were put at nearly £12m.
Another unknown was how much missing client money could be recovered.
The administrators said they were “confident of achieving sufficient asset realisations” to make payment to Barclays at a minimum.
Leonard Curtis’s own costs of the administration are estimated at around £1.1m, plus £350,000 in legal fees for Leonard Curtis Legal, its alternative business structure.
The fees of City firm Devonshires, which is acting for the company in pursuing claims against third parties – particularly Axiom Ince owner Pragnesh Modhwadia – were estimated at £125,000.
Other professional costs and trading expenses were put at around £660,000.
Last year, the SRA said it was reviewing the risks of so-called accumulator, or consolidator, firms. “We need to understand whether there is now a new systemic risk which would mean we need to adapt our regulatory approach and how we can best proactively identify early warning indicators.
“In the meantime, we have increased our scrutiny of firms we have classified as accumulators and will commence inspections of a number of such firms.”
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