The Ince Group is to sell the corporate adviser and stockbroker it only bought in April for a £7m loss as it seeks to focus on its core legal business.
The troubled AIM-listed law firm announced this morning that financial services group Zeus would acquire loss-making Arden Partners, paying an initial £1m in cash – but only on the basis of there being £1m of free cash in Arden and no material outstanding debt.
Zeus will pay a further £2m based on certain Arden revenues it receives in the three months following completion.
Ince’s deal to buy Arden was pushed through even though the London Stock Exchange decided that Arden could no longer be a nominated adviser (nomad) – a financial services business that advises would-be entrants to AIM.
In an announcement to the market today, Ince said: “Following the recent changes in management, the disposal forms part of Ince’s strategy to re-focus on its core legal services business and to dispose of businesses that are not closely aligned to that strategy.
“In addition, the board of Ince continues to implement a number of changes in line with its previously announced cost rationalisation programme and growth strategy, particularly in light of prevailing market and economic conditions.”
The company explained that, following the acquisition, Arden saw “good retention levels amongst its broking clients”.
But the “recent macro-economic headwinds experienced by the capital markets in London” have delayed a substantial part of Arden’s transaction pipeline into early next year and beyond.
“In addition, the continuing pressure on revenues and operating margins within the small cap broking sector has increased the requirement for investment and scale in Arden’s business, at a time when Ince is least able to make such a commitment.”
Arden’s last annual results, to 31 October 2021, showed revenues of £9.3m and a profit before tax of £850,000, with net assets of £5.8m.
“Since then the Arden revenues for the current financial year to date have declined significantly. This decline is largely attributed to the increasingly challenging fundraising market and wider economic conditions in the UK since early 2022.
“As a result Arden is currently loss making and the opportunities and benefits that were identified by Ince at the time of the acquisition of Arden are now not expected to be achievable for the group, given its current resources.”
The disposal is subject to approval from the Financial Conduct Authority and the Ince Group’s principal lending bank.
Donnie Brown, the former chief executive of Arden who took over from Mr Biles to lead Ince, said: “In challenging market and economic conditions, the disposal of Arden will allow Ince to focus its resources on its core legal business where there are increasing opportunities.
“It also benefits Arden, whose clients and employees will become part of a much larger business that is well positioned in the London equity markets.
“We continue with our re-focused strategy for growth and cost rationalisation which is already achieving positive results.”
Ince’s share price has been bumping along at an all-time low of around 5p since the end of July.