Taylor Rose TTKW is set to pay £1.4m to buy McMillan Williams (MW), which was sunk by slowdowns in both the property market and personal injury settlements, and its high level of gearing, it has emerged.
Now a top-75 firm, Taylor Rose has paid £450,000 up front, along with 75% of all recovered clinical negligence and personal injury work in progress (WIP), up to £950,000.
MW’s administrators, Quantuma, said in their SIP 16 statement – the pre-pack sale disclosure statement – that they expected to receive all of this, given the amount of WIP on the books.
The acquisition was announced last month as Taylor Rose aims to become a leading player in the consumer law market.
The statement revealed that McMillan Williams approached Quantuma on 7 February 2020 because the firm had become insolvent because its high-volume residential conveyancing practice was first hit by Brexit uncertainty and then the onset of Covid-19.
It went on: “Clinical negligence and personal injury also provided significant revenue for the business though this income is unpredictable and requires significant investment by the firm and, for complex cases, funding.
“Delayed settlements coincided with the slowdown in residential conveyancing… which resulted in working capital constraints.”
Further, MW was “highly geared”, having WIP and disbursement funding lines for its personal injury and clinical negligence work with VFS and Doorway, as well as a term loan and overdraft facility with Barclays.
It had also received “significant investment” from private equity fund BGF and director John McMillian, along with other short-term facilities.
“Additional funding was not available and none of the board were prepared or able to provide further personal guarantees to support any additional short-term loans.”
Barclays was owed £506,000, VFS £2m and Doorway £2m – the first two had debentures and Doorway a fixed charge.
Some £4.6m of the WIP and disbursements was charged to VFS and Doorway – written down to £4m by WIP valuation specialists ZebraLC – while a further £11.4m (written down to £6.6m) was uncharged, as at October 2019.
“In order to continue trading, the company required additional funding above the level available to it by its existing facilities and neither the company, its directors nor its investors were in a position to provide or secure any further facilities,” the statement said.
There was enough working capital to allow MW to continue to trade in the short term as a buyer was found, however.
“There were no requests made to any potential third-party funders as the company required a significant cash injection in order to trade beyond the period required to identify a purchaser.”
Quantuma received two offers to buy the business and considered that Taylor Rose offered “the best opportunity of preserving and realising maximum value for creditors”.
As part of the sale, Mr McMillan has agreed to stand aside for dividend purposes in the administration in respect of his unsecured claim, while neither Barclays nor VFS raised any objections to the pre-pack.