Slater & Gordon proves ambition to be consumer law powerhouse with £33m Pannone deal
Grech: Pannone delivers us the scale we need
Slater & Gordon (S&G) will have more than 5% of the UK personal injury market, and number one or two market share position in most consumer law practice areas, it claimed today after announcing details of its long-awaited acquisition of Manchester firm Pannone.
The £33m deal, which should be completed in February, will see S&G take Pannone’s consumer law business, including around 400 staff, with the corporate arm spinning off into an independent practice. Due diligence is substantially completed and formal business sale agreements have been executed.
The Australian listed alternative business structure said the annual revenue generated by the acquisition is £34.5m, rising to £72m when taken with the other recent deals to buy Fentons, Goodmans, John Pickering & Partners and the PI practice of Taylor Vinters.
Some £40m of this will be in the S&G’s 2014 financial year, and its total UK revenue for the year is now expected to be £89m. It will have around 1,200 staff.
The deal also goes some way to rebalancing S&G’s UK operations, which due to the other acquisitions had become 76% personal injury and 24% other consumer law, having been 58:42 beforehand. The Pannone deal will take the ratio to 69:31.
S&G is paying £18.5m in cash and £3.5m in shares upfront (subject to restraints on sale for the next three years), with a further £7m in cash and shares worth £4m deferred and subject to performance milestones until 2017.
S&G is funding the cash component using a multi-currency syndicated debt facility. Existing debt facilities, due to expire in 2015, have been refinanced to support the acquisition and provide “future funding flexibility”. Total debt facilities will increase by £38m to £120m, with the new facilities, supported by Westpac and National Australia Bank, “providing improved terms and conditions, and ample funding headroom to drive future growth”.
Andrew Grech, S&G’s managing director, said: “Pannone Solicitors delivers us the scale we believe is necessary to operate in the UK market.
“Our brand strength in the UK will continue to grow, benefiting from increased marketing and business development capacity and the strong regional brand delivered by the acquisition. Management depth has also been enhanced with many Pannone practitioners recognised as leaders in their field.
“The acquisition also provides the opportunity to realise synergies in Manchester where we will have over 650 employees in three city centre offices. Our focus in the UK for the next 12 months will be on integration of the businesses acquired and delivering operational efficiencies.”
Neil Kinsella, S&G’s UK head, added: “This acquisition will transform us into a significantly larger firm offering a broader range of legal services and allowing us to help more clients in their fight for justice.
“The planned acquisition of Pannone is a vital step in our strategy for growth, bringing us closer to our aim of becoming the UK’s leading law practice for every day people.”
Pannone managing partner Emma Holt said: “This is an exciting time for Pannone and we see this as a significant opportunity that will be beneficial to our clients and our people. We look forward to working towards the completion of this deal with Slater & Gordon, the result of which will make us a stronger advocate for our clients as we continue to put them at the centre of everything we do.”
The future for Affinity – Pannone’s white-label consumer law service – and referral network Connect2Law is currently unclear. Mr Kinsella said: “Affinity will be restructured at completion. All decisions around the transaction have been made with the aim of creating the strongest platform possible for the firm to move forward as a well-funded, well executed national firm with quality service at the heart of our business.
“Connect2Law is a valuable part of the Pannone business and we will be working closely over the next few weeks and we’ve worked very hard with the Pannone leadership team to devise a strategy to build on the existing relationships.”
The new firm Pannone Corporate will be led by partners Paul Jonson, head of dispute resolution and regulatory, and senior partner Steven Grant. They will be joined by around 50 other partners and lawyers from the commercial side of the practice. “The firm will focus on its existing client base while competing in the upper mid market across its practice areas,” it said in statement.
Mr Grant said: “We believe our proposition is very much in line with current market requirements and our clients will be hugely supportive of our plans. We intend to offer an attractive alternative to the traditional law firm model.”
Tags: ABS, Alternative business structures, Slater & Gordon
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