RJW deal shows firms have a realisable value – and are getting "real" about business, say experts

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By Legal Futures

3 February 2012

Chris Bull: merger not a knee-jerk reaction to client or market pressure

Slater & Gordon’s is evidence that law firms are “joining the real business world” and that there is realisable value in legal practices, leading consultants have said.

Chris Bull and Sean Larkan of Edge International described the deal as “a positive and exciting development for the legal profession”.

They said it is “affirmation” that many law firms see acquisition and merger as simply one possible strategy in achieving their vision and carefully thought-through strategic key objectives. “It is not a knee-jerk reaction to client or market pressure.”

It also proves that there is “real value in law firms, and it is possible to put a dollar or pound figure to that value, something which vendors and potential acquirers had some difficulty with in the past”.

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They predicted that the acquisition is going to be “a case study in the emerging science of law firm valuation”: S&G is paying £36.4m in cash and £17.4m in shares, based on target projected revenues of £53m and earnings before interest, tax depreciation and amortisation (EBITDA) of £10.9m. Some observers have questioned whether five t

imes earnings is a strong enough multiple, however.

Mr Bull said that although 2012 will see the creation of a host – “quite possibly hundreds” – of alternative business structures, it will be a while longer before full listed legal services companies emerge in the UK. “S&G’s arrival in the UK is a landmark and they may well have a five-year head start in operating as a listed business.”

At the same time, while the two firms are “making a decisive play for a big share of the fast-consolidating personal injury market, we doubt they will have the PI headlines to themselves for long”.

The two firms have touted their combined practice as the new leader in the race to create a dominant legal brand, the consultants observed. “What is certain is that this is a big field and there is a long way to the finish line.”

Meanwhile, George Bull (unrelated to Chris), head of professional practices at accountants Baker Tilly – which advised S&G on the deal – said: “This is a ground-breaking development for the legal profession. Having successfully pioneered the world’s first listed law firm, balancing their obligations to the courts and regulators, clients and investors, Slater & Gordon’s entry into the legal marketplace in England and Wales is another important milestone for the company.”

He added: “One of the challenges of the transaction was to identify and successfully implement a structure which will enable our clients to register as an alternative business structure regulated by the Solicitors Regulation Authority while simultaneously facilitating the continuing provision of excellent client services and satisfying the reporting requirements of the Australian Stock Exchange.”

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