Here come the Aussies

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31 January 2012

Loud and proud: Slater & Gordon's headquarters and its rather conspicuous signage

Around 18 months ago, Andrew Grech, the managing director of Slater & Gordon (S&G), gave a presentation to a seminar run by accountants Baker Tilly. He began by showing a slick corporate video outlining the history and achievements of S&G. Two things struck me from this.

First was a cut-away of S&G’s headquarters, at the top of which was a huge ‘Slater & Gordon’ sign, the kind of self-promotion UK firms simply don’t indulge in (at the moment). But this reflects the fact that S&G appears to have achieved what no UK firm has done and actually established a brand that consumers recognise.

Second was the thought that the closest UK equivalent was Russell Jones & Walker (RJW) – both firms started life (RJW in the 1920s and S&G in the 1930s) acting for trade unions, and, while personal injury remains their core business, both have since grown significantly and diversified into other areas of mainstream legal practice. It was a comparison acknowledged by the senior RJW partner sitting next to me.

So while the news that RJW is to be acquired by S&G was undoubtedly a ‘blimey’ moment, it does not come as a total shock as on its face this looks a good fit. There’s obviously more to the deal than a common history, but it’s a good starting point.

And, taking a step back, it is not the most radical development we will see in the post-alternative business structures world. This is, at the end of the day, one law firm buying another and no doubt that allayed any fears among RJW partners.

Then again, S&G is no ordinary law firm, famously becoming the first law firm in the world to go public back in May 2007. Indeed, those UK law firms considering a stock market flotation will no doubt take note of the bold moves that increased access to funds can facilitate.

S&G can boast of some impressive statistics since 2007: turnover nearly tripled to A$182m (£123m), staff numbers increased from 418 to 1,102 and office locations up from 26 to 61. A good deal of this is a result of an acquisition spree that has seen S&G swallow up no fewer than 20 practices; both RJW’s Neil Kinsella and Mr Grech were coy about the potential for acquisitions over here when I spoke to them yesterday, but it’s fair to say that buying size and weight fits S&G’s MO. Just two months ago it bought a conveyancing practice from which to establish a “beachhead” to grab a significant share of that market in Australia.

I’ve been keeping an eye on S&G, albeit from afar, and it would seem that the concerns some people had around a law firm going public have not been realised, particularly around conflicts of interest. The firm’s prospectus made it clear that its duties were, in order, to the court, its clients and then its shareholders – although on Twitter yesterday the Law Society (through its Legal Market account) noted that this has yet to be tested in court.

For RJW, the partners get the firm’s overdraft paid off and will receive both cash and shares, as well as the financial wherewithal to expand and reach the goal of becoming one of the two or three major legal brands that Mr Kinsella believes will exist in five years or so. As he told last April’s Legal Futures conference, “ABS is just a means to an end, a way of facilitating capital that is required to get transformative change underway”.

So let the transformative change of RJW begin – it has been clear for a long time that the firm was itching to do something big and it now has the capital backing to realise its ambitions. RJW’s obvious rivals at the top end of the consumer market, such as Irwin Mitchell and QualitySolicitors, will no doubt be watching very closely as it does so.


4 Responses to “Here come the Aussies”

  1. S&G’s share price has been a little underwhelmed so far at the ground breaking news – not much movement. Perhaps investors in Oz are a tad more pragmatic, perhaps they’d factored it in already.

    In the accountancy sector when MYOB from Oz grew its tax software businesses and piled into the UK market, there was a lot of chat about the scale opportunities, etc. But as I keep saying – there are no green fields – not in professional services which is not short of money, talent or tech – at any rate. MYOB underestimated the market gaps between Sage and Solution6, let alone where IRIS was – it ended in tears.

    S&G are buying their own little trench in the war in the UK between insurers and consumer lawyers. Whether lawyers are relegated to a part of the claims management function, or whether they drive the service is what’s at stake. The smart money thinks the insurers will win, frankly, but only because clients really don’t give a hoot who does it.

    Bear in mind also that S&G are showing a PE ratio currently of x9.39 – while Thomson Reuters and even Reed Elsevier are in the x16.6-16.9 territory. Clearly this is a time to be selling the shovels, not panning in the mud.


  2. David R Johnston on January 31st, 2012 at 10:04 am
  3. Dear Neil,

    I find your website very informative and I retweet much of your content but I find it quite odd that you regard Quality Solicitors as a ‘top end’ consumer market firm…

    How are you defining ‘top end’ and on what basis are you making the comparison with RJW and Irwin Mitchell?


    Andy Thorogood
    Practice Development Manager
    Bonnar & Co

  4. Andy Thorogood on January 31st, 2012 at 10:37 am
  5. If this wasn’t anything other than the legal sector, I wonder if it would be such big news. Surely, it just mirrors the ‘real’ world where businesses get acquired and disposed of all the time? The real test will be whether bigger = better.

    Also, let’s not forget that the brand is the talent – nothing more, nothing less. In time this will be where the real ‘war’ will be waged not in acquiring one firm after another.


  6. Julian Summerhayes on January 31st, 2012 at 11:41 am
  7. Prompted by Julian Summerhayes, Beaton believes the bigger-better-both cause and effect debate in professional services has only just begun. Years ago Professor Ashish Nanda then at Harvard Business School argued, I believe on grounds of logic rather than empiricism, there are no effective economies of scale in professional services firms. Beaton is fostering this debate; please join us.

  8. George Beaton on February 1st, 2012 at 10:50 pm

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