From stock market first to major recapitalisation deal — and everything in between
In 2007, amid much fanfare, personal injury giant Slater & Gordon (S&G) became the first law firm in the world to go public when it floated on the Australian Securities Exchange (ASX).
Keen to tap into the UK legal market, the Melbourne-headquartered firm expanded beyond its Aussie borders when it made a number of subsequent acquisitions, these included London-based law firm Russell Jones & Walker and Quindell’s professional services arm. But the firm’s expansion has been anything but plain sailing.
In November 2015, S&G witnessed its share price plummet after the then Chancellor of the Exchequer, George Osborne, mooted a ban on general damages for minor injury claims. Moreover, Osborne suggested a new small claims limit of £5,000 on all personal injury matters which would allow (in theory) insurers to reduce premiums and pass on the savings to drivers. Great for consumers, bad for S&G.
At the time, Legal Cheek reported that S&G’s share price had dropped to AUS$1 (48p) from a 2015 summer high of AUS$6 (£2.87). Remaining positive, the firm — perhaps best known in the United Kingdom for its TV adverts (see below) — issued a statement stating that its “scale and diversity” would allow it to “deal with the potential impact of any future legislative change”.
However it is S&G’s dealings with Quindell, now trading under the name Watchstone Group, that have arguably been its biggest headache. S&G purchased Quindell’s professional services division including its legal services arm for £637 million in 2015. Unfortunately the high-profile deal made headlines in both hemispheres for all the wrong reasons.
S&G has since claimed that “but for fraudulent misrepresentation” it would never have struck a deal with Quindell and is, as a result, seeking £637 million in damages. The legal action — which is being contested by Watchstone Group — is based on alleged representations in Quindell’s management accounts and PowerPoint presentations that it sent to S&G bigwigs.
Legal wranglings aside, there has been no escaping S&G’s disappointing financial results.
Pointing the finger at UK underperformance, among other things, the beleaguered outfit posted what is understood to be the legal sector’s largest annual loss of AUS$1 billion in 2015/16 (then £580 million), and later AUS$546.8 million in 2016/17 (then £335 million). Then, S&G cut UK headcount by 20% and closed at least 18 of its UK outposts. Figures from June 2017 show that gross debt currently sits at AUS$780.9 million (£478 million).
In August, S&G revealed that it was to break off its UK arm and hand control over to the firm’s senior lenders. As part of a major recapitalisation deal with its creditors, S&G confirmed its UK operations would be placed in a separate holding company called UK HoldCo. The move — which was officially given the green light by 70% of shareholders this week — will see New York hedge fund Anchorage Capital Group effectively take ownership of S&G’s UK businesses.
Commenting on the move, S&G’s UK chief executive, Ken Fowlie, said: “This is a very important milestone in our turnaround story and a good day for our business.” Whether this good day translates into a good week, a good month or a good year remains to be seen.