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Slater & Gordon: The tale of the battered and bruised personal injury giant

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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.

Screenshot of Slater & Gordon’s share price November 2015

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.

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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.

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14 Comments

Anonymous

A genuinely interesting article on Legal Cheek?

We can’t all the articles be more like this?

speculator

Sounds like a good time to buy some shares…

Anonymous

Balloons

Bruce of Sydney Counsel

One point, Thomas: Slater’s was floated on the Australian Securities Exchange, or ASX, not the ‘Australian Stock Exchange’ (which hasn’t existed for years, and even when it did was abbreviated as the ASX not ASE). A two-second Google search would have turned up the correct name and abbreviation.

Other than that, it’s an interesting article.

Thomas Connelly

Thanks Bruce of Sydney Counsel. I have updated the article.

Anonymous

Stop trying to impress Alex by working at 10pm. Snake.

Anonymous

I’ve looked up “moreover” in the dictionary and now I know what it means.

Anonymous

Not a suprise they are not doing so well. The way they handle claims is a total waste of resources.

Anonymous

OMG I need to highlight your spelling error and use it to undermine the rest of your sentence.

Anonymous

Hope they go under; have dealt with them. Parasites only interested in costs building rather than their clients.

Anonymous

I used to have a friend at law school – I saw she carried a Slater & Gordon water-bottle. We ceased being friends from that moment.

S + G

This post has been removed because it breached Legal Cheek’s comments policy.

!

Nice.

Anonymous

They could have saved a fortune in due diligence (and reached the correct conclusion) on Quindell by simply reading back issues of Private Eye for a few years. It’s hard to have any sympathy for management or investors- but plenty for the luckless staff.

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