Floating the Firm - An Australian Innovation?

By Jim Robinson

In 1935, Bill Slater and Hughie Gordon founded a law firm in Melbourne which still bears their name. Its focus was servicing the needs of trade unions and their members. A large part of the practice was plaintiffs' claims for workers' compensation, and for damages in industrial accidents. In the 1970s, Slater & Gordon opened branch offices in Victoria. In the 1980s, they opened branches in other states.  

After a variety of practice structures, in 2001, the firm became an incorporated legal practice. This had become permissible under Victorian legislation passed in 1996. The firm then began to acquire, or merge with, other firms in Victoria, and in other States.  

In 2007, the firm announced plans to list on the Australian Stock Exchange. Further amendments to legislation had permitted profits from a legal firm to be shared with non-members of the firm, and with non-lawyers. This was the first listing of a legal firm on the Australian Stock Exchange. It is believed to have been the first floating of a legal firm anywhere in the world.

There were to be 35 million shares, with a par value of $1 each.  $17.3M of the capital was allocated to the 7 vendor shareholders, who retained a 48.8% stake in the company. The other money raised was to be applied to the further acquisition of firms practicing in the personal injuries/workers compensation jurisdiction, and to fund expansion of the firm's areas of practice. However, it was reported that 3 of the major vendor shareholders each pocketed $4.6M by selling shares from the first day of trading - 21 May 2007.

The shares were listed at $1, but closed at $1.40 at the end of the first day's trading.  This gave the firm a market capitalization of $151M. That would have been dwarfed if any of the 6 major national Australian firms listed. It seems that none of them intend to do so.

Conflict of interests?

The company's constitution specifically provides that the firm's first obligation is to the Courts, their second is to their clients, and their duty to shareholders is subservient to those. On the day of the float, the President of the Law Institute of Victoria was quoted as saying, "Lawyers have a cascading series of obligations, which they manage. I don't see that there's anything in the nature of the business ownership that affects those duties."

Since then?

The company published its first annual report in October 2008. It reported a net profit of $15.1M. Fully franked dividends of 4 cents a share had been paid. The company claimed it would not be unduly affected by the impending recession because "unfortunately, people still get injured or have commercial disputes or family break-ups." During the week ended 30 January 2009, shares traded at $1.45 to $1.48, on low volumes.

The company’s last annual report, published in October 2014 for FY14 (the year ended 30 June 2014) showed:

- Revenue of $418.5M (up by 40.4%)

- EBITDA of $100.8M (up by 38.3%)

- NPAT of $63.0M (up by 51.0%)

- earnings of 31.3 ¢ a share (up by 29.9%)

During most of 2014, the shares traded at between $6.00 and $6.50, mainly on low volumes. However, in early February 2015, there were three days of relatively high volumes, and the share price rose to $7.87, before dipping to $7.51.  

Will it spread?

Since the Slater & Gordon listing, other entrepreneurs have mooted proposals to form companies which will own firms of varying sizes across Australia. Our firm Best 

Hooper received such a proposal in 2008, but there were a raft of conditions attached, and the numbers did not seem attractive. None of the major Australian firms seem to have plans to float. No other firms have floated.

[All amounts quoted are in $AUD]

By Jim Robinson

Best Hooper 

Melbourne - Australia