Allegro agrees take-private of Australian law firm

The specialist turnaround investor has won board approval for an off-market takeover at AUD 0.55 per share, subject to a minimum acceptance threshold of 50.1%, according to a filing. The offer will cover all existing shares and those issued to employees who exercise their performance rights prior to the deal closing.

Allegro will commit capital from its fourth fund, which closed on AUD 750m in May 2022, beating a target of AUD 600m. The first investment from the new vehicle – announced in August of last year – was the NZD 552m (USD 327m) acquisition of petrol station chain Gull New Zealand.

Slater & Gordon became the world’s first publicly traded law firm in 2007 on completing a AUD 35m IPO. It was the subject of a Harvard Business School case study. The offering was priced at AUD 1 per share and the stock passed AUD 8 in April 2015, giving the company a market capitalisation of AUD 2.7bn. The stock subsequently collapsed, closing at AUD 0.57 on February 23.

“We don’t belong on the stock exchange,” said CEO John Somerville, the Australian Financial Review reported. Somerville noted that the benefits of being listed include access to capital, liquidity, and visibility for shareholders. “But all that comes at a cost; we have no liquidity in our shares, we don’t get access to capital. All we do is get the costs,” he added.

Founded in 1936, Slater & Gordon went public to support an ambitious expansion strategy. It entered the UK in 2012 and was the seventh-largest player in the market within two years following a string of acquisitions. Hedge funds began targeting the stock following the AUD 1.3bn purchase of Quindell’s professional services division in 2015. Quindell had earlier been attacked by short sellers.

In mid-2015, Slater & Gordon announced a significant accounting error, which prompted the securities regulator to launch an investigation. With the UK operations underperforming and subject to a restructuring, the company swung from a net profit of AUD 62.4m for the 2015 financial year to a net loss of AUD 1.02bn in 2016, even as revenue rose from AUD 598.2m to AUD 908.2m.

Slater & Gordon’s net debt had soared to AUD 682.3m as of June 2016. A recapitalisation was completed the following year, which saw a consortium of lenders led by US special situations investor Anchorage Capital Group assume control of the company. The recapitalisation involved a separation of the Australian and UK businesses.

The company now claims to be Australia’s leading consumer law firm with expertise in personal injury claims, superannuation and insurance, class action lawsuits, commercial litigation, and employment law. Revenue reached AUD 155.4m for the 12 months ended June 2022, up from AUD 154.2m a year earlier. Over the same period, net profit fell from AUD 14.5m to AUD 2.2m.

Slater & Gordon was severely impacted by COVID-19. The company noted in its 2022 annual report that a net profit of AUD 2.2m represented a good turnaround from the AUD 7.5m loss reported in the first half of the year. In the first half of the 2023 financial year, net profit recovered to AUD 16.7m, while revenue increased 14% to AUD 89.3m.

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• Topics
• Australasia
• Buyouts
• Advisory
• Restructuring
• Australia
• professional services
• Allegro Funds