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Russell Jones & Walker (RJW) is to be acquired by Australian listed firm Slater & Gordon.
RJW chief executive Neil Kinsella said the deal would give the firm a capital injection to lead the consolidation of the consumer services legal market.
“The task for independent law firms is to make sure we dominate the market and that means capital,” Kinsella told The Lawyer. “This deal means we don’t have to go through the steps of raising capital and we also get the benefit of five years of experience from Slater & Gordon.”
An announcement was made to the Australian Stock Exchange this morning, with Slater & Gordon valuing the firm at £53.8m - or Aus$80m. RJW is believed to have a turnover of approximately £42.5m, although it has historically kept quiet about its financials.
Slater & Gordon said it would pay a cash consideration of £36.4m for the firm, of which £8.8m will be deferred subject to performance targets and £10.3m used to repay outstanding bank debts. In addition, it will issue £17.4m Slater & Gordon shares, subject to restraints on sale for four years.
RJW’s senior management, who will receive shares in Slater & Gordon, will be locked into the firm for three years. Share options will also be made available to the firm’s non-legal staff.
In the stock exchange announcement, Slater & Gordon said the deal, which also comprises the acquisition of RJW subsidiary Claims Direct, is predicated on the RJW business generating revenues of £53m in the 2013 financial year, with earnings before tax depreciation and amortisation (EBITDA) of £10.9m.
Slater & Gordon managing director Andrew Greech said the firm had received several approaches from UK firms looking to take advantage of the Legal Services Act, but RJW was the only firm to have the right “cultural fit”.
He said: “We’ve been tracking the UK market for three years. We met the Legal Services Board when they were first appointed, they wanted to meet a living example of an ABS [alternative business structure].
“We’ve looked under the hoods of 30-plus firms and claims management companies. It’s given us an insight into the many models. The compelling thing about RJW is the quality of people involved. Our growth in Australia is ongoing, we need to have people in the UK who are up to the task.”
He continued: “When I first met with Neil 12 months ago we had the same vision, we didn’t want insurers to own our firm, no third-party investment companies. We want to control our relationships between our forms and have a clarity of vision.”
Slater & Gordon operates on a corporatised model, which RJW is expected to adopt, although the firm will continue to trade under the RJW brand.
Greech commented: “The partnership model is dead, everyone is looking for something to replace it with. We’re on a more corporatised model. The thing is to be transparent.
“We say to our workforce ’these are what your opportunities for ownership are’. Those who contribute to the business get rewarded for that.”
The aim is to become the UK’s leading full-service law firm offering personal legal services. Kinsella said the emphasis would be on building the firm’s brand in the consumer market through organic growth.
On the firm’s expansion plans Kinsella said: “It’ll be very much about organic growth and judicious acquisitions as well as laterals where its appropriate.”
It is the boldest move yet to come from firms looking to take advantage of the Legal Services Act. Last week, AIM-listed company Quindell Portfolio announced its intention to acquire Liverpool-based firm Silverbeck Rymer (24 January 2011).
RJW was advised by Macfarlanes partner John Dodsworth while Slater & Gordon was advised by LG corporate head Christopher Tite and partner David Ponsford (30 January 2011).