The individual posts on common management problems are not long, but they take a surprisingly long time to write. So while I am writing the follow up to my last post in the series, I thought that I should provide my international readers with a short update on the continuing process towards corporatisation in the Australian legal sector.
Australia's legal sector is now clearly following the trend set earlier first by medicine and then accounting in which aggregators buy up practices to create new corporate entities. As happened in medicine and accounting, the trend has been opposed by many in or connected with the profession. Nevertheless, I think that the trend is irreversible if only because, as I have argued elsewhere, the current treatment of goodwill creates a financial opportunity for the aggregators.
Chris Merritt's story in The Australian of 12 March 2007 provides a slightly sensationalised snapshot of the process at work.
Merritt notes that the 41 equity partners at the Australian law firm Slater & Gordon are expected to raise tens of millions of dollars from a float now in the final stages of preparation.
Details of the Slater & Gordon float are expected to be made public in the first week of April.
Merritt quotes sources as saying that the company is planning to use the money from the float to take over legal practices that have had difficulty adapting to changes in the increasingly complicated area of workers compensation and personal injury law. Slater & Gordon also hopes to expand into new areas of practice. Another attraction of a public listing is that the firm currently uses debt to finance a substantial proportion of its work in progress, WIP often created under no-win, no-fee agreements.
While much of the money raised in the float will go back into the business, a substantial amount will be distributed to current equity holders. The biggest winners are expected to be the firm's seven original partners who were behind its decision to incorporate in 2000. Since then, the firm has engaged in a string of mergers and internal expansions that have transformed it into a national organisation with 140 lawyers, 400 staff and 17 offices.
Other equity holders who stand to benefit from the float include employed solicitors who have gained equity in the business after being promoted, and principals in several small practices that have been taken over by the firm.
Merritt also reports that former Minter Ellison managing partner Phil Clark is backing a group which has already started incorporating and consolidating legal practices without a public listing. The venture, known as DJClark, has already signed up six firms.
According to Integrated Legal Holding's principal Brett Davies "there were plenty of valuable law firms throughout Australia and it was clear there was now a race to acquire them."