The troubled U.K. business of Australia-based Slater & Gordon, which became the world’s first publicly traded law firm a decade ago, will be divided from its parent into a holding company owned by the indebted firm’s senior lenders.
In an announcement to the Australian Stock Exchange on Aug. 31, Slater & Gordon confirmed that as part of a recapitalization deal with its creditors, the U.K. operations would be separated from the wider firm. The separate holding company will then be controlled by its senior lenders.
Slater & Gordon listed itself on the ASX in 2007 and entered the U.K. market in 2012 after raising $64 million to fund its takeover of British firm Russell Jones & Walker and a handful of other personal injury practices. Those moves preceded a flurry of other acquisitions, including Slater & Gordon’s $947 million acquisition of insurance company Quindell’s professional services arm in 2015.
While the series of deals initially boosted Slater & Gordon’s bottom line, it didn’t take long for the firm to run into mounting financial difficulties. The firm’s stock price slumped as it sought to reorganize its U.K. business. Last month, Slater & Gordon kicked off a strategic review of its legal services operations in the U.K., the value of which it significantly wrote down earlier this year.
In June, former Slater & Gordon managing director Andrew Grech—once named one of The American Lawyer’s top 50 innovators—stepped down from the firm as lenders moved to take control. Bryce Houghton, the Melbourne-based CFO for Slater & Gordon, is also preparing to leave the firm as a consortium of hedge funds led by New York-based Anchorage Capital Partners LLC began asserting itself and ousting individuals from the firm’s executive ranks.
In its statements to the ASX, Slater & Gordon said that it will seek to recruit a new CFO to replace Houghton for its Australian-listed entity, while implementing its plans to separate its U.K. business.
“The company believes that separation of the U.K. operations provides the best option to enable both the Australian and U.K. operations to succeed in their own right and will enable the company to focus its management’s time and resources on the Australian business,” Slater & Gordon said in a statement to the ASX.
Total revenue for the firm’s 2016-17 fiscal year fell 33 percent, from A$908.2 million to A$611.5 million ($487.4 million), with Slater & Gordon reporting a $546.8 million loss ($435.9 million) for the 12-month period ending on June 30, 2017.
Fee and service revenue for the firm’s U.K. arm plummeted 31 percent, from A$230 million to A$157.8 million ($125.8 million), which Slater & Gordon attributed to a reduction in size of its business following a “business rationalization programme.”
The firm has already reduced its head count in the U.K. by 20 percent and closed at least 18 of its offices in the country. A report last month by British legal blog RollonFriday claimed that Slater & Gordon was letting going of dozens of lawyers in the U.K.