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The impact of AFL’s ‘significant and unprecedented’ merger with GTC Legal Group
In October, listed national law firm Australian Family Lawyers acquired GTC Legal Group Holdings, in a move dubbed a “seminal moment for the personal legal services industry”. Here, AFL’s executive director speaks about why the transaction will have such an influence on the marketplace.
Lauren Croft
As part of the merger, AFL Legal Group (ASX: AFL) executed a share sale deed to acquire 100 per cent of the issued share capital of national company GTC Legal Group Holdings, which owns referral network gotocourt.com.au, “traditional” model firm Armstrong Legal, “non-traditional” model revenue-sharing firm GTC Lawyers, hotline manager GTC Legal Group Services, and allcourts.com.au (which boasts around 1,500 network partners).
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GTC operates across seven segments of personal law, being family law, criminal law, contested estates, civil and commercial, administrative, agency and immigration.
“The business has 116 staff, seven offices in Australia and generated pro forma $20.3 million in revenue, $4.8 million in EBITDA and $3.6 million in EBITA for the financial year ended 30 June 2022,” AF Legal said in its announcement to the ASX at the time.
Following the merger announcement, Lawyers Weekly spoke to AFL executive director Grant Dearlove, who said the merger has a significant impact on the Australian legal market.
“The merger is significant and unprecedented due to the fact that the market has previously been highly fragmented with a surplus of 18,000 firms that have an average of three lawyers per firm. Consolidation of this magnitude has never been seen before — AF Legal Group will be the largest personal service firm in Australia in both family and criminal law, especially with ongoing expansion into growing verticals.
“Smaller general practices are required to invest in modernising. The competitive landscape is set to change as AF Legal reaches more clients and pursues its aggressive growth strategy. With 26 offices in its network and another 30 areas identified, the firm is excellently primed to dominate the market in future,” Mr Dearlove said.
The merger follows a “record” performance for AFL in FY22, with reportedly more than $18.5 million in revenue, the opening of a new office in the Gold Coast, and the launch of a “first-of-its-kind” partnership model, whereby both lawyers and firms are able to partner with, and co-own, a legal practice with the incorporated entity.
It also marks a shift in legal professional services across the country, post-pandemic.
“COVID has accelerated the pace of changes occurring in the legal services industry in a big way. In the legal profession in Australia, this has manifested in working from home arrangements, the utilisation of technology and cloud-based applications where clients are happy to instruct via Zoom, changing office environments, alternative fee models and more,” Mr Dearlove explained.
“At this juncture in time, many lawyers are looking for autonomy and work/life sustainability. Stats show that by 2026, thirty-six per cent of lawyers in the UK will switch to consulting simply to gain better control of their working environment. The merger between Australian Family Lawyers and GTC Legal Group Holdings offers more lawyers the chance to benefit from modern working arrangements with fewer of the pressures traditionally associated with the role.”
These kinds of working arrangements are particularly relevant in the face of a potential economic downfall. Treasurer Jim Chalmers recently told the ABC that “the world is bracing for another global downturn” from which Australia will not be spared — and both BigLaw firms and SMEs and boutiques have been warned to be prepared.
“The opportunities offered to lawyers as a result of this merger [are] even more potent in the face of a looming recession. Rather than cope with increased stress and uncertainty, legal practitioners can find support and take advantage of the end-to-end back and front of house services through GTC’s platform and more. For a modern lawyer, the AFL/GTC offering is the complete solution to what they’re seeking,” Mr Dearlove added.
“High-performing individuals can considerably increase their earnings and effectively recession-proof their careers thanks to the defensive nature of the AFL/GTC model. This model is underpinned by diversifying our service offerings to cover areas which are consistent and prevalent during difficult economic times such as family, crime, and wills and estates.”
The merger is also a key part of AF Legal’s growth strategy moving forward, Mr Dearlove concluded.
“The acquisition of GTC Legal Group is a part of AF Legal’s three-pillar strategy to maximise its market presence and capitalise on the incredibly lucrative opportunities in other areas of law worth $7.5 billion. So far, the company has been making firm strides towards achieving these goals within the three-year time frame AF Legal has set for its growth strategy,” he said.
“On top of promoting our signature equity partnership model, the merger will significantly add to the expansion of our law service offerings and stimulate more brand and client acquisitions.”
