In a statement to the market, AFL said it would engage with GTC to “finalise the arrangements regarding the termination” but, in the meantime, “will immediately cease all work on the GTC transaction”.

“AFL will continue to apply its focus on its own ongoing operations and will provide further updates to the market as appropriate,” it said.

Following the listed firm notifying the market, Lawyers Weekly was alerted to a statement from GTC Legal Group that indicated it was the one that pulled the pin on the proposed merger.

The firm explained information that came to light “renders the transaction untenable”.

The firm’s managing director James Stevens described the move as “disappointing” but an appropriate course of action.

“GTC was fully committed to progressing the transaction and [was], until now, ready to complete what we had considered to be a merger of equals,” Mr Stevens said.

“Unfortunately, our assessment in the light of the accuracy of certain disclosures made to us by AFL is that we now believe the best course of action for our shareholders is to exercise our right to terminate.”

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Elaborating further, Mr Stevens said: “There were a number of important inconsistencies and discrepancies we discovered during due diligence that were not explained, or dealt with, by AFL to our satisfaction.”

Speaking to Lawyers Weekly, Mr Stevens said the end of this proposed merger won’t stop GTC Legal Group from pursuing its consolidation plans.

“It is our view that the Australian legal industry, and particularly the personal services legal market, is one of the most fragmented in the world, and ripe for consolidation. We strongly believe the GTC Legal Group has the technology, expertise and resources to be one of the driving forces behind this long-overdue change in how legal services are provided,” he said.

“While we are disappointed that the proposed merger with AF Legal couldn’t go ahead, we will be exploring other opportunities for expansion, not just in Australia, but also in the UK and Canada.”

To accelerate the efforts, Mr Stevens and chief executive Wayne Windell will travel to the UK in December, where they plan to meet with “a number of platform law firms [that] operate similar, but much larger, businesses”.

“One of our objectives is to explore the possibility of establishing a relationship with a UK firm similar to the one between Keystone (UK) and Keypoint (Australia),” Mr Stevens explained.

“Although we are disappointed by the outcome of our due diligence and the fact the proposed merger didn’t proceed, we learned a lot from the experience, and we wish the staff and shareholders of AFL all the best.”

To ensure right of reply, Lawyers Weekly reached out to AFL asking whether they, too, would be exploring a merger with other firms in the future and if it could elaborate on its growth plans now that this one had been terminated; however, it did not provide a response by deadline. 

Interestingly, at the same time AFL posted about the termination, it also issued a notice about media commentary published on 22 November and 23 November in the Australian Financial Review (AFR), pertaining to an error it made in its FY22 Remuneration Report, which it corrected in compliance with its legal obligations on 9 November.

The 9 November statement to the market spoke to misreporting of cash and fee payments made to executives during FY22.

“Page 14 of the Annual Report incorrectly states the cash salary and fees paid to Kevin Lynch was $54,000 instead of $50,000, resulting in a total of $141,000 and cash salary, and fees paid to Pratyush Jagdishwala was $60,000 instead of $93,000, resulting in a total of $144,000,” the statement said.

“This results in a corrected total cash salary and fees paid for FY22 of $1,010,000 instead of $989,0000 and the corrected total FY22 remuneration of $2,167,000 instead of $2,147,000.”

The statement continued: “Page 15 and 16 of the Annual Report incorrectly states that the total annual remuneration for Kevin Lynch was $35,000 instead of $50,000 and for Pratyush Jagdishwala was $187,000 instead of $290,000.

“No other revisions or changes to the Annual Report have been made.”