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Familiar waters for ABL in public float

Familiar waters for ABL in public float

DEVISING INCENTIVE and retention schemes to ensure Slater & Gordon keeps its best lawyers was a key part of advising the firm on its world-first initial public offer and listing, according…

DEVISING INCENTIVE and retention schemes to ensure Slater & Gordon keeps its best lawyers was a key part of advising the firm on its world-first initial public offer and listing, according to the firm’s legal advisers, Arnold Bloch Leibler.

The $35 million float will see Slater & Gordon become the first law firm in the world to publicly list next week.

According to the prospectus, the listing will result in a $17.3 million sell-down by the existing equity partners, and a $17.7 million issue of new shares.

“For a law firm, its real assets are its people. There are other businesses out there that are listed that are really people businesses. But for a law firm what we are really doing is saying to the public, ‘listen, we’ve got these very smart people and they can do things that other people can’t, and you’ve got to invest in their capacity to keep making money by doing them’,” said ABL partner Jonathan Wenig.

He said the float is delivering “a lot of money” to the upper echelon of lawyers in the firm, as well as to the firm itself.

These senior partners are important to the firm, so he said it was essential to ensure that these lawyers “keep producing, rather than sitting on a yacht somewhere”.

“You’ve got to … keep them working, because that’s what the market is investing in,” Wenig said.

There are also obvious inherent conflicts to overcome for a law firm looking to go public.

“A law firm has a duty of confidentiality to its clients, and [as a listed firm] it has duties to keep its shareholders informed,” he said.

“Although this doesn’t reconcile them, the first step was to get the legal regulators comfortable that even though Slater & Gordon was becoming a public company, they still understand that the duty to the court and the duty to the client come first.

“We had to put that in the constitution and the prospectus, and make it very clear, yes [they] are becoming a public company, but at the same time we are still going to be lawyers,” said Wenig.

It was Slater & Gordon’s view, however, that the usually very public nature of their work meant this conflict would be minimal. “Almost all their work happens either in regulated processes, or in a court,” he said.

“When a matter comes to court it’s on the public record. If Slater & Gordon is launching a big class action, they want everyone to know about it.”

Other professional service firms had managed to overcome this issue as well, but he said lawyers were particularly constrained by duties of confidentiality and professional privilege, so it was unlikely that more commercially-focused law firms would find it so easy to reconcile the conflict.

The fact that the national legal profession reforms that allowed the float to occur are not yet operating in every jurisdiction was also a factor to take into account.

So far New South Wales, Victoria, Western Australia and the ACT have passed bills to introduce the model national laws. This means Slater & Gordon has to maintain dual structures, but, as Queensland and South Australia are due to introduce the reforms in coming months, Wenig pointed out this is likely to be a temporary situation.

ABL’s role included chairing the due diligence committee, preparing the documentation for the float, including the prospectus, and liaising with regulators such as the Australian Securities and Investments Commission, the Australian Securities Exchange and state legal profession regulators to ensure compliance with law firm obligations.

“This was not just another float,” added Wenig. “The process of implementing a public offer and giving practical effect to Slater & Gordon’s business strategy was both challenging and rewarding. Our objective was to add real value as lawyers to the lawyers.”

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