Slater & Gordon Acquisition of Keddies Faces Due Diligence Hurdle

After a period of acquiring many regional-based personal injury practices, Slater & Gordon has today signalled its intention to make its biggest, and in our view most risky, acquisition.

punished for charging over

In an ASX announcement this morning, Slater & Gordon advised that the firm:

…has announced today that it had agreed in principle, subject to execcuted documentation and final due diligence, to acquire NSW personal injury firm Keddies Lawyers for $35million.

The four Keddies businesses in NSW and one in Queensland will be integrated into Slater & Gordon’s structure. The purchase is expected to be finished by mid-January 2011, subject to a formal agreement and due diligence. Of the $35 million consideration, it will comprise $3.7 million in shares, the absorption of Keddies $11 million debt and the balance in cash, with some of the cash component held for up to 30 months.

Slater & Gordon Managing Partner Andrew Grech, is quoted in the ASX announcement as saying:

“We’ve said from when we listed that the consolidaiton of the Australian personal injuries market was a prime aim for us, with QLD and NSW as the main targets… After the Keddies acquisition we’ll be the clear market leaders and have strong, efficient based for further growth in each of the eastern states, which represent around 85 per cent of the national personal injuries litigation market”.

A presentation accompanying the announcement demonstrates how Slater & Gordon’s soaring revenue is forcast to climb from $120m in 2010 to approximately $170m in 2011, while the company’s EBIT is forecast to soar proportionately even higher, from approximately $30m to approximately $45m. Based on the forecasts, therefore, the acquisition of Keddies looks fantastic, but we think the Slater & Gordon “M&A” team performing provisional due diligence over this transaction probably forgot to incorporate the damage to good will caused by:

• the Keddies lawyer recently convicted of female police-officer assault;
• the allegation that the firm unnecesarily incurred costs;
• the fact that three Keddies partners were charged with unprofessional conduct as a result of overcharging;
• the rumour the firm slashed many jobs during the GFC; and
• further allegations that the firm has been overcharging clients.

What would former Slater & Gordon lawyer, Prime Minister Julia Gillard, think of these questionable episodes in the acquisition target’s recent history?

For those who missed our story on the Keddies lawyer who convicted of assaulting a female police-woman, our article is republished in full below:

The ex-managing partner of Keddies Lawyers’ Liverpool office, David Marocchi, has been convicted of assaulting a woman.  The Newtown Local Court found Marocchi guilty of two counts of assaulting police, including kicking a female officer in the chest.  Marocchi was fined $4500 and ordered to pay $73 in court costs.

As we noted in March:

According to news reports today, David Marocchi … was pulled over by police who suspected that the ‘excessively loud music’ emanating from his black Holden Commodore might infringe recently legislated anti-hoon laws.  Reputedly, police officers then asked Marocchi to undergo a breath-test.  Marocchi repeatedly yelled:

‘I don’t have to do anything … I’m a solicitor… prove to me I’m over [the limit]!’

Marocchi apparently … used force of his own to wrestle the arresting female officer, thrashing his arms at her and forcing her to the ground where she sustained serious, but non-life-threatening injuries… Marocchi delivered an intense, violent kick to the female officer’s left breast which contained so much force that she fell backwards to the ground.

His conviction comes amid continued investigations as to Marocchi’s billing practices whilst a Keddies Lawyer.  Is this the legal profession’s finest ambassador?

Send the Firm Spy your news and views!