In 1935 Bill Slater and Hugh Gordon started a Melbourne law firm to serve local union members. Eighty years later the impetus is broadly the same, to offer decent legal services at an affordable price, but the ambition has changed. If regulators approve the takeover of Quindell professional services, Slater & Gordon will, by some distance, be the largest personal injury law group in both the UK and Australia.
When Andrew Grech took over as managing director in 2000 Slater & Gordon was still a partnership. It incorporated the following year, then listed in 2007, and he has bought more than 50 law firms to get to this point. “We’re not megalomaniacs; none of us set out to become bigger for its own purpose”, he told FT Alphaville. Rather, size is a means to offer specialist legal services to the greatest number of of clients at a reasonable price.
Still, industry roll-ups come with risks, the company is the only listed law group of size and legal accounting can be opaque. One way to assess the success of all the consolidation is to ask a question: what would happen if Slater & Gordon stopped buying law firms? Read more
Wondering what the mastermind behind Quindell plans next? Watch this space:
A quick trip to QuobPark.com tells us “The Quob Park Estate Strategy Evolution Team are working with and investing in companies that are focused on the benefits of Digital Disruption”. Read more
Another Quindell correction, this time to Monday’s announcement of a deal to sell nine-tenths of the company to Slater & Gordon, the Australian law group.
It comes after shares were suspended for more than five hours on Wednesday, provides partial answers to one of the outstanding questions — where had the rest of Quindell’s business gone? — while raising others about the nature of its operations, financial statements and previous announcements. From the RNS:
The Board has noted that there was a failure to fully transcribe profits related to entities forming part of the Disposal as disclosed in the Circular (predominantly in respect of iSaaS Technology Limited and Intelligent Claims Management Limited, entities previously included within the Company’s “Digital Solutions” division in historic financial information).
Quindell shareholders will soon be asked to approve the sale of substantially all of the company to Slater & Gordon, the Australian listed law group. The sale was agreed after S&G was granted the exclusive right to negotiate and conduct due diligence on the UK ambulance chasing law firm. Quindell is also strapped for cash and the list of alternative bidders seems small to non-existent.
Yet there remains a pertinent question: do Quindell shareholders have enough information to approve the sale?
PWC has conducted a review of Quindell’s accounting, one likely to lead to restatement of revenues and profits in recent years. S&G have seen the accountant’s work, yet shareholders have not. The review is price sensitive information – is it fair disclosure for the buyer to have seen it, but the selling investors to have been kept in the dark? Read more
Congratulations! Assuming Quindell shareholders give it the nod and UK financial and legal regulators approve, the Australian-listed law group Slater & Gordon will soon be the proud owner of Quindell’s professional services division.
What are you buying? The UK’s largest ambulance chasing law firm, for one, but rather more than that. We don’t have the answers, but here are the questions to ask about the deal, as well as the ongoing peculiarities of legal accounting.
First up: what is Quindell Professional Services? Read more
Quindell plc (AIM: QPP.L) announces that it has today entered into a conditional sale and purchase agreement to dispose of the Professional Services Division (“PSD”) to Slater and Gordon Limited (“SGH”) for an initial cash consideration of £637 million and further contingent cash consideration payable in respect of the future settlement of its clients’ noise induced hearing loss (“NIHL”) cases (“Disposal”).
Quindell’s law firm is to be sold to Slater & Gordon, the Australian listed law group, and shareholders will get half a billion returned to them in cash in the second half of 2015.
More disposals to come, restatement of past accounts likely, and a new chief executive is needed again, while the chief lingering question is what remains. Read more
The latest update from Quindell lands. Contrary to rumors circulating, the company is not talking to Australian law group Slater & Gordon about a takeover of the whole business, just the professional services division where the UK ambulance chasing law firm resides.
Meanwhile, an ongoing review of the books by accounting firm PWC continues, and has taken longer than expected due to “the high level of corporate activity” which went into the formation of a jumble of businesses loosely connected to insurance. Also:
Advice in relation to the Company’s main accounting policies (in particular revenue recognition in the Professional Services Division) is being further considered and no conclusions have been reached.
An update lands from Quindell regarding discussions with Slater & Gordon, the Australian listed law group.
Further to its announcement of 22 January 2015, Quindell Plc (AIM: QPP.L) notes the further press speculation and announces that it has extended Slater & Gordon Limited’s (“SGH”) exclusivity period relating to the possible disposal of the professional services division (“PSD”) of the Group to 31 March 2015. Discussions are progressing with SGH and the indicative terms being discussed would imply a significant premium to the Company’s market capitalisation at the close of trading on 20 February 2015. There can be no certainty that these discussions will lead to an offer for, or the disposal of, the PSD. Further announcements will be made, as appropriate, in due course.
Dear shareholder, no promises, but our stock could be worth more than the short-seller battered share price suggests… Read more
Quindell, an unusual collection of loosely related insurance, technological and legal businesses piled on top of a golf club by Robert Terry, can confound attempts to understand it. There is, however, one simple question which gets right to the heart of what has been going on.
What were the cash balances at Ingenie, the associate company it acquired last year?
As we’ll explain, there aren’t clear good answers to this question, just least bad ones. It is something for PWC and the company’s bankers to ask, because the answers should help show whether management of what was once the largest company on London’s junior market, AIM, was disingenuous, profligate, or something worse. Read more
Further to the announcement by Quindell that it has appointed two new executives in return for a bucket full of options and a corporate consulting gig, another statement follows with full terms of the grant to incoming and current executives.
Details after the jump, but the headline is 12.9 per cent of the company will potentially be handed to senior executives in return for keeping it afloat. Read more
Quindell, the description-defying collapsed stock promotion acquisition roll-up machine whose stake-selling founder lurks as a well remunerated consultant, has a new non-executive chairman, Richard Rose.
The former credit hire executive will be joined by Jim Sutcliffe as Strategy Director and Deputy Chairman, pending approval by the Solicitors Regulation Authority — the two have been tempted by £16m worth of short dated options.
The pair have a package which suggests a kill or cure approach is in prospect for a business which has struggled to generate cash flow, with those options vesting in stages over the next 12 months. Long term incentives and all that. Read more
Robert Terry, founder of the UK’s first listed golf course cum law firm cum scaffolding and insurance processing technology specialist, has sold more of his stock since stepping down as chairman last month.
The sale was disclosed by the company, which reports: Read more
Metaphorical stock, mind you. That rare thing on Monday, an announcement from Quindell that doesn’t involve the share count rising:
The Directors believe that the recent changes to the Board mark a natural point at which to take stock of the Group’s position. As set out below, PwC is being engaged to conduct an independent review.
Translation and context below but, for those who haven’t been following the Aim market stock promotion disaster story this year, first a quick reminder of the nature of Quindell and what’s been going on. Read more
The Financial Times can reveal that Roble is one of a clutch of shell companies based in the Cayman Islands created by Tiger Global, one of the world’s largest but lowest profile hedge funds. Tiger Global used a series of these structures to bet against at least a dozen European companies, including Quindell.
Terrific gumshoe work by the FT’s Miles Johnson, who has identified Tiger Global as the big US investment company using Cayman-registered special purpose vehicles to short European stocks without attracting attention.
One of them is the Spanish-sounding but Cayman-registered Roble SL, which held the biggest short position in Quindell this year as the controversial law firm and technology company’s stock collapsed. Read more
Much of our coverage of the controversial Quindell has focused on its transformation into one of the UK’s largest law firms. This rise has not received the wider attention it might, perhaps because Quindell was listed on Aim, London’s junior market, and until recently described itself in the garbled jargon of a technology company.
We suspect that could change. A stock market valuation of more than £2.7bn earlier this year has collapsed to less than a tenth of that total, posing a problem for a group that has funded both breakneck expansion and day-to-day expenses by issuing shares. Robert Terry, the company’s founder, recently sold stock during a period that he had promised would show Quindell’s ability to stop burning through cash, and has resigned as chairman.
Which prompts a question for the legal industry in general and the Solicitors Regulation Authority in particular: what would happen if a law firm managing 100,000-plus claims were to fail? Read more
Here is a selected chronology of recent events at Quindell, one of the UK’s largest law firms, whose share price has collapsed in the last month.
October 13 – A third-quarter trading statement says the company’s preferred measure of cash flow is ahead of expectations. (Share price 143p).
October 21 – Quindell announces what it calls a major contract win. Also, Canaccord Genuity gives notice of resignation as joint broker and financial advisor, which is not announced. (Share price 161p). Read more
On Wednesday Quindell — the UK’s largest listed law firm — announced that its chairman, finance director and a non-executive director had borrowed some money to buy stock. The announcement was titled “directors share purchases”.
The company, the London Stock Exchange and Cenkos, Quindell’s nominated advisor, were then bombarded by questions from investors (and journalists) about the true nature of those transactions and the quality of the disclosure.
A correction has now followed. Details below but the essence is this: one month into what is widely regarded as a crucial quarter for the business, Quindell’s founder sold a fifth of his stock at a deep discount as part of an agreement to buy it back in two years time. He received £7.5m, and then spent £1.2m buying new shares. It was only details for the latter part of the transaction which Quindell initially disclosed. Read more
The Wednesday announcement by Quindell — an all purpose law firm, technological insurance outsourcer and scaffolding company — that three directors have arranged a loan to buy stock has not had the effect some might have expected.
The shares closed up on the day, but Thursday saw the shares hit a new post consolidation low of 118p in late trading. So what happened?
The answer may be a question of disclosure, in that the announcement raised more questions than it answered. Read more
A fresh post-share-consolidation low for the Quindell share price appears to have tempted some buyers: three directors of the UK’s largest listed law firm and all-purpose insurance, technology and solar panel installation conglomerate.
Robert Terry, chairman, Laurence Moorse, finance director, and Steve Scott, non-exec, have together purchased 1,575,000 shares, for about £2m.
To fund those purchases the men borrowed the money and pledged an undisclosed amount of their existing stock holdings as security.* Read more
John Aglionby, who spoke to Quindell chairman Robert Terry for this FT story on Monday’s trading statement, asked a follow up question. Would it be wrong to say that Quindell revised downwards its revenue guidance, but still expects to hit targets for key performance indicators?
Their answer… well, here it is in full:
The Company does not use Revenue as a Key Performance Indicator or provide guidance on the levels of revenue it will do, only on what level is needed to achieve current market expectations for its KPI’s based on its current EBITDA margin guidance and its confidence in hitting these levels.
A third quarter trading statement arrives from the UK’s largest listed law firm. The board remains confident of hitting its targets for this year, while generating revenues of £750m to £800m, a lower level than previously forecast.*
All that work has again produced de minimis cash flow, however.
Adjusted operating cash flow1,4 for Q3 significantly ahead of expectations and guidance with c.£9.4m inflow compared to original guidance of breakeven (H1 2014: £51m outflow also £9m ahead of expectations) which includes c.£3m of business integration activities which were planned and included in prior guidance
The FT’s ever resourceful Henry Mance has obtained copies of the Quindell versus Gotham City Research court documents from the Queen’s Bench.
They are much as you might expect. Quindell sued Gotham for defamation in relation to the April report which blew its share price apart. Gotham, protected by US law against enforcement of foreign libel judgements, did not respond and so a summary order ruled in Quindell’s favour.
One possible surprise is that Mrs Louise Tracey Terry, wife of chairman Robert Terry, also claimed for libel along with her husband and the company he founded. Read more
Quindell has announced that the High Court of England and Wales ruled in its favour in a libel judgment against Daniel Yu’s US based short selling outfit, Gotham City Research.
The UK’s largest listed law firm filed suit in April after Gotham published a highly critical report on the group, a former country club transformed by a string of acquisitions. Following publication of the report Quindell’s share price collapsed.
The company said that it had received judgment in its favour after Gotham failed to provide either acknowledgment or a defence against the libel proceedings. Read more
The plan to revolutionise the car insurance industry has crashed. Quindell has announced that what it claimed in April was the world’s largest ever deal to put monitoring devices in cars, is dead.
As the FT reported in August, a joint venture with the RAC to put so-called telematics devices in cars of RAC members failed to get going and talks to restructure the entity, called Connected Car Solutions, fell apart.
Quindell said that it is paying a net £3.5m to buy out its joint venture partner, and has abandoned plans for significant investment in CCS this year.* Read more
A note arrives from house broker Canaccord Genuity which appears to resolve our conundrum about how Quindell spent £335m in the first six months of this year.
The short answer: it didn’t.
The longer answer is largely, as we speculated, that “cash collected” did not mean what we understood it to mean. While the UK’s largest listed law firm said that it collected £220m in the period, it turns out that only £177m of that total was cash available to be used as it sees fit. Read more
A few more things to ponder following the results for Quindell last week, beyond the cash situation that we have already covered.
One is the difference between what the UK’s largest listed law firm has assumed it will get paid for industrial deafness claims it is pursuing, and what UK insures have set aside to pay such claims.
Consider these thoughts from someone insurance minded who attended the Quindell analyst meeting: Read more
The cash situation at Quindell is important, hard to follow and weird all at the same time. The revenues that the group reports are largely promises of cash at some point in the future.
So our recommendation to those interested in the UK’s largest listed law firm is to pass over the commentary (don’t worry, we’ll be coming back to it) and turn straight to the balance sheet and cash flow statement. Read more
Quindell, the UK’s first large listed law firm that started life as a country club before expanding into telecoms, technology, insurance and law, is unusual. Indeed, the company presents risks that we suspect investors, accountants, directors and regulators are unused to thinking about.
One of those for auditor KPMG to ponder is revenue recognition, something we explored in a previous post.
Another is “under-settlement risk”, which leads to a fundamental question: can Quindell ensure that it does the best possible job for its clients while growing at a breakneck pace and meeting promises to stock market investors? Read more
Everything is on track, according to Quindell.
The Board reports that the Group has met all its key performance indicators for July (cash conversion, adjusted EBITDA and adjusted EPS)
On the cash flow front the month was one of operating inflows, as defined by Quindell. Although the statement also mentions one wrinkle:
Certain contracts being restructured to ensure the optimum return on cash resources but both profit and cash guidance are not dependent on any upside from these initiatives