History is littered with examples of Aussies sticking it to the Brits: from early convict rebellions to the time Rupert Murdoch bought our favourite tabloid newspaper, The Sun, and had a photo of a topless woman placed on its inside page each day — a tradition that continues to this day (semi-NSFW link).
Last week they were at it again when Australian law firm Slater & Gordon used some of the millions generated from its 2007 public listing — the first ever for a law firm — to snap up the large British personal injury firm Russell Jones & Walker (RJW), in an unprecedented £54m ($85 million) cash and shares deal. Once again, the people of the U.K. were left shaking their heads.
Of course, we should have seen it coming. British lawyers have been talking about the deregulatory provisions of the U.K. Legal Services Act (LSA) for years now. And it’s not as if we haven’t been watching the rapid growth of Slater & Gordon — where turnover, staff numbers and office locations have nearly tripled since the firm responded to Australia’s enactment of a similar law by going public — with eyebrow-raised interest from afar.
For some reason, though, we failed to put the two together….
Amid all the excitement, it was easy to get carried away. “Slater & Gordon invasion has Britain reeling,” bellowed The Australian last week as it announced the deal. The newspaper continued, breathlessly: “The British lawyers have good cause to worry. Until now, the power relationship with Australian law firms worked in the opposite direction, as big English firms merged with Australian practices that were keen to tap global markets. But if this week’s deal goes well the power will move to Melbourne.”
While it’s true that no one really knows what the effect of the LSA will be, it would certainly come as a surprise if it were to see London’s place on the legal map replaced by Melbourne. A safer bet would be for the rule change to result in a host of stock market offerings of British law firms. Although Slater & Gordon isn’t floating in the U.K. at this stage, the share element of the deal means RJW’s 19 equity partners should receive more than £2m ($3.2m) each. Looking ahead, the temptation for equity partners at similar firms to cash in, Facebook-style, will surely prove too much for many. Few, though, expect the top Biglaw firms — where the partners are sufficiently wealthy and business models sufficiently efficient to dampen the incentive to shake things up — to list.
But what will happen to age-old professional virtues fostered by the quirkily protective partnership structure? IBM general counsel Robert Weber reckons they could be compromised: “Imagine discovering that the law firm you hired to defend your company in a business dispute is partly owned by private investors,” he wrote in Businessweek last year. “And those investors also have financial stakes in the company that is suing you — and perhaps even stakes in the law firm representing your adversary. Would you rest easy, assured that the firm will still represent your best interests in the courtroom?”
Others are less concerned. As The Economist put it last month, “lawyers have always cared about making money, and giving duff legal advice is seldom a good business plan.”
Currently Jacoby & Meyers, the US personal-injury firm, is in a legal battle with New York, New Jersey and Connecticut for the right to raise outside capital. As the case rumbles on, those involved will doubtless be keeping one eye on events in London.
Alex Aldridge is Above the Law’s U.K. correspondent. He also writes a weekly column for The Guardian and is the Editor of Legal Cheek. Previously Alex was Associate Editor of Legal Week, having begun his career with The Times. Follow Alex on Twitter @AlexAldridgeUK or email him at [email protected].