Grech: transformational opportunity
Slater & Gordon has moved to dispel any doubts about the wisdom of its acquisition of Quindell’s professional services division (PSD), emphasising the work it put into going over the books.
It also revealed that the PSD will be a standalone division requiring “minimal” integration, while one of its most senior manager is relocating to the UK to head operations here.
On Friday, Quindell’s shareholders approved the sale of the PSD for an initial £637m, with further payments due as noise-induced hearing cases pay out.
Ken Fowlie, the current head of S&G’s Australian practice, will become managing director United Kingdom (UK) & Europe on completion.
In a statement today to the Australian Stock Exchange, he said: “In reaching the decision to acquire PSD, we have undertaken a bottom-up, fundamental assessment of PSD’s historical performance and future potential, leveraging a large team of internal experts and external advisers. As part of this we restated PSD’s financials using Slater & Gordon’s own evidence-based accounting policies.
“This work, together with our firm’s deep UK market experience and track record of successful acquisitions and integrations, underpins our confidence in the opportunity. I am looking forward to moving back to the UK to lead the local team and our enhanced UK and European operations.”
Slater & Gordon’s group managing director, Andrew Grech, said: “The acquisition of PSD is a transformational opportunity for Slater and Gordon… It is anticipated the acquisition will deliver significant value to Slater & Gordon shareholders.”
He said PSD expected to be “more than 30% EPS accretive in first year of ownership” – that is, it will increase the Australian firm’s earnings per share.
The online resource Investopedia explains that ‘accretive’ acquisitions tend to be favourable for the company’s market price because the price paid by the acquiring firm is lower than the boost the new acquisition will provide to the acquiring company’s EPS.
Mr Grech said S&G would also have a continued operating cash to net profit conversion target of greater than 70%, while there was an “attractive transaction multiple of 6.9 times pro forma adjusted volume trend core EBITDA of £86m”.
He confirmed that PSD “complements Slater and Gordon’s existing UK operations and will operate as a standalone division with minimal integration requirements”.
The transaction remains subject to regulatory approvals and financial close is expected in May 2015.
Tony Hanmer 
Share price before the purchase $7:60, share price now $6:50! Seems that the market doesn’t agree with Mr Grech.
Having been involved with a few take overs in the last few years one thing I have noticed with S&G in the UK ‘over valuation’ of assets they have purchased, RJW and Pannone being the worst value.
Next year will make or break S&G, they already seem to be over stretched and marketing seems to be very confusing at present.