Creating the First Public Law Firm: The IPO of Slater & Gordon Limited
Posted: 3 Dec 2012
Date Written: October 17, 2012
Slater & Gordon (S&G), a midsized Australian law firm with a high-growth consolidation strategy, had an initial public offering (IPO) scheduled for May 2007. Due to a series of regulatory changes in Australia in recent years, the IPO provided an opportunity for S&G to become the first publicly-traded law firm in the world. The firm and its underwriters had just issued a prospectus and were now in the process of lining up investors for the offering. Gloria Rosen, a portfolio manager at Freemantle Securities, was trying to decide whether to buy the stock for her small-cap growth fund. With only a few days left to place an order for the offering, she had to decide whether to invest and, if so, how much to invest. To make her investment decision, Rosen had to understand the value implications of the firm's business model and its growth strategy, as well as the relevant risks.
The case has four pedagogical objectives: 1) to understand the relationship between growth, accounting profitability, and value creation; 2) to illustrate the valuation of a service business and determine the key value drivers; 3) to explore the IPO process and the resulting corporate governance issues created by the public ownership of a law firm; and 4) to explore the optimal capital and ownership structures for a professional service firm.
This case is appropriate for students in a wide variety of courses including introductory and advanced corporate finance, mergers and acquisitions, restructuring, entrepreneurship, and valuation courses. To assist students with analyzing and preparing the case, there is an Excel workbook (“HBS Courseware”) available from HBS Publishing or the authors.
Keywords: IPO, M&A, law firm, valuation, growth strategy, corporate governance, roll-up, value drivers, capital structure
Suggested Citation: Suggested Citation