Is QLS deal more important to S&G than Quindell?

Why the Quindell Legal Services deal is important to Slater and Gordon

The Slater and Gordon strategy is to grow their UK business by c7% and to dominate the market.

QLS is important to them as it is the largest personal injury firm in the UK.

Acquiring QLS will:

1. Make S&G the largest publicly listed legal firm in the world.

2. Make S&G the largest personal injury film in the UK.

3. Prevent any other business from becoming the dominant player in the market.

4. Provide the opportunity to increase margins due to scale

Why Slater and Gordon deal is important to Quindell

a) Provides market with a valuation for the business.

b) Results in a streamlined Quindell business.

Conclusion of a deal below market value does not have to happen. QLS could continue to operate as a viable revenue generating business.

Quindell are in the driving seat with the negotiation process and the fact that one of the deals has already been indicated as being c£900m (£640m +NIHL upside) means (a) above has already been achieved.

It remains to be seen if Quindell accept or reject a Slater and Gordon offer and if other parties indicate their interest in the QLS business.

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One response to “Is QLS deal more important to S&G than Quindell?

  1. Interesting times….

    For Quindell ….

    The rationale you have stated for the Quindell Board selling QLS, to obtain a Market Valuation, is somewhat oversimplified imho. As far as a market valuation for QLS is concerned, that ought to be addressed by the findings of PWC who have been tasked these past three months, inter-alia, to review key accounting policies – in particular the group’s revenue recognition policy – in order to inform the Board’s strategy going forward. It is for that reason that Quindell have not issued any financial guidance regarding Q4/2014 other than to state that trading had been robust and the Board was comfortable with cash-flow.

    Personally, I find it difficult to reconcile the intentions of the Board in selling QLS, the group’s star performer in terms of revenue generation and associated high margin EBITDA. Moreover, I am somewhat concerned that the RNS responses from Quindell to the (several) press speculations about their negotiations with Slater & Gordon, have suggested that they are for the disposal of the whole Professional Services Division of which QLS is a sub-division, only to be clarified by S&G that it’s due diligence has been confined to the Personal Injury litigation cases.

    For Slater & Gordon …

    Whilst you are correct in your assertion that Slater & Gordon’s stated strategy is to grow their UK operations, they have done so up to now by acquiring much smaller private practices in certain parts of the UK and they have acquired those practices by a combination of equity and debt. Quindell won’t be looking for paper in any deal, having just disposed of its investment in NARS for cash. Thus Slater & Gordon would have to raise the majority of the £600m odd upfront cash by means of a placing, presumably with institutional investors in order to maintain its gearing levels.

    I also have some concern that if Slater & Gordon were to acquire QLS, then its (enlarged) UK legal services operation would represent the greater part of the SGH group revenue and profit. That would increase risk to the Slater & Gordon group.

    Finally, if QLS was already the largest publicly owned legal firm globally for personal Injury litigation, then is there any prospect that the proposed acquisition for QLS by Slater & Gordon be referred to the Competition and Markets Authority?

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