What to do when the acquisition doesn’t work out? Sue the seller!
Slater & Gordon, the listed Australian law firm, is to sue over the disastrous UK acquisition that help push it to a $A1.02 billion full-year loss. The company has told Watchstone Group, formerly Quindell, that it intends to bring claims against it… Slater & Gordon to sue over UK acquisitionthumbnail courtesy of thetimes.co.uk
Background: Slater & Gordon (S&G) purchased Quindell’s (now called the Watchstone Group) professional services division last year. But at the start of 2016 S&G disclosed a write-down of goodwill in the acquisition and this led to a staggering loss of over one billion Australian dollars.
Needless to say, S&G are not happy. And when you’ve made an acquistion promising shareholders it will lead to more profit you are, not unreasonably, expected to deliver more profit. If you deliver instead a record loss of over a thousand, million dollars shareholders aren’t going to be best pleased.
One way to placate them is claim it wasn’t your fault and you were misled.
That’s S&G’s line. They have notified Watchstone they intend to bring a claim … but haven’t disclosed much else.
The problem is that under the terms of the purchase the amount held in escrow is a measly $50m, less than 1/20 of the losses at S&G that forced a renegotiation of their debt.
Watchstone has issued a statement to say it does not believe there are grounds for a claim and that it will defend the claim “robustly”.
In other news, law firms are apparently concerned that the slowdown in M&A activity could hit their profits. We’re not so sure they have much to worry about.