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8/9/2019 017.ASX IAW Nov 30 2007 AGM Presentation
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A Platform of Growth for Law Firms
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Activities since listing on ASX 17 August 2007
$12m capital raising oversubscribed
Acquired businesses continue to operate profitably
Talbot Olivier tuck-ins:
legal practice of Shayne Leslie(expected revenues of $3m over 3 years)
Peter Marks, Succession Lawyers(1,100 Will bank, staff, and below market lease)
Dividend Policy announced - 2.5 cents per share
But, failed to convince the market of our worth
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Snapshot of the Legal Industry in Australia
Average profitmargin of
29.7%
Annualrevenue $6b
Fragmented 7,000practices
Cottageindustry-10employees
Australian Bureau of Statistics, 2002
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Issues Facing the Legal Profession
Partnerships hard to sell Junior lawyers unwilling to buy into partnerships with no liquidity Limited ability for Partners to sell their practice as remaining Partners
must approve of new Partner
Traditional partnership structure Partners jointly and severally liable for the debts of other partners
Poor staff retention Junior solicitors often resent a third of their billings going to Partners
Over-specialisation boutiques are not a one-stop shop Clients want an array of services but desire for expertise causessmaller firms to be more specialised
must refer other issues to outside solicitors
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What we are doing right now?
1. Acquiring stand alone firms that want to grow Highly selective approach. Targeting law firms with best cultural, strategic and
financial fit.
6 25 partners in size in capital cities and large regional areas
City acquisition primarily commercial and corporate or boutiques in thoseareas
Regional practices must have substantial presence in their geographic area
Firms are priced conservatively, thus allowing higher profit share back to the
Principals going forward
Member firms given level of independence and responsibility for theirbusiness, consistent with their size, dynamism and ability to meet budgets
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2. Supporting Member Firms sourcing their own tuck-ins
3. Facilitate move to Corporate structure, best practice and crossreferral of clients Firms share knowledge and contribute to overall group strategy and direction
4. Employee Share Scheme To motivate lawyers and staff to stay longer
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Why do firms want to join us?
Bigger Ability to grow via acquisition tuck-in
Better staff retention through employee share schemes
Member Firms are Employers of Choice Greater attraction for new lawyers and staff Secondment opportunities - lawyers and staff can move within the group
(rather than being lost to the group) Lawyers have a clear and transparent path to Principal
Key employees are rewarded with equity in the Company and they becomeactively involved in the success of the group
Employees stay longer because of Integrated training modules
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Better
Provide training and documentation support for implementing Best
Practice initiatives (client satisfaction surveys, suggested businessprocesses, empowering employees to service clients to allow Principalsto manage and increase their leverage)
Quarterly meetings of all Chief Executives to develop Best Practice andbenchmark to each others practice. Tools for continual improvementand support.
Best Practice encourages the institutionalising of the clients, allowingnon partners to service clients and increasing the principals leveraging(number of fee-earners per principal). The Principal is encouraged tomanage effectively and is rewarded for increasing profits rather thanhoarding clients and work greater corporate approach.
Motivation for the Associate Principals to stay longer with a clear road tothe level of Principal (and then Principal with profit share).
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Broader
Broader network of client referral through other Member Firms
Develop areas of specialisation within individual Member Firms toattract and retain employees and increase sources of referral work asreputation expands
Acquire complementary practices through tuck-ins to bring in newareas of practice and leverage of existing client base
Member Firms recruitment opportunities through staff looking to work
in other Integrated firms in different states and different areas ofpractice
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Incentives for Older Partners Reduce fluctuations and risk of income
Reduces the reliance on one form of income, being 100% share of profits ofthe practice
Replacing 100% of the profit of the law firm that can fluctuate up and downwith a more reliable and less risky income stream made up of threecomponents:
Base salary (including the protection of sick leave, annual leave, longservice leave)
Profit share of that Member Firm Dividends from Integrated shares
With these three forms of income we expect the Principals to, within 3 5
years, to move back to the incomes that they were receiving before theyjoined the Integrated group with a lot less risk
The dividends provide a passive income from dividends and an opportunityfor capital growth of the shares (which extend into retirement)
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Working capital extraction - releases the capital value of
their practice now, rather than later Reduce risk by removing personal guarantees for law
firms loans, overdrafts and leases
Building a model that drives succession
Succession planning - younger equity partners andsenior associates, through a corporate approach, are
able to move up to join and, where required, replaceretiring partners. Partners can leave with dignity and withproper succession
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Incentives for Younger Partners
Increased personal growth and professional development andopportunities
Achieve higher growth in your business and therefore, through profitshare, higher income
No cost of moving into a Principal profit sharing position equity
position without capital
Transparent succession planning and path to Principal allowsorderly transition. This encourages lawyers and senior associates towork through the system to get to Principal level at a Member Firm,while receiving proper and fair valuation through salary and the
application of the Employee Share Schemes Orderly and documented succession planning allows older partners
to retire to make way for younger partners, without short termupheaval or adverse affect on profits
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Value for Integrated Shareholders
Allows lawyers and non-lawyers alike to share in the high profits ofthe legal profession
Small head office staff and low head office overheads gets as muchprofit into the hands of the shareholders as possible
Relatively high dividend policy gives both equity partners andshareholders alike a solid and recurring income stream, while stillallowing retention of profit to fund future acquisitions
Quarterly meetings of all Member Firms Chief Executives leads to
sharing of best practice and increased profit performance. The sumis greater than the parts.
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Questions & further information
Brett Davies08 9463 4341 or 041 998 0972
brett@ilh.com.au
Disclaimer and Confidentiality This presentation is prepared by Integrated LegalHoldings Limited for investors as background information. It is not an offer, invitation, solicitation or
recommendation for the purchase or sale of securities.This is a summary only. You should undertake your own research. Neither Integrated Legal HoldingsLimited or its affiliates make any representation of warranty.
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