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AF Legal’s (ASX: AFL) proposed $11 million merger with GTC Legal Group has been broken off by the latter today, quashing the potential to create 'one of the largest personal legal services firms in Australia’.
In an update to the ASX this morning, AF Legal announced the transaction was terminated with immediate effect. The firm is working with GTC to finalise arrangements for the now-dead merger.
The transaction would have seen AFL take control of GTC in exchange for 49.7 million shares, giving existing GTC shareholders a 39 per cent stake in the merged entity.
At the time the deal was announced, AFL said the merged entity would have pro-forma FY22 revenue of $40.8 million and EBITDA of $8.8 million.
“We are disappointed to have had to terminate our proposed merger with AF Legal," GTC Legal Group managing director James Stevens said.
"GTC was fully committed to progressing the transaction and were, until now, ready to complete what we had considered to be a merger of equals. Unfortunately, our assessment in the light of the accuracy of certain disclosures made to us by AFL is that we now believe the best course of action for our shareholders is to exercise our right to terminate."
Founded in 2009 by managing director James Stevens, GTC operates across seven segments of personal law, namely family law, criminal law, contested estates, civil and commercial, administrative, agency and immigration.
The business has 116 staff, seven offices across Australia and generated pro forma revenue of $20.3 million and EBITDA of $4.8 million in FY22. The proposed merger would have bolstered AF Legal’s geographic footprint from 19 to 26 offices.
Brisbane-based GTC operates a ‘platform’ model that includes a ‘traditional’ law firm (Armstrong Legal), a ‘non-traditional’ revenue-sharing law firm (GTC Lawyers), around 1,500 network partners (All Courts Lawyers), and a front and back-office service company (GTC Legal Group Services).
The company also operates a legal hotline - which fields around 80,000 enquiries every year - from 7am to midnight every day, staffed exclusively by practicing lawyers. GTC Legal also runs websites www.gotocourt.com.au and www.armstronglegal.com.au.
The news of the collapsed deal comes almost a month after AF Legal’s CFO Pratyush Jagdishwala resigned from the company.
On November 9 - which was the same day Chris McFadden was appointed interim CFO – it was revealed Jagdishwala’s total annual remuneration was $290,000 instead of $187,000.
The corrected salary figure was $42,000 higher than AF Legal’s CEO Stace Boardman.
Based in Melbourne, AF Legal specialises in family and relationship law and provides advice to clients in respect of divorce, separation, property and children’s matters together with related and ancillary services such as litigation. The company acquired one of Australia's largest family law firms - Watts McCray - for $1.5 million last year, as well as Withnalls Lawyers.
“AFL will continue to apply its focus on its own ongoing operations and will provide further updates to the market as appropriate,” the company told shareholders today.
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