To observers of the legal sector, Slater and Gordon’s decision to spend £637m on Quindell’s legal department was always a mystery.
Sadly for the curious among us, the explanation is unlikely to be publicly aired. The firm today settled its legal claim to recoup its outlay. The case, which was due to open in court this morning, might have finally shone some light on what will remain a baffling and costly purchase.
The settlement is a downing of arms, with neither side able to claim victory. Neither Slater and Gordon nor Watchstone has admitted fault, and relatively little money has changed hands. After two years of posturing, accusations and millions spent on legal costs, the case has been put out of its misery.
While not as head-scratching as the deal itself, it was always questionable why Slater and Gordon wanted to pursue this claim. Clearly the payback might have been substantial had the firm been able to prove it had knowingly been sold a dud, but in all other respects the business had moved on. The firm's old owners had returned to Australia, chastened and considerably poorer, while the new owners had started to turn the business around.
The model is now a complete different one to seven years ago, when Slater and Gordon made its first UK acquisition.
The plan then was to grow quickly, and spread far and wide. The brand appeared in towns and cities across the country, with familiar, often much-loved, local firms being swallowed up and erased. At a time when the personal injury sector was going through such flux, it was a short-sighted and doomed prospect. When businesses needed to consolidate and upgrade their technology, Slater and Gordon grew larger and amassed a huge staff.
Even without the Quindell disaster, it was probably unsustainable. Only last week, the firm closed yet another legacy office in Leeds. It’s grim for lawyers who’ve done nothing wrong – and often were working perfectly happily in the acquired firms – but the network has to shrink and work become centralised if the business can survive.
Early signs are promising, with balance sheets returning to the black, but the Quindell case always cast a shadow. The vigour with which Quindell (now Watchstone) fought back was evidence that this was a risky claim. When details emerged of the extensive due diligence apparently done in the lead-up to the deal, that risk looked foolhardy. Settlement will be seen as another embarrassing climbdown, but better that than a trial which could leave them with nothing – or worse. There were 637 million reasons for the Quindell deal to stick in the throat, but it was time to move on.