ILH Sharing lawyers profits

IHLSharing lawyers profits, Cover Story, THE AUSTRALIAN INVESTOR, July 9, 2007

Many believe that owning a law firm is a licence to print money. Recent changes in the law
mean that non-lawyers may now own law firms in Western Australia, New South Wales and
Victoria. As a result, Australia is one of the few places in the world that allows you to share
in the profits of a law firm. Integrated Legal Holdings (ILH) has been incorporated to utilise
these legal changes with their unique business strategy.
The Company is offering non-lawyers as well as lawyers the chance to participate in the
establishment and growth of a legal services group via their IPO offering of 24 million shares
at 50 cents each. www.ilh.com.au
Mr. Brett Davies, Integrated Legal Holdings spokesperson, explained the key features of
their business strategy to the Australian Investor and highlighted the potential future outlook
for Integrated Legal Holdings.
We believe that there are better ways of operating a law firm than the old partnership
model, Mr. Davies explained to the Australian Investor, Traditionally, the ultimate aim of
joining a law firm was obtaining a partnership. This meant you spent a long time in one firm
to eventually build up to that position. But eventually you retire with little value for your
partnership interest. However, this structure is beginning to break down due to the X and Y
generations perspective. Often, they do not want that long-term tenure or the joint financial
liability with the other partners. So, our business plan is transforming the structure of law
firms to make them more appealing and therefore fast track growth.
ILH can accommodate law firms whether some partners want to retire and others want to
build their business. Without ILH an exiting partner is likely to walk away from their practice
with little value. ILH can offer the retiring partner one to three times the EBIT multiples,
which is generally significantly greater than what they would get on the open market. In
return, ILH gets that law firms client base, files, staff, lawyers, business name and
reputation. They acquire the firm and can either tuck it into one of their existing law firms
or it can be a stand alone subsidiary of ILH.
The second types of partners are the ones who seek to growth their business. The approach
ILH has to these types of law firms is that by joining their existing structure they will have
the opportunity to fast track their growth. With ILH these practices have the aid of employee
share schemes and a structure that helps overcome the increasing complexity of the law that
requires greater specialization, which makes it harder for small and mid-tier firms to service
all of their clients needs. Now, such specialist law firms have the potential to recommend the
services of other ILH law firms.
We believe this structure has an immense amount of value for both parties, Mr. Davies
informed the Australian Investor, We aim to quickly grow law firms that are bigger and
more profitable and present a long term opportunity for the equity partners that join us.
Mr. Davies continued, ILH, the holding company, only needs three staff: a CEO, CFO and
marketing secretary. We are a holding company, which means we do not operate the law

firms, we own them. So, there is little to no management involved by ILH over the actual law
firms.
Going forward, ILH seeks to buy law firms for 2 purposes. The first acquisitions are for tuck
ins. These law firms (usually smaller practices) are merged into a willing existing ILH law
firm. Their partners, lawyers, staff, files and expertise etc are added to an existing ILH law
firm. Or, secondly, ILH can acquire a law firm (perhaps 6 35 partners in size) they continue
to operate on a stand alone basis. In this case, the law firms partners, although now owned by
ILH, nevertheless continue to operate under their business name, set their own hourly rates,
develop their own specialised areas, and the other aspects of their business. ILHs
involvement with the firm is generally from ILHs CFO who works with each practice in
regards to their budget and performance of the budgets.
We are not telling our law firms what to do or how to run their business, Mr. Davies
commented, However, we are giving them the tools such as employee share schemes,
economies of scale and the like to help aid in their growth and development.
ILH has entered into agreements to acquire initially the legal practices of Talbot Olivier and
Brett Davies Lawyers. It is intended that the acquired legal practices will continue to practice
utilising their existing names under the umbrella of Integrated.
For example, Talbot Olivier is the 15th biggest law firm in Western Australia, Mr. Davies
explained to the Australian Investor, They have been around since the 1920s and have been
highly successful. They are not seeking help from ILH in how they run their firm, but they do
like the employee share schemes and the economies of scale that are available from being
part of a listed vehicle. Under ILH our law firms have the opportunity to grow faster.
Maintaining each law firms existing brand is important to the business model, as is the
continued incentive for its equity partners to deliver quality work. The changes to law in
Western Australia, Victoria and New South Wales have created an opportunity for law firms
to benefit by restructuring their operations.
In addition to purchasing law firms, Integrated is acquiring the shares in Law Central Co Pty
Ltd. This business provides access for lawyers and the public to legal information and
documents. www.lawcentral.com.au is arguably the biggest supply of Self Managed
Superannuation Funds in Australia.
Law Central is a document generation website, Mr. Davies told the Australian Investor, It
has achieved what many law firms strive to do; earn a passive income. Law Central has no
lawyers and few employees but many banks of computers. It provides documents on legal
issues such as how to build lease agreements, family trusts and many other issues. The
Honourable John Dawkins AO (former Treasurer of Australia) has a long and proud tradition
with Law Central as its Non-Executive Chairperson. Mr Dawkins moves up to be Chairman
of ILH.
Mr. Davies concluded, We believe that we have an exciting, unique offer that gives everyone
a chance to be a part of the legal industry.
Overview

Integrated has been formed to own a number of Australian law firms under one business
structure which will become known as the Integrated Legal Group.
Recent changes in the law now mean that law firms may be owned by non-lawyers in
Western Australia and Australias largest markets for legal services, New South Wales and
Victoria.
The Prospectus offers 24,000,000 Shares at an issue price of 50 cents each to raise
$12,000,000 with a right to accept oversubscriptions for up to a further 4,000,000 Shares.
The Shares already on issue are tightly held with more than 50% of the company escrowed
for up to 4 years from the date of listing.
The business model is that ILH will acquire law firms for up to 5 times EBIT. This is while
the stock market is trading above 12 times EBIT.
Since knowledge of the ILH float has become public there have been over 89 enquiries from
other law firms and associated businesses such as settlement agencies and company
manufacturers. This includes two requests for information from UK legal firms.
The float is fully sponsored by Sentry Financial Services Pty Ltd Australian Financial
Services License 286786. The preliminary response indicates that the float will be
oversubscribed and will close early. The subscription price is 50 cents per share.

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