Law firms' merger trap

👋 G’day

Today’s brief:

• Two-thirds of US’ largest law firm mergers underperform, says Bloomberg.

• Apple’s top lawyer walked away with $27m last year.

• A recent survey reveals that understaffed legal teams is the biggest constraint for in-house departments.

PRACTICE POINTS

Wage theft penalties surge

• Since 1 January 2025, civil penalties for wage underpayments have jumped. For companies (excluding small businesses), the maximum penalty will be the greater of:

  • 1,500 penalty units (or 15,000 for serious breaches)

  • 3 times the value of the underpayment (if that option is pursued).

• The Treasury has unveiled updated "policy specifications" for a proposed regime requiring unlisted entities to maintain a public register of beneficial owners. Key changes include:

  • Access to the register will be limited to journalists, academics, entities with AML/CTF obligations, and regulators/law enforcement during Stage 1 (not the general public).

  • The definition of "beneficial owner" is now narrowed to those with 25% (previously 20%) of shares/voting rights.

  • Reduced regulatory obligations for certain entities, like director-owner companies and wholly owned subsidiaries.

• ASIC has laid out its top priorities for 2025, with a sharp focus on cyber risks, market shifts, and greenwashing. Key areas in its sights:

  • Public vs Private Markets: ASIC will review whether its regulatory approach needs to evolve as private capital plays a bigger role in financial markets.

  • Cybersecurity & System Failures: Expect more scrutiny on cyber resilience, data breaches, and internal failures that could erode market confidence. ASIC also plans to enforce directors’ duties on cyber risk.

  • CHESS Replacement: With ASX’s troubled clearing and settlement revamp ongoing, ASIC (alongside the RBA) will keep a close eye on system reliability and risk management.

  • Climate Disclosures & Greenwashing: New climate-related financial reporting rules are rolling out. ASIC will crack down on poor disclosures and misleading claims about sustainable investments.

WORD ON THE STREET

Why law firm mergers fail

• A Bloomberg Law analysis revealed that two-thirds of the 18 largest US law firm mergers in the past 15 years underperformed competitors in profit per partner and revenue per lawyer. Many firm leaders rush into mergers, hoping it will solve their deeper problems, but overlook long-term impacts and fail to secure buy-in from key partners—leading to poor talent retention. “That’s a recipe for failure”, says Albert Bollard of McKinsey & Co. “Too often, the merger is seen as a strategy in itself”.

• Apple’s top lawyer, Kate Adams, earned an astounding $27.2m last year, far exceeding the earnings of top-tier partners. Hired in 2017, securities filings reveal Adams has sold ~$140m in Apple stock over the last 4 years.

• Former financial adviser Anthony Paul Torre has pleaded guilty to stealing and fraud charges after misappropriating $1m in client funds. Torre appeared in WA’s District Court on 28 January, admitting to offences spanning 2010 to 2015. Facing up to 10 years behind bars, he was remanded in custody ahead of a sentencing hearing set for 9 June.

TALKING POINTS

No fact-checking, more defamation?

• Legal experts warn that Meta’s decision to ditch third-party fact-checking could fuel more defamation cases. With its shift toward “freedom of expression,” they say the platform may inadvertently allow users to target others based on identity and escalate hate speech.

• Despite being a mineral-rich nation, Australia’s grip on global resources is slipping. Rising energy costs, slow project approvals, and Labour workplace reforms are choking the sector, with the Chamber of Minerals and Energy WA warning urgent policy changes are needed to stay competitive. With international capital moving fast, Australia’s appeal is waning as the path of least resistance leads elsewhere.

• A survey revealed that understaffed legal departments are the top challenge for Australian chief legal officers. Yet, despite the strain, only 31% increased their reliance on external counsel last year—well below global averages.

• Dutton takes a page from Trump’s playbook. The opposition leader is taking aim at DEI roles in the public sector. He slammed Labor’s hiring spree, claiming the government has wasted taxpayer money on tens of thousands of new bureaucrats.

TREASURY

DEAL ROOM

Mining mega-mergers in bound

• Former Anglo American CEO Mark Cutifani is betting on more consolidation among the world’s top miners. With investors flocking to less capital-heavy sectors like tech, Cutifani believes the mining giants will have to team up to stay relevant.

• Selfwealth announced it received an NBIO from Svava Pte Ltd to acquire Selfwealth for $0.28 cash per share via a scheme – a $65m valuation. Back in November, Bell Financial Group made a $0.25 cash offer, with the alternative scrip offer on the table for shareholders. Bell’s scrip offer is equal to 0.1831 Bell shares per Selfwealth share. Looks like things are heating up at the trading desk.

• Astral Resources and Maximus Resources announce plans to merge to become a leading WA gold developer. The all-scrip, off-market takeover prices Maximus at ~$31m. Maximus shareholders will receive 1 Astral share for every 2 Maximus shares, representing an implied 61% premium.

• Zenith Energy has just upped its debt refinancing to $1.8bn—more than double its existing $775m debt facilities. Why the bump? With the company up for sale, sources say the oversized refinancing is part of the pitch to prove Zenith’s value and give owners some extra leverage as buyers weigh its valuation. Initially pegged at around $2bn, this new $1.8bn refinancing could push the price tag well beyond that.

• Austal’s shares have jumped nearly 24% in 2025, hitting a five-year high—now well above the levels seen during its takeover talks frenzy back in '23 and '24. Brokers like Jarden and Wallabi Group are circling, with most of the interest tied to Austal’s US operations. But there's no concrete sign of a fresh takeover bid yet.

• KKR’s still in talks to buy Perpetual’s corporate trust and wealth management unit, with hopes of a sweeter offer. A surprise ~$500m tax bill from the ATO could dent shareholder returns, but KKR’s eager to strike a deal—and with the market up 10% since talks began, they might just cough up more cash.

SECTOR SPECIFIC

Witness tampering scandal hits EDO

🚜 DIGGERS

• The EDO is at risk of losing its charity status after being accused of witness coaching and fabricating evidence in a failed legal challenge against Santos’s $5.8 billion gas project. Opposition MP Susan McDonald has called for an investigation into the EDO’s “serious failure in governance.” Despite a court ruling that slapped EDO with a $9m costs bill, the organisation insists it’s not facing bankruptcy.

• Rio Tinto is teaming up with Hydro to explore carbon capture tech for aluminium smelting, pledging $45m over the next 5 years, advancing the aluminium sector’s efforts to reduce emissions.

🏦 FIN

• CBA is the first major bank to approve mortgages for prefabricated homes as it says more creative solutions are needed to hit the government’s ambitious target of 1.2 million new homes by 2030.

• Putin has approved Goldman Sachs’ sale of its Russian operations to an Armenian investment fund, making it one of the few Western banks to leave the country.

• Customers of banks, insurers, and super funds are facing delays of up to 6 months for the Australian Financial Complaints Authority (AFCA) to even process their complaints, with some cases taking years to resolve. And with AFCA set to take on scam complaints handling under the new scam prevention laws, things could get even slower.

🏡 RETAIL & REAL ESTATE

• Global investment manager Realterm has snapped up its third industrial outdoor storage site in western Sydney, boosting its Australian portfolio to over $120m. With e-commerce giants like Amazon driving demand, this emerging asset class is set to grow significantly in Australia, following Realterm's success in Europe and the US.

• Property prices took another hit in January, with buyers in Melbourne, Canberra, and Sydney feeling the squeeze. CoreLogic’s Home Value Index for major cities dropped 0.2%, marking the second straight monthly decline. Melbourne led the fall (-0.6%), followed by Canberra (-0.5%) and Sydney (-0.4%) as affordability pressures bite.

• SkyCity Adelaide will shell out $13.1m in extra casino duty and $24.8m in interest after cutting a deal with SA’s treasurer to end a decade-long dispute. The casino will also cough up $200k in legal costs. The fight centred on how loyalty points converted to gaming credits were taxed.

📱 TECH

• Netflix defends its decision to make a manager redundant while she was on maternity leave, claiming it was part of a restructure and citing “ongoing performance issues.” This comes after a former manager sued the streaming giant last year for adverse action.

• Next month, lawyers in competing class actions against Google’s ad tech practices will face off in Federal Court to determine which case moves forward—known as a "carriage contest". Maurice Blackburn and Phi Finney McDonald are planning to file a joint action, while Piper Alderman has already filed the first group claim.

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