The Australian market for professional intellectual property services is unique. In the last few years we have witnessed a frenzied conjoining of respected, long-standing and independent Australian IP firms all rushing to the ASX alter. The speed dating proved productive. When the music stopped, three large listed IP holding companies emerged: IPH Ltd, Qantm Ltd and Xenith IP Ltd.
The “roll-up” business model is not uncommon to other sectors but is conceptually challenging in the context of professional advisory firms where duties to clients, not shareholders, are paramount. No less than a dozen of Australia’s and New Zealand’s most established and respected IP advisory brands surrendered their independence.
Over the past few months we’ve witnessed a new dance with Xenith IP Ltd (owner of Griffith Hack, Shelston and Watermark et al), the subject of enthusiastic courting. The first suitor, Qantm Ltd (owner of Davies Collison & Cave and Freehills Patent Attorneys), last November announced a proposed “merger of equals”. Not to be outdone, IPH Ltd (owner of Spruson & Ferguson, Fisher Adams Kelly, Pizzeys, AJ Park et al) signalled a hostile takeover of Xenith IP commencing last month with the acquisition of a nearly 20% stake in Xenith IP.
Further consolidation, and a resultant lessening of competition in the market is now inevitable. Today (28 March 2019) Australia’s competition regulator, the ACCC, announced that it will not oppose IPH’s proposed acquisition of Xenith IP. The ACCC was not satisfied the acquisition would result in a substantial lessening of competition despite the ACCC noting IPH’s proposed acquisition will combine the largest and the second largest providers of patent services in Australia. As a related aside, these three ASX listed corporations employ roughly 65% of the profession.
Today’s announcement follows last week’s release that the ACCC would not object to a merger between Qantm and Xenith IP. In relation to that deal, the ACCC pointedly noted:
“While firms within the same ownership group have regulatory obligations to maintain independence for the purposes of managing conflicts of interests, the ACCC considered that firms within a merged QANTM and Xenith do not have the incentive to compete with each other.” (Emphasis added.)
Shareholders may enjoy a win from the inevitable acquisition of Xenith IP. However, it is difficult to see how the interests of clients of all of these firms are served by this further consolidation, given, by the ACCC’s own reckoning, these firms will not have an incentive to compete with each other.
In our opinion, a legal practitioner’s fiduciary duties to clients should never be compromised by competing duties to public shareholders or a corporate structure which makes more difficult the management and disclosure of conflicts of interest.
At Buchanan Law Firm, independence and the uncompromised advancement of our clients’ interests remain paramount.