Sodali & Co sifts through the numbers after rainmakers step away

The struggling spin machine says its communications business will fortify its balance sheet despite feeling a sharp financial sting last year.

Sodali scooped up Citadel Magnus and Brett Clegg, left, in 2022, and a year later acquired Domestique, where Ross Thornton was chair.

Spin shop Sodali & Co is expected to face a profit hit as the firm continues to slash the value of its acquisitions, with several high flyers at the firm forced out or quitting amid a crisis at the top.

Sources say despite private equity pouring millions into acquiring publication relations hustlers Domestique and Citadel Magnus, the combined Sodali operation is under pressure as debts and cuts look set to weigh on the business.

Company accounts handed to the corporate regulator late last year revealed Sodali slumped to a $3m loss in the 2024 financial year, despite six months of revenue from its acquisition of rival communications firm Domestique.

The report, which also included the first full year of earnings impacts from the acquisition of Citadel Magnus, snapped up in a $50m deal, saw Sodali book $41.3m in revenues.

But, this was against $44m in costs — most of which was not related to the Domestique purchase— which squeezed Sodali’s earnings, pushing the company to a second loss in as many years.

The back-to-back acquisitions — Domestique was acquired in a $63m deal — now rely on Sodali and its rainmakers delivering to pay back its private equity owners TPG, and lenders, and keep equity holders happy.

The two firms snapped up by Sodali were rainmakers in their own right, with slim staffing numbers, but sources said the maturation of Sodali to a bigger business with more back office has squeezed its margins.

Concerns about the financial future of Sodali have already seen one of its key spinners, Ross Thornton, flee the firm.

Thornton, known for helping CEOs in crisis, quit Sodali earlier this year after stepping away from the business late last year.

The corporate whisperer, known for being a man to call in a crisis, now runs his communications recruitment firm Temple, having noted on social media he faced a case “when a crisis manager can’t manage his own crisis”.

The move sees Thornton surrender almost $9m in equity in Sodali, walking away from a share in the firm with nearly two years of the deal still to vest.

Citadel Magnus’s Brett Clegg is now in control of Sodali, after local boss Christian Sealey was forced out of the spin shop amid a putsch at the top of Sodali.

Clegg, who started his career in news media, had moved into communications, working alongside Sue Cato before being punted from their partnership after failing to reveal thousands of options in ASX-listed rising star Afterpay, earning him millions.

Cato, who runs her own communications firm, represents Sodali owners TPG.

Sue Cato split with Brett Clegg after discovering his millions in Afterpay options.

Clegg’s rise to the top of Sodali and Thornton’s exit came amid concern over Sodali’s finances, with its American operations losing out amid doldrums in financial markets.

The Australian proxy solicitation business is also challenged, with sources saying the segment has struggled.

Thornton and Clegg had clashed over the direction of the firm, with several blow-ups between the corporate spinners about seating and org charts colouring their relationship, despite publicly insisting they remain close friends.

Clegg, who insists he’s more than willing to work with Thornton again, is now left in charge of a firm missing a key rainmaker, with several others looking to step aside from 9 Castlereigh Street.

Fellow spinner Lauren Thompson is taking a 12 month sabbatical, with senior managing director Peter Brookes also dialling in some time away.

Catherine Strong, Lachlan Johnston, and Tom Callachor are leaving the communications business, well known in media circles for selectively placing stories in very friendly publications.

Sodali senior managing director Lauren Thompson.

This is alongside the loss of Sodali’s debt services business as well as members of its investor relations team.

Sodali has also punted Michael Salvatico, who ran the firm’s local sustainability practice.

Sources said they expected Clegg, who is now Sodali’s Asia Pacific chairman, to look at shutting the firm’s six-strong Japan operations, with questions over its Korean and Philippine forays.

Sodali’s accounts will be hit as it rapidly writes down the goodwill of Domestique and Citadel Magnus to nothing. It has already slashed $4.8m from the carrying value of assets.

Sodali is carrying a further $76.5m in goodwill which is expected to be quickly written down as the Domestique and Citadel Magnus brands are rolled into the group.

The firm’s new local management faces a ballooning pay bill, topping $24.3m last year.

Insiders are talking up Sodali’s prospects, pointing to 20 per cent growth in business for its strategic communications business over the past two years.

Sodali has profited from key relationships with journalists, some of whom holidayed with its principals, offering clients the chance to see their stories in small print.

But others are questioning whether Sodali is crossing conflict lines in a bid to grab business, with the firm representing companies or groups with competing interests.

This includes acting on multiple sides of the WiseTech blow-up, with Sodali also servicing David Di Pilla’s HMC and acting for his takeover target Healthscope.

One Sodali source noted much of the firm’s work was visible across the business, sitting on one shared drive.

Sodali senior managing director Jim Kelly.

Sodali senior managing director Jim Kelly said the firm “continues to be financially strong and enormously successful”.

“The fact is our headcount has grown – and will continue to grow – in line with our business,” he said.