Thomson Geer investing in tech, AI to keep ahead of the game

Thomson Geer’s tech spin-off is tapping into the AI shake-up sweeping over law firms as it nears a multimillion-dollar gain on its stake in ASX-listed Qantm IP.

Thomson Geer chief executive partner Adrian Tembel. Picture: Matt Loxton

Thomson Geer’s technology spin-off is exploring opportunities to capitalise on the artificial intelligence and technology-led changes sweeping over the legal profession as it closes in on a multimillion-dollar windfall from its investment in ASX-listed Qantm Intellectual Property.

The law firm’s TG Legal and Technology vehicle had upped its stake in Qantm to 4.9 per cent by the time private equity firm Adamantem Capital trumped rival bidder IPH with a $254m buyout proposal, which has since been backed by the Qantm board.

TG Legal and Tech, owned by Thomson Geer’s equity partners, stands to almost double its money following approval of the $1.817 per share deal after quietly beginning to accumulate its stake about three years ago.

Having previously considered an IPO itself, TG Legal and Tech was spun out from the partnership two years ago and offers high-volume services in industries including workplace and insurance, property and financial services.

Thomson Geer chief executive and partner Adrian Tembel would not comment on whether the company would investigate a public listing, but said the industry remained ripe for more tech-led disruption.

“Our big picture strategy was always to build that part of our law firm that needs tech, AI and automation to create scale in quite a clever way. And we didn’t just sit back – we obviously made an aggressive investment to help consolidate that sector,” he said.

“The idea of shifting into a corporate vehicle with capital was to create a different modern mindset – not the traditional legal mindset, but a mindset that was interested in tech and not scared of it.”

Thomson Geer will relocate its Adelaide head office to the $400m Market Square development. Picture: Supplied by ICD Property

Qantm owns three intellectual property businesses, including two trademark and patent legal firms and Sortify.tm – a New Zealand-headquartered company that uses AI and automation to assist the filing of trademarks in Australia, New Zealand, Asia and the UK.

While some in the legal profession fear the potential impact of AI, particularly on junior lawyers looking to break into the industry, Mr Tembel is more upbeat, believing the firms and individuals who embrace emerging technologies are likely to benefit from the disruption. “We only now take essentially law graduates with either a commerce degree or an IT degree,” he said.

“If you’re going to be a commercial lawyer you have to have a demonstrable commercial skill or a demonstrable coding, programming skill, because we need a workforce that can embrace AI.

“We say AI is a wonderful opportunity, if you’ve got the interest, mindset and the skills to use the tools. But if you don’t know how to use them, you’re gone.

“The tools are there to enhance and improve the quality of the lawyers’ work. They’re not replacing the thinking work or the judgment work. Or those real relationship skills – that’s alive and well.

“The growth in complexity of business dealings, whether its regulatory complexity, or just the sheer size and scale of disputes and transactions – that grows, and so thank goodness we’ve got AI to allow the lawyer to do more with their day, because otherwise we wouldn’t be able to keep up.”

Thomson Geer announced last week that it would relocate its Adelaide head office to a new $400m development in the city’s Central Market precinct.

Following the firm’s acquisition of Perth litigation and construction practice Tottle Partners last month, the firm is on track to grow its partnership team to 150, consolidating its position as one of the country’s 10 largest law firms, and the only one headquartered outside of Sydney or Melbourne.

Annual revenue at the firm is on track for an 18 per cent increase in the 12 months to June, to $263.8m, and Mr Tembel said it had the balance sheet firepower for more acquisitions in the year ahead.

“We’ve got a very strong balance sheet and we’ve got a mandate to help consolidate the sector – we’ve got a very acquisitive agenda,” he said.

However he warned that after a period of strong revenue growth across the industry, competition over fees was likely to intensify in the year ahead amid a slowdown in corporate transactions and activity.

“We’re probably a little more cautious about the year ahead than maybe some of our rivals,” he said. “Revenue growth has been strong and quite strong price increases have been flowing through the system.

“I think the demand for legal services is probably going to stabilise a little bit, and there’s probably going to be a bit more of a squeeze in the year ahead around pricing.

“And that could have knock-on consequences to industry profitability, and therefore partner stability – because in this industry, the minute your partners’ profits drop, some rival will start to pick off your people.”

Thomson Geer provides legal services to The Australian