While the AFR headline indicates that Grant Thornton bought the R&D tax division of Glasshouse, my interpretation is that no money has changed hands. IPH has not issued any announcement to the Australian Securities Exchange (ASX), as would be required if the event were relevantly ‘material’ to the business. And the Grant Thornton media release appears to be quite carefully worded, referring to the arrangement as a ‘transition’, and quoting IPH COO and acting Glasshouse Advisory EGM, John O’Shea, as saying:
We are delighted to have reached agreement for transfer of the Glasshouse Advisory R&D tax incentive practices to Grant Thornton and we see this as a positive next stage for Glasshouse’s R&D tax incentive business. Since our acquisition of Glasshouse Advisory as part of the Xenith Group in August 2019 we have undertaken a detailed review of the Glasshouse Advisory business and concluded that these aspects of the business would be better placed within a specialist business, more closely aligned to their service offering.
Nowhere is there any mention of a ‘purchase’, or any suggestion of a price paid by Grant Thornton to acquire the Glasshouse R&D tax practice. Indeed, it is unclear what Grant Thornton would be getting for any money they might pay out – certainly not the Glasshouse brand (which would be of no interest to them), nor any ‘rights’ in relation to the ‘transitioned’ staff (who are not indentured servants, and are of course free to vote with their feet if they are not in favour of the change in employer). The Glasshouse client list might be worth something (the R&D tax advisory business is reported by the AFR as being worth around A$2.5 million annually), but I suspect that repeat business in this area is patchy, and that only a relatively small proportion of clients might be regarded as a reliable source of future income beyond the short term.
I understand that new roles have not been found for staff in other Glasshouse divisions, and that the business effectively ceases operation after 22 May 2020.
My take on this is that IPH most likely determined that Glasshouse was neither a sufficiently good fit with the other entities in the group, nor a large enough source of revenue, to justify its retention. No doubt some efforts were made to find a buyer for the business, but in the end the best that could be done was to provide a new home for some of the staff, at Grant Thornton.
It is a dog-eat-dog world out there, especially in the publicly-listed segment of the IP profession. Another significant stream of the Glasshouse business was patent research, including novelty and freedom-to-operate (FTO) searching. Commonly an in-house function at many medium-to-large IP services firms, under Xenith’s ownership the patent searching capability was moved out of Griffith Hack into Glasshouse to form part of a broader IP strategy, valuation, and monetisation service offering. While I feel for all of the people whose roles have been made redundant by the closure of Glasshouse – particularly in these challenging times – my sympathies are especially with the search and analytics specialists who might now be feeling – with some justification – that they would have been more secure had they remained within the traditional patent attorney firm environment.
From the outset, I have argued that the ‘bold experiment’ of public listings and formation of ‘ownership groups’ of firms is, as much as anything else, a response to the demands of achieving growth and improving efficiency and profitability in a challenging, low-growth, market. In this sense, restructuring and associated redundancies are perhaps inevitable within the IP professions, regardless of ownership arrangements. Even so, I cannot help feeling that Glasshouse Advisory, and a number of its people, have ended up as casualties of a failed experiment.
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