Topic
What is QANTM?
Summary
― Following Listing, QANTM will own 100% of DCC
and FPA (the Firms), which are two of Australia’s
leading IP firms.

DCC was established over 130 years ago, and is one of Australia’s largest IP
firms, providing patent and design, trade mark and legal services.

FPA was, until July 2012, a part of HSF, one of Australia’s leading commercial
law firms. FPA separated from HSF and commenced operating independently
in 2012. FPA provides services in relation to patents and designs, and has an
ongoing relationship with HSF.
― The Firms offer their clients a suite of IP related
services associated with the creation, protection,
commercialisation, enforcement and management of
IP rights.
― The Firms will continue to operate independently
following the Listing.
What are IP rights?
― IP rights are legal devices which protect the output
of intellectual creativity in the industrial, scientific,
literary and artistic fields, such as inventions, works
of art and literature, and product designs. In addition,
IP rights include marks and logos used in connection
with products and/or services, and which distinguish
them from similar products and/or services from
other sources.
― Of the legally recognised categories of IP rights,
some require registration including patents, trade
marks, designs and plant breeders’ rights. Other IP
rights which do not require registration include
copyright, trade secrets, confidential information and
integrated circuit layouts.
Why is IP and IP
protection important?
― Patents, registered designs and copyright are the
principal means for establishing ownership rights to
inventions and other works, and provide a legal
foundation for generating tangible benefits to
individuals, businesses and the international
economy. Trade marks enable entrepreneurs and
businesses to protect the goodwill and reputation
they have developed in relation to their products
and/or services. The intangible assets that IP rights
Topic
Summary
represent are often critically important to entities
ranging from small to medium enterprises to
research institutions, universities and multinational
corporations.
How do the Firms
generate revenue?
― The Firms generate revenue by providing services
associated with the creation, protection,
commercialisation, enforcement and management of
IP rights. Due to the long term nature of the IP
lifecycle, the Firms are able to generate recurring
revenue from their clients over a relatively long
period.
― In respect of clients seeking IP protection,
generally, the majority of fees are generated during
the initial filing and prosecution phase of the patent
or trade mark process. In addition, the Firms also
typically generate revenue through ongoing patent or
trade mark renewals which can be up to 20 years or
more for patents and indefinitely for trade marks.
Where IP oppositions or infringements arise, they
can also generate substantial revenue for the Firms.
― In addition, a significant portion of the Firms’
revenue is generated outside of the IP application
process. Clients engage the Firms to provide
strategic IP advice regarding their IP portfolio or that
of their competitors. Such strategic advice assists
the Firms’ clients in identifying potential
opportunities for IP protection.
― As at 31 March 2016, in aggregate, the Firms had a
total of approximately 80,000 active patent, trade
mark and design cases at various points in the IP
lifecycle from which they can generate revenue.
― The Firms do not provide services on a ‘no win no
fee’ basis, and invoice frequently to ensure that WIP
and bad debts are kept to a minimum. The Firms 140
professionals generated $73.7m in Service Charges,
and issued over 63,000 invoices in aggregate
throughout FY15.
Topic
Who are the Firms’
clients?
Summary
― The majority of the Firms’ clients are corporate
clients located in the US, EU, Japan and Australia,
and can be broadly divided into three groups:

local clients, which include Australian and New Zealand based corporates,
public sector research institutions, universities and private individuals; and

international clients which include:
- direct foreign corporates, being international clients that are engaged
directly by the Firms and include Fortune Global 500 companies and other
foreign multinational corporations; and
- Foreign Associate clients, which are international clients referred to the
Firms by Foreign Associates.
― In FY15, local clients represented 37% of the Firms’
aggregate Service Charges, direct foreign corporates
represented 36%, and Foreign Associate clients
represented 27%.
Where are the Firms’
operations?
― DCC’s primary offices are located in Melbourne,
Sydney, Brisbane and Singapore. DCC also has a
presence and ongoing access to offices in Geelong,
Greater Western Sydney, Hobart, Launceston,
Adelaide and Canberra.
― FPA has offices in Melbourne and Sydney which
service its entire local and international client base.
― Each Firm services a broad base of clients across
numerous jurisdictions. The Firms’ principal market
is Australia where each Firm services both local and
international clients. In jurisdictions outside of
Australia, New Zealand and, in the case of DCC,
Singapore, the Firms typically service their clients
using Foreign Associates.
Who are the Firms’
competitors?
― The Firms’ key competitors include:
What is the Group’s
―
position in the Australian
market?

other large specialist IP services firms;

smaller specialist IP services firms and sole practitioners;

IP groups within commercial law firms; and

niche providers of specific services such as IP renewal and PCT national
phase entry service providers.
Both Firms are among the leading providers of IP
services in the Australian market. There is no true
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Summary
measure of market position given the broad range of
services the Firms provide. The number of patent or
trade mark applications filed by the Firms in
Australia provides a measure of one segment of the
market but does not capture the substantial revenue
generated by the Firms from filing applications
overseas or the provision of strategic advice and
opposition or infringement engagements.
― The Firms compete against a range of individual
firms, some of which have recently combined to form
groups with common ownership structures.
― In CY15, DCC:

filed more Australian PCT applications than any other individual firm;

filed more Australian trade mark classes than any other individual firm; and

filed the second largest number of Australian patent applications by any
individual firm.
― In CY15, the two Firms in aggregate:

filed the second largest number of Australian PCT applications by any group;

filed the second largest number of Australian trade mark classes by any group;
and

filed the second largest number of Australian patent applications by any group.
― The listed group that filed the most PCT
applications, trade mark classes and Australian
patent applications in CY15 now consists of 5
individual firms.
― The Company believes that DCC’s legal services
practice is one of the leading specialist IP law
practices in Australia.
Owner of two of
Australia’s leading IP
firms
Article I.
DCC was established over 130 years ago
and is one of Australia’s largest specialist IP firms.
DCC has 108 professional employees across patents
and designs, trade marks and legal services.
Article II.
FPA is a specialist patent services firm
which was formerly part of HSF, one of Australia’s
leading commercial law firms. FPA has 30
professional employees providing patent and design
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Summary
services.
Article III.
Both Firms have long operating histories,
professional staff that include leading Australian IP
professionals, numerous industry awards and client
bases that include leading international companies, a
broad network of Foreign Associates, blue chip
Australian companies, research institutions and
universities.
Compelling logic in
Article IV.
The Company believes that there is a
combining the Firms and
compelling logic in combining DCC and FPA to form
Listing
the Group and in Listing, including:
 the establishment of QANTM will create a group
of significant scale and diversification in terms
of clients, industries, services and geographies
that will provide a stronger platform to service
the growing IP services market;
 there are a number of opportunities to increase
earnings over time given the range of common
business systems and processes across the
two Firms and a number of potential synergies
have been identified;
 the Australian professional IP services industry
is consolidating and the Restructure and Listing
will provide the opportunity to participate in this
consolidation;
 Listing will also provide the Group with
advantages associated with its increased scale
and financial flexibility, including:
- the ability to use equity to attract and retain
professional staff including the ability to
provide professionals with equity stakes
sooner than might be the case in a partnership;
and
- the opportunity to undertake complementary
strategic acquisitions given the Group’s
increased financial flexibility and access to
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Summary
capital.
Article V.
An important factor in deriving these
benefits is that the Firms share common business
philospohies and cultures, including their
commitment to quality clients, highly skilled and
credentialed practitioners and the provision of
premium IP services.
Market leading positions
Article
VI.
In CY15, DCC:
 filed more Australian PCT applications than any
other individual firm;
 filed more Australian trade mark classes than any
other individual firm; and
 filed the second largest number of Australian
patent applications versus any individual firm.
Article VII.
In CY15, the two Firms in aggregate:
 filed the second largest number of Australian PCT
applications by any group;
 filed the second largest number of Australian
trade mark classes by any group; and
 filed the second largest number of Australian
patent applications by any group.
The Company believes that DCC’s legal services
practice is one of the leading specialist IP law
practices in Australia.
The Firms have broad portfolios of active matters with
blue chip local and international clients that will
require examination, maintenance and renewal over
future years. As at 31 March 2016, in aggregate the
Firms had a total of over 80,000 active patent, trade
mark and design cases at various points in the IP
lifecycle, and a range of matters involving litigation
and strategic advice.
Quality, diverse and
Article
longstanding client base
VIII. Both Firms have high quality international
clients that include blue chip multinationals primarily
based in the US, EU and Japan. As at [XX], the Firms
Topic
Summary
had active matters for over 85 Fortune Global 500
companies.
Article IX.
The Firms also have strong local client
bases that include ASX 100 companies, leading
research institutions and universities.
Article X.
In FY15, the largest client across the two
Firms represented 2% of aggregate FY15 Service
Charges and the top 20 clients represented 20%.
Article XI.
Of the Firms’ top 20 clients by aggregate
FY15 Service Charges, 16 have been clients of at
least one of the Firms (or their predecessor in the
case of FPA) for more than 15 years.
Attractive industry
dynamics
Article XII.
The IP services industry has a strong link
to ongoing investment in R&D by corporates and
publicly funded institutions. IP rights are intangible
assets that, in many cases are the most valuable
assets of companies ranging from start-ups to major
multinationals. Investment in the protection of IP
rights is considered essential by many of these
companies.
Article XIII. IP is a sovereign right of individual
countries and therefore requires local expertise in
each jurisdiction. It also has a long lifecycle, which
supports the generation of long term, predictable
earnings for the Firms.
Article XIV. In Australia approximately 28,600 patent
applications and 73,200 trade marks applications
were filed in FY15. Filing numbers have grown at a
CAGR of 3.6% and 4.2% respectively between CY95
and CY15. Typically these filings, particularly
patents, result in a number of years of ongoing work
before IP rights are granted and then a long tail of
potential revenue for the Firms through renewals and
potentially enforcement actions.
Asia
Opportunity
Article XV.
The Company believes that there is
currently a favourable environment for established
Topic
Summary
and reputable IP services firms in Asia. Multinational
corporates are increasingly seeking to establish
distribution and operations in Asian countries as
these economies continue to grow and industrialise.
Article XVI.
Both Firms are focused on Asia as a
growth opportunity and the opening of DCC’s
Singapore office provides the potential to accelerate
this growth. The Group’s strategy involves:
 building on the Firms’ existing relationships in
Australia to provide clients with services in
Asia, a strategy the Firms have already
commenced; and
 leveraging the Firms’ reputations to offer
services to Asian clients for the protection of IP
rights in Asia and internationally.
There is the opportunity for FPA to leverage DCC’s
knowledge of the Singaporean regulatory and
commercial environment as well as the established
back office and ICT infrastructure in Singapore.
Strong financial
performance
Article XVII. The Company has a number of attractive
financial attributes:
 DCC has a long history of trading profitably
through various economic cycles, including the
GFC;
 FPA traded as a profitable practice group within
HSF and has continued to trade profitably since it
separated from HSF in 2012;
 regular invoicing of clients means the Firms have
low WIP and combined with minimal capital
expenditure requirements, this leads to strong
cash flow conversion;
 QANTM is forecasting pro-forma revenue CAGR of
7.6% and pro-forma EBITDA CAGR of 24.2%
between FY14A and FY16F. The Company is
expecting continued growth, forecasting pro-forma
FY17 EBITDA growth of 11.7%.1; and
1
Please refer to section [5] for the key assumptions and sensitivities and section [4] for the key risks underlying the forecasts.
Topic
Summary
 the Firms both have significant pipelines of patent
and (in the case of DCC) trade mark cases at
various stages of the IP lifecycle which will
generate revenues over a number of years to
come.
Significant earnings
growth opportunities
The Company believes the Firms have significant
earnings growth opportunities, which include:
 opportunities resulting from combining the two
Firms, as they share a range of common business
processes, including identified synergies;
 the Asian expansion opportunity;
 ongoing automation and the continuous
development and improvement of DCC’s ICT
systems to drive further cost savings and
efficiencies shared across the Firms;
 the potential acquisition of complementary firms
and businesses or attracting senior professionals
from competing firms;
 a favourable local environment given the
Australian Government’s National Innovation and
Science Agenda;
 regulatory changes in New Zealand; and
 IP rights generated through emerging fields of
technology.
Experienced professional
Article XVIII. The Firms have developed and invested
staff, management and
a multidisciplinary team of professionals with high
Board
in
levels of technical expertise and experience
including some of the leading IP professionals in
Australia.
Article XIX. In aggregate, the Group will have over 369
employees, including:
 96 patent attorneys and 42 lawyers (some of whom
have both qualifications);
 a highly technically qualified team, with 42 PhDs;
and
 a number of professionals who have taken active
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Summary
roles on industry bodies, have authored industry
publications and been awarded industry awards.
Article XX.
To provide leadership, the Company has
assembled a Board with diverse and complementary
skill sets and experience across public companies,
professional services businesses, Asia and other
relevant sectors.