Merger deja vu?
Legal Week reports
February 20, 2002 at 07:03 PM
3 minute read
It is one of the City legal market's best known stories. A big five accountancy firm strikes a deal to tie up with a top UK firm. The deal is announced in a blaze of publicity and we are told that it will only be a matter of time before the merger formally takes place. The same message is repeated when a number of partners, who oppose the tie-up, quit the firm. Then, suddenly, the marriage is off. The accountants walk away from the negotiating table leaving the reputation of the bean counters within the City's legal community in tatters.
We are, of course, referring to Arthur Andersen and its ill-fated courtship of Wilde Sapte. But the story bears a striking resemblance to the next serious big five bid to snap up a UK law firm – KPMG's planned union with McGrigor Donald. Except that, at the time of going to press, this particular story had not run its course. Yes, the two sides have agreed to merge, but the official union has been delayed due to what are being described vaguely as 'logistics'. In the meantime, several McGrigors partners have jumped ship including, in London, former City managing partner Stephen Scates, fellow property partner Mark Johnstone and technology partner Hannah Sutter.
As this magazine revealed last week, negotiations are taking place against a background of friction in London, where KLegal is due to merge with McGrigor Donald's London practice. From KPMG's point of view, the opportunity to double the size of its City office was the key rationale for the tie-up. But that has not stopped the merger from being problematic. Legal Week has in the past praised KLegal for the progress it has made in building up a credible City practice under the leadership of Nick Holt. Yet suddenly some of those handpicked lawyers he recruited do not feel quite so central to the KPMG project.
On the McGrigors side many people will inevitably be asking themselves whether they want to join an accountancy-tied firm, especially in the wake of the Enron scandal.
So what are the chances of history repeating itself? If McGrigors and KLegal are to be believed the answer to this question is an emphatic 'nil'. But, if there is one lesson that can be drawn from the Andersen Wilde Sapte debacle, it is that mergers between accountants and law firms are not 'done deals' until they are actually done.
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