Arthur Andersen casts a net for prestige Spanish merger

Firms across Europe are reeling from the news that Big Six accountancy firm Arthur Andersen is seeking to hitch up with top Spanish law firm A&J Garrigues in a move which will create the largest law firm in Spain.

The proposed merger between Arthur Andersen's Spanish legal arm, Arthur Andersen ALT, and Garrigues is one of the largest jumps into the European legal market by an accountancy firm.

The firms have been discussing a merger for several months and details are still not finalised but the combined firm, which would retain the prestige Spanish name Garrigues, would have 57 partners, 330 lawyers, and an annual turnover of about Pts8.5 billion (£43 million).

Arthur Andersen ALT is already the largest law firm in Spain by turnover (Pts5.3 billion) and number of lawyers (230), and Garrigues is the third largest, with an annual turnover of Pts3.4 billion and 25 partners and almost 100 fee earners. But while Andersen has stuck to tax deals, Garrigues is a full-service commercial law firm.

The deal is likely to affect City firm Simmons & Simmons' association with Garrigues - the two opened joint New York and Brussels offices six years ago - because Arthur Andersen is likely to refer Garrigues' clients needing UK legal advice to its own UK law firm affiliate Garrett & Co.

Garrigues senior partner Ramon Llado confirmed his firm had been in merger talks with Arthur Andersen ALT, adding the two had already co-operated on several transactions. He said: "Bit by bit we are seeking to do something more formal; to be more integrated. We are studying the problems of possible integration."

James Wyness, Linklaters & Paines senior partner, said: "This consolidates the Arthur Andersen advance into legal services internationally in a very striking way. It will be the first time any of the Big Six accountants have managed to swallow a first class law firm.

"Although Garrigues will be technically independent from the accountants, presumably Arthur Andersen's referrals will go there and Andersen will have some say in decision making. This is a rather sad loss of independence for one of the greatest firms in Madrid."