Both Wilde Sapte and Arthur Andersens will have to make compromises if their planned link is to be successful, writes Robert Lindsay
Despite its huge significance for City firms there is a certain inevitability about a Wilde Sapte-Arthur Andersen link.
For one thing, Wilde Sapte, plagued by loss of lawyers and work, has been searching for a white knight merger partner for two or three years.
Its strength in tax-based asset finance and insolvency makes it an ideal fit for an accountancy firm.
For another, Arthur Andersen has been determined, for at least a couple of years, to pull a major City law firm on side. Its enormous global reach and resources were sure to win it that goal eventually.
It has been plain for several years to Wilde Sapte that the steady flow of big corporate deals has been going to the big five firms.
Its major client, investment bank NatWest Markets, has been divided up and sold. Its parent, the National Westminster Bank, is giving the bigger work, such as the NatWest Markets sell off, to its other lawyers, Linklaters. The Lloyd's litigation, in which the firm was heavily involved has also come to an end.
All this has been accompanied by a haemorrhaging of lawyers. It has lost more high-flying partners to US and big five City cherry-pickers in the last 10 years than any other City firm. Tax partner Miles Walton, who went to Allen & Overy last year and John Walker and Russell Jacobs (who are still on gardening leave), who left to join US firm Cadwalader Wickersham & Taft, are just the latest defectors.
The firm has expensive offices in Paris, Hong Kong, New York and Tokyo. The latter two bases are notoriously difficult to make profitable.
From Arthur Andersen's point of view, the revenue from its traditional audit and accountancy advice has long been in decline and it dislikes having to refer its audit and tax clients to other firms of lawyers to do the lucrative legal work.
There has been one problem preventing a marriage a difference in vision. Wilde Sapte wants to lead the legal advice on big multinational transactions. Andersens and the other accountants want a legal backyard in which to refer their legal work in each country.
When rumours that Wilde Sapte was talking to a Big Six accountancy firm began circulating in mid December, senior partner Steven Blakeley told The Lawyer that he had indeed talked to several of the Big Six.
“There are aspects of the accountants that would serve the purposes we need from a merger,” he said then. “They have some of the assets we need an international brand name and massive resources.”
But he warned: “Before we would feel able to do any deal with one of the firms of accountants, we have to believe they have understood the need of English law to deliver an international practice.
“It's not another domestic practice to be plugged into an international network with a separate operation in each country.”
“It's no good treating English law or New York law in the same way you would treat the law of any other jurisdiction as a legal capacity to be used in particular jurisdictions alongside your conventional business. So far, that's what I think all of the accountants have done.”
He added that it would take “quite a big shift on the part of any of them” to embrace the concept of a truly global law firm.
Andersens already in the midst of what looks like a very painful divorce from its consulting arm Andersen Consulting is likely to want to stop short of creating another new semi-autonomous arm which might one day seek to break away again as the uppity Andersen consultants are currently seeking to do.
But it looks as if either Blakeley has swallowed his pride, or he and his team from Wilde Sapte is convincing Andersens to give them the power to co-ordinate legal advice world wide; to give the new lawyers joining Andersens some kind of autonomy to develop their own practice and their own clients, and to place English lawyers in foreign jurisdictions.
Blakeley does have a negotiating lever. After the public break up of Andersen's merger talks with Simmons & Simmons last year, Andersen's team will be keen to avoid another such failure.
The word is that an agency brought in to redesign Wilde Sapte's stationery was told to allow room for 40 offices. It looks as if Andersens may be considering giving its legal advice the Wilde Sapte brand worldwide. Garretts and Dundas & Wilson and possibly even Archibald Andersen in Paris and Garrigues in Spain could be subsumed.
The fact that there is talk of a public announcement next month at least three weeks after Wilde Sapte partners are supposed to have voted for the deal may be to allow time to negotiate with Andersens.
Blakeley, senior partner Mark Andrews and one or two others, at least, would be likely to be made Andersens international partners, with a share of the international equity, and probably a say in the global development of legal advice.
Wilde Sapte has had 213 years of proud independence. This would be a sad, but perhaps not the worst, way to go.