KLegal: partners look for divorce from KPMG

Partnership conference to discuss total split; McGrigor Donald set to be reborn

KLegal’s UK practice is seriously considering the option of a demerger from its accounting parent KPMG. The firm could dissociate itself from KPMG as soon as next September, the end of the firm’s financial year.

With many of the legacy KLegal partners already gone, the firm would essentially revert to the McGrigor Donald outfit, which merged with KLegal in 2002.

KLegal managing partner Nick Holt told The Lawyer that no decision has yet been made, but well-placed sources within KLegal and McGrigors are braced for a fundamental strategic shift. The issue will be discussed along with other options at KLegal’s upcoming end-of-year partnership conference.

As part of the move, KLegal will be rebranded, possibly as McGrigors. However, more fundamental issues such as funding, shared office premises and referral targets will also have to be addressed, as a rebranded McGrigors puts distance between itself and KPMG.

KPMG subsidised its accountancy-tied firm until last year, but it is now largely self-financing. However, the guaranteed incomes given to legacy McGrigors partners under the merger agreement, and underwritten by KPMG, are still in place. When they expire next September, one of the partners’ biggest incentives to stay close to KPMG will be gone.

The discussions come against a backdrop of wider debate in KPMG’s global network. While the KLegal network has not unravelled in the same way as PricewaterhouseCoopers’ legal network Landwell, the question of how to respond to diverse European regulatory constraints has been a thorny one for the accountancy-tied firm.

A decision on how the network firms will work with each other and KPMG is imminent and will clear the way for the UK firm to decide its future. Sources at the firm say the final decision will not be taken without proper partnership consultation, so there is still some way to go.

However, given that KLegal is now dominated by a Scottish contingent, which seems increasingly unconvinced by the charms of KPMG, the writing may well be on the wall.