Dominic Egan asks if the appointment of ex-Clifford Chance managing partner Tony Williams marks the end of Arthur Andersen's legal troubles and talks to the man with the task of turning the firm around.
The white flag has been waved. The Lawyer's revelation earlier this month that former Clifford Chance managing partner Tony Williams will be joining Garretts in March signals much more than the beginning of a new phase in Arthur Andersen's attempts to conquer the UK legal market.
It is clear that the accountancy giant has finally accepted that its original strategy has failed. Williams, who is taking on a dual international and domestic role, now faces the huge challenge of revitalising a firm that, in recent months, has looked close to disintegration.
More than a few lawyers around the country will be enjoying this moment. After all, didn't they tell their accountancy friends right from the start that they were barking up the wrong tree?
In 1993, when Arthur Andersen launched Garrett & Co, the greater part of the legal profession had one question – who is Colin Garrett? The answer – a former in-house lawyer with 3i – served only to cause mass confusion. Why had the world's largest provider of professional services not gone for a big name who would make a big splash?
The answer, it has since been claimed, was that Arthur Andersen was concerned that it should not fall foul of Law Society regulations and did not want to attract undue attention while it continued negotiations with the profession's governing body. But Arthur Andersen continued to pursue a softly-softly approach long after the Law Society gave the green light.
When Colin Garrett was forced to retire due to ill health, his replacement was another former 3i lawyer with no significant track record. Even more curiously, Julia Chain, who became Garretts' managing partner in October 1993, had no previous experience of management.
Garretts, it seemed, was simply full of surprises, not least in the way it chose to expand. After establishing a small London office, the firm made its next move in Reading, recruiting three partners from Pitmans. In May 1994 Garretts took advantage of problems at Simpson Curtis, recruiting five partners and five associates to form a Leeds office.
Thus, the pattern – in so far as there ever was a pattern – was set, with Garretts choosing to make a series of opportunistic moves that kept everyone guessing. Where would Garretts strike next?
Following start-ups in Birmingham and Manchester, the answer seemed to be Bristol. But in fact, it turned out to be Glasgow.
Another twist was that Arthur Andersen had, on this occasion, pulled in more than just a handful of lawyers looking for a fresh start. In January 1996 it formed an alliance with an entire firm, Dorman Jeffrey & Co.
This move served only to create further doubts about Garretts' strategy. Why had Arthur Andersen not chosen the alliance route before? Moreover, why was the mighty accountancy company engaging in a series of skirmishes rather than seeking to engage the enemy in one decisive battle? After all, nothing to date had impressed the City and that was surely where Garretts had to make its mark.
That situation changed overnight in mid-1997 when it was announced that Dundas & Wilson would be joining the Arthur Andersen Legal Network. The capture of Scotland's premier legal practice suggested that it could only be a matter of time before a major City firm lined up with Arthur Andersen as well.
But it hasn't happened. Negotiations with Simmons & Simmons came to nothing, while Arthur Andersen's decision to withdraw from a merger with Wilde Sapte which everyone believed was done and dusted, has caused major damage to its reputation. Finding a London partner now will be ten times more difficult.
It is remarkable that an organisation as successful as Arthur Andersen should make such a mess of things. Although numerous factors have played a part, Garretts' problems have all stemmed from a fundamental misunderstanding of the UK legal services market on Arthur Andersen's part. The accountancy giant thought it would be easy. It underestimated lawyers' conservatism and their hostility to being run by accountants.
Chastened, Arthur Andersen is now finally going down the predictable, most would say logical, route. It has hired a big name whose primary duty will surely be to make Garretts' London office a credible force. This is vital for both domestic and international reasons.
Garretts' regional offices have been haemorrhaging badly in the last year as partners have quit through disillusionment with the rate of Garretts' progress as a national legal network. Arthur Andersens' European legal network, meanwhile, boasts some proud names. But how can that network be taken seriously when it has barely any presence in Europe's financial capital?
So desperate is Arthur Andersen to turn things around that it is said to be paying Tony Williams close to £1m a year for his services.
Nevertheless, few can envy him his task. Not only does Williams have a mountain to climb, he first has to get Garretts out of the pit that Arthur Andersen has dug.
Garretts' troubled history
Garretts' head of IT leaves to set up his own practice, 18 November 1997
Garretts' head of IP/IT, Richard Kemp, is leaving the firm at the end of this month to set up his own practice.
Kemp, one of London's top information technology lawyers, only joined five-year-old Garretts in July 1995 from Hammond Suddards.
Kemp, who is also head of Arthur Andersen's IT/IP European network, said he was unable to comment on his departure. But one source said Kemp had been disappointed that most of his work came from clients he had brought in himself rather than from those referred by Andersens.
IT/IP departures continue at Garretts as two more defect, 13 January 1998
Garretts IT partner Mark Turner, and Mark Hill, the head of the firm's Yorkshire intellectual property practice, have defected from the firm.
Turner is taking up a partnership in the IT/IP department at Herbert Smith while Hill is joining Dibb Lupton Alsop in Leeds as a partner.
Chain to break links with Garretts and AA for new job, 14 July 1998
Julia Chain, Garretts' managing partner and an Andersen Worldwide partner, is to leave the firm this year as soon as she has a concrete job offer.
Chain said she would not be continuing in private practice and had decided to "make a change of direction that allows me to develop further my managerial experience".
She denied that the attempted merger with Wilde Sapte, which failed last month, had anything to do with her decision.
"I'd practically made the decision before that," she said.
Andersens breaks with HK firm as it forges Singapore alliance, 29 September 1998
Arthur Andersen Legal has dumped its Hong Kong firm Ede Charlton only two years after setting up the practice – at the same time as acquiring a 67-lawyer Singapore firm.
Ex-Simmons & Simmons corporate partner Julia Charlton is understood to have reached an agreement with Andersens to allow her to keep practising under the Ede Charlton name from 30 October, when the contract with Andersens ends.
John Burrows, managing partner, Greater China at Andersens, said: "It was a matter of the strategy of the people running the firm. Our management and business approaches differed and we couldn't see the future in the same light."
But insiders claim the office has fallen victim to conflicts of strategy between regional heads within Andersen Accounting. Whatever the reason, Andersens spent heavily over the two years, bringing in Charlton to co-manage the firm with ex-Garretts litigation partner Justin Ede.
Rowe & Maw recruits Garretts' banking head, 24 November 1998
Rowe & Maw has boosted its financial services team by hiring Garretts' head of banking.
Peter Richards-Carpenter is the second Garretts partner – after EC and trade law specialist Philip Ruttley – to join the firm in the past month.
Richards-Carpenter, who was headhunted by Garretts two years ago from Baker & McKenzie, is currently advising the Financial Services Authority on its new regulatory regime.
He said: "When I went to Garretts, the firm was very new, very young and very ambitious."
However the events of the past year – the collapsed merger talks with Wilde Sapte and changes in management – left the firm "chastened".
Dibbs gets boost with three new partners, 15 February 1999
Dibb Lupton Alsop is appointing three new partners to its London and Birmingham offices.
Dibbs is recruiting a corporate recovery and insurance insolvency team from Davies Arnold Cooper.
Meanwhile, Garretts partner Adrian Watson is joining Dibbs' commercial property department in Birmingham.
Garretts senior partner Paul Finlan says: "Garretts' unique culture, which has made us the UK's fastest-growing law firm, does not suit everyone. We accept Adrian's decision and wish him well in his new role."
Addleshaws raids Garretts, 28 June 1999
Addleshaw Booth & Co is continuing its raid on Garretts, the associate law firm of Arthur Andersen, by taking two partners, including the head of property in its Leeds office, Dean Copley.
Garretts gets revenge with Addleshaws partner hire, 5 July 1999
Garretts, the associate law firm of Arthur Andersen, has hit back at Addleshaw Booth & Co's predatory lateral hires of its lawyers by poaching litigation specialist Deborah Bould.
Garretts loses top partner to Dibbs, 19 July 1999
Garretts' Manchester office has suffered a blow with the departure of its head of corporate development to Dibb Lupton Alsop.
Stephen Devlin, who set up the practice four years ago, is one of the City's top lawyers. He stepped down from the managing partner position last year.
Digests, 18 October 1999
Garretts, the legal arm of accountancy group Arthur Andersen, has lost its Leeds head of banking to local commercial firm Walker Morris. Ian Akitt has joined Walker Morris as a partner in its banking and insolvency group and brings the firm's team of non-contentious banking lawyers to 13.
Andersens lawyer opts for Addleshaw Booth, 25 October 1999
The fourth partner to quit Andersen Legal's Sydney practice in as many weeks is returning to the UK to join Addleshaw Booth & Co's fledgling London office.
UK M&A lawyer Tim Bee, who has been with Andersens for two years, will join the 88-partner firm in November.
One Australian source says: "Bee was seduced by the blandishments of Andersens but then, like Kapp and others, felt where Andersens wants to go is different to where he sees."
Garretts loses banking head to Halliwell Landau, 13 December 1999
Garretts' partner exodus is continuing unabated as its head of banking and founding partner of the Manchester office is leaving to join Halliwell Landau.
Highly-rated northern head of banking Susan Molloy is leaving for Halliwells in the new year. At the same time, Shabnam Qasim, a share scheme partner at Garretts' Manchester office, is quitting for PricewaterhouseCoopers' Birmingham practice.
Molloy, who joined and helped set up Garretts' Manchester office in 1995, says: "I have come to a time in my life when I want to make a push into something else. The platform I needed wasn't there [at Garretts]."
Molloy admits that the migration of partners from the firm has influenced her decision to leave. She says: "It is bound to have an effect. I think to keep the high level of work you need the right sort of people around you. You need a firm that is outgoing and entrepreneurial which Halliwells is."
Garretts loses founding partner, 7 January 2000
One of the founding partners of Garretts' Reading office is quitting the Arthur Anderson-tied law firm to strike out on his own.
Adrian Phillips joined Garretts nearly six years ago and played a key role in building the Reading office.
Garretts dealt blow with loss of corporate partner to Dibbs, 10 January 2000
Garretts, the associate firm of Arthur Andersen, has lost its third partner in two months – leaving the Leeds office with only two corporate partners.
Corporate finance partner Roland Todd joins the Leeds office of Dibb Lupton Alsop this month.