News Analysis – [HH] Brave faces all round.

Divorce is often a messy and drawn out process, just ask Donald and Ivana Trump.

But at last the long-term fall-out between Andersen Consulting and Arthur Andersen came to a head this week with both parties, predictably, claiming victory.

International arbitrator and Colombian lawyer, Dr Guillermo Gamba presented his findings to the International Chamber of Commerce in Paris on Monday after a three-year process. The ruling, which cannot be challenged, came down in favour of allowing AC – now the largest consultancy in the UK – to split from AA on grounds of unreasonable behaviour.

This was obviously good news for AC, which immediately proclaimed it would now enjoy an increased client base and improved turnover. Joe Forehand, AC global managing partner and CEO proclaimed his euphoria at the result.

He added: ‘We are delighted to at last be a separate entity from AA.

It was the only rational decision Gamba could have come to. It is fantastic news for us and our 65,000 clients and we will now move quickly to focus on the future.’

Other good news for AC was the rejection of the $14.5bn claim from AA for breaching their contract on not competing for the same business – thus diffusing a potentially disastrous payout. Instead it will pay AA an estimated $1bn – money the firm claims it has set aside and will not interrupt its cashflow.

It is understood AC attempted to settle the case out of court and had offered more than the arbitration ruled it must pay.

But while AC celebrated there can be no hiding from the fact it lost its brand name. The arbitrator ruled it must hand the name back to Andersen Worldwide, until this week the umbrella organisation for the two firms, by the end of the year, despite recent claims by AC partner in charge of arbitration Jon Conahan the idea was ‘fantasy’.

Despite the firm playing down the loss, there can be no doubt there needs to be some serious consideration – and an investment maybe as high as #2.5bn – in order to create and publicise a fresh brand.

One possibility could be for the firm to acquire rival with a strong brand, and Forehand has already predicted acquisitions are imminent.

But as with many divorces, while Consulting was celebrating, AA was also getting ready to claim victory.

The firm reclaimed its brand, while the arbitrator ruled AA did not breach any of its obligations to AC under their competition agreement, and so did not have to pay out any damages.

Additionally, technology that was jointly developed by the two parties was ordered to remain solely with AA and is not to be used by its former sister firm. Almost $1bn in transfer payments which had been held in a shared holding account are to be returned to AA.

Jim Wadia, worldwide AA managing partner, said: ‘We are pleased the arbitration has upheld our position and we are now prepared to move ahead with our own business plans. AA is strong and will continue to serve our clients without interruption.’

Wadia then dropped a bombshell by announcing his resignation as head of the firm in favour of early retirement. Some have suggested this decision was due in part to the disappointment of his fellow partners at the arbitrator’s decision.

He added: ‘It has been three years since I stepped into this role – time that has been spent helping our organisation focus on being a leading service provider in the new economy.’

Louis Salvatore, managing partner of AA’s New York offices, has taken on Wadia’s role while a permanent replacement is found.

He said his focus in the coming weeks will be to assure partners and employees are focussed on providing their services. As the war of words submerges both have been quick to claim victory and put on a brave face.

Both parties may have won, but lost significant parts of their business in the bust-up.

Related reading