Analysis: Breaking up is hard to do

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 the UK?s largest consultancy, AC, to split from AA on grounds of unreasonable behaviour.

The AC camp was elated at the news and immediately proclaimed it would now enjoy an increased client base and improved turnover. Joe Forehand, AC global managing partner and CEO unashamedly proclaimed his euphoria at the result.

‘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 – faster than we were able to move before,’ he said.

Other good news for AC was the $14.5bn separation penalty claimed by AA for breaching contract, was rejected by the arbitration. Instead it will pay AA an estimated $1bn – money the firm claims it has already set aside and will not interrupt its cashflow.

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

While AC celebrated, however, there can be no hiding from the fact it lost it’s brand name. The arbitrator ruled it must surrender it to Andersen Worldwide by the end of the year, despite recent claims by AC partner in charge of arbitration Jon Conahan the idea was ‘Arthur Andersen fantasy’.

Despite the company 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 one party was celebrating, AA was also 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 any damages.

Additionally, technology, which was jointly developed by the two parties, must remain solely with AA and is not to be used by its former sister company. Also, nearly $1bn in transfer payments, which had been held in escrow, was returned to the parent group.

Jim Wadia, worldwide AA managing partner, said: ‘We are pleased that 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.’

That statement turned out to be almost the last thing he did for the firm, as he then dropped a bombshell by announcing his resignation and headed for early retirement.

He said: ‘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’.

Reports this morning suggested that Wadia was forced out by partners disappointed by his failure to win a substantial termination sum, claims AA denied.

Until a permanent replacement is found, Louis Salvatore, chairman of the Andersen Oversight committee of Andersen Worldwide, has taken on Wadia’s role.

He said his focus in the coming weeks will be to assure partners and employees are focussed on providing their services.

So while the dust settles on the result – and with both parties putting on a brave face – it would perhaps be fair to suggest both parties have won, although both have also lost significant parts of their make-up.

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