Buyout blowup: LECG in sale talks
A private-equity deal leaves partners and workers Philly's biggest accounting firm scrambling for jobs
Employees of the former Smart Business Advisory and Consulting, Devon, the largest independent accounting firm based in the Philadelphia area before its 2007 acquisition by Boston buyout firm Great Hill Partners LLC, are wondering who they'll be working for as the fallout from that $100 million+ deal settles.
Smart's current owner, cash-strapped LECG Corp., is negotiating to sell other business units to FTI Consulting Inc. of West Palm Beach. It's a week since LECG put out a statement confirming it's been talking to Florida-based FTI Consulting Inc. "on the possible acquisition of several specific practice groups within LECG and not an acquisition of the entire firm."
Smart founder Jim Smart and his partners sold his controlling stake back in 2007 to Great Hill Partners of Boston for $60 million in cash (plus $45 million in assumed debt.) Partners retained a $15 million interest, now worth nearly nothing. Great Hill then merged Smart into LECG, a publicly-traded company, and invested another $35 million. LECG then moved its nominal HQ to Devon.
The LECG-Smart combination, under boss Steve Samek, was supposed to increase clients for both consulting and accounting. Instead, the combined firm, especially LECG, was whammed by the recession. Total employment fell to 1,450 last Spring from 1,700 a year ago. Smart at its peak employed over 500, about two-thirds of them in the Philadelphia area. Earlier story here.
FTI-LECG is not a done deal, according to LECG's week-ago statement: "While the Company is pursuing discussions with the identified party, the Company, together with its advisor William Blair & Company and counsel, is also analyzing other restructuring possibilities."
But LECG's credit facility runs out March 31, and it's going to have to come up with $28 million by then if it doesn't find new owners or investors. The stock is trading below $1 a share, valuing the company at $26 million, a quarter of what Great Hill paid less than four years ago.
Meanwhile, Jim Smart is back in business, as a partner in Smart, Devine & Co. after paying $8.5 million to acquire the Philadelphia forensic accounting firm formerly known as Nihill & Riedley, last year.