From the sublime to the ridiculous: The Financial Times reports that U.K.-based PA Consulting is suing Arthur D. Little, America’s century-old management consultancy, over failed merger negotiations last year. The $2 million lawsuit claims ADL conducted parallel negotiations with the strategy consultancy Monitor during its courtship with PA, thus breaching an exclusivity clause.

Times are indeed tough when two midtier firms (three, if you count Monitor) go to court over a failed courtship.

On paper, ADL and PA might have made a good combination. Each is structured as a hybrid partnership/company with a trust that essentially offers strong input from retired partners. That particular wrinkle makes these firms oddballs in an often odd world.

ADL is essentially two firms. Its European operation is classic strategy, competing successfully with the McKinseys and BCGs. The firm’s North American division is more technical. The schism between the two helps explain why ADL would have been chatting with two such diverse companies as PA and Monitor.

ADL’s former CEO, Lorenzo Lamadrid, was unceremoniously dumped last year after two years of withering returns and his failure to spin out C-quential, ADL’s technology and telecom subsidiary. At the time, acting chief Pam McNamara clearly stated that merger negotiations had ceased.

PA, meanwhile, has been in an ADL-like rut. With a legacy that dates back more than 50 years, the firm never really gained a strong foothold in the United States. Years of organic farming didn’t work, so PA started actively trolling for M&A targets. It bought Hagler Bailly last year.

Failed couplings usually don’t produce lawsuits, particularly with publicity-shy consultants. Although neither side will comment, we would expect PA to try to recoup its legal and financial fees. Given ADL’s tough financial situation, there is little to be gained by going after punitive damages.

Practically speaking, ADL should take a page from the KPMG/E&Y handbook and sell North America to the highest bidder. That solves ADL’s fading Memorial Trust problem, the crux of ADL’s financial woes. Should another firm find ADL’s European group attractive, so much the better.

Heard on the street
The restructuring at A.T. Kearney continues. An 8 percent cutback—or 400 people—was announced last week. That was expected, given the soft client demand. The more interesting changes are taking place out of the spotlight. CEO Dietmar Ostermann is turning ATK’s cost-reduction prowess inward: Thirty ATK officers who were working corporate HQ jobs have been moved back into the field.

About the author

Inside Consulting is written by Tom Rodenhauser as a free weekly supplement to The Rodenhauser Report. The report informs senior advisors and business executives of consulting trends and best practices. Subscription cost is $295 per year for 10 issues. Copyright 2001, Consulting Information Services, LLC. Reproduction is prohibited. Quotation with attribution is encouraged.