LECG To Merge With SMART

Emeryville, Calif.–based LECG Corporation has entered into definitive agreements to merge with Devon, Pa.-based SMART Business Advisory & Consulting (FY08 net revenue of $98.8 million).

Great Hill Partners, a SMART shareholder, will make the $25 million cash investment in LECG as part of the deal. After the deal is done, GHP will own about 40% of the voting stock in the business. LECG will buy SMART with about $39.9 million of its own stock.

“There are fundamental shifts underway in the global professional services marketplace today. We believe disciplined leadership and a more diversified and integrated platform will be the keys to future success for the combined company,” says Chris Gaffney, MP of GHP.

Steve Samek, 56, Smart’s CEO since November 2008, will be the new chief executive. The combined company will be LECG, says Steven Fife, LECG’s CFO.

Samek says the merger was attractive due to the synergies between the two firm’s consulting businesses. Smart is strong with technology, tax and accounting while LECG brings expertise in economics, forensic accounting and bankruptcy/turnaround. Smart focuses on the banking, insurance, real estate, health-care, education and public sectors.

“This is huge for both firms in that it rounds out their platform and makes them a true integrated services platform in their niches,” says Allan Koltin, CEO of PDI Global. “This is very similar to what we saw the Big Eight do many years ago when they merged firms and ultimately became the Big Five.”

LECG chief executive Michael Jeffery will step down, as planned prior to the merger.

Within the $41-billion-a-year business-consulting industry are six key sectors: fraud, tax, accounting, forensics, crisis management, and economic consulting. Samek says LECG was strong in three, and Smart is strong in three. “We literally cover the entire space. We don’t have overlap,” he says. “We are not doing this to lose people. We are doing this to build on the base. We are really creating something that doesn’t exist there today.”

The boards of both companies have approved the transaction, expected to close in the fourth quarter.