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LECG Corp. of Emeryville, Calif., will buy Smart Business Advisory & Consulting L.L.C. with about $39.9 million of its own stock. LECG will also assume about $32.4 million in Smart's debt.
Smart has $100 million in annual revenue and 500 employees, including 311 in Devon and Center City. LECG has $270 million in annual revenue and 1,500 employees, including 29 who work in Philadelphia and Wayne.
Steve Samek, Smart's CEO since November, will be the new chief executive. The combined company will be LECG, said Steven Fife, LECG's chief financial officer.
No decision has been made on the headquarters.
LECG will acquire all of Smart's stock, and, in exchange, issue about 10.9 million shares of common stock valued at $39.8 million based on Friday's closing price of $3.65 a share. LECG shares closed today at $3.74.
LECG chief executive Michael Jeffery will step down. The boards of both companies have approved the transaction, expected to close in the fourth quarter.
LECG will also receive $25 million from a Boston private-equity firm, Great Hill Partners L.L.C., and, in return, issue 6.3 million shares of new company stock at a purchase price of $3.96 a share.
Great Hill will own about 40 percent of the voting stock of the new business.
"We're absolutely not pulling out of the Philadelphia area," Samek said. "We are the third-largest management-consultant firm in Philly, and the fifth-largest accounting firm."
Within the $41-billion-a-year business-consulting industry are six key sectors: fraud, tax, accounting, forensics, crisis management, and economic consulting. Samek said LECG was strong in three, and Smart is strong in three.
"We literally cover the entire space. We don't have overlap," he said. "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."
Samek, 56, a former Arthur Andersen managing partner, came to Smart from Chicago after founder and then-CEO Jim Smart left.
Smart was founded in 1988 as an accounting and auditing firm, and it has more than a dozen offices in the United States and Europe.
Smart grew rapidly in the era of tougher, post-Enron accounting rules. The federal Sarbanes-Oxley Act of 2002 benefited Smart by prohibiting accounting firms from providing consulting services to the publicly traded companies they audit.
Contact staff writer Linda Loyd at 215-854-2831 or lloyd@phillynews.com.
To see more of The Philadelphia Inquirer, or to subscribe to the newspaper, go to http://www.philly.com/inquirer. Copyright (c) 2009, The Philadelphia Inquirer Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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