Private sleuths slug it out

James Matthew and Paul Farrelly report on the takeover war that has erupted in the shadowy world of corporate investigators, where old soldiers are deploying new weapons

It is a bit too early to tell whether their old regimental motto, "Who dares, wins", will still hold good. But, against a new adversary, on a new front, an advance guard of former officers of that most elite of Britain's special forces, the SAS, has gone into battle.

Their adversary is not Saddam Hussein or Radovan Karadzic, but a schmoozing, cigar-chomping Manhattan lawyer and former aspirant Democrat politician named Jules Kroll. Their first objective - strategically located in Savile Row, suppliers of bespoke mufti - is the London office of his company, Kroll Associates, the world's best-known firm of corporate investigators.

They also plan to take Kroll's offices in Paris, Frankfurt, even Moscow. Why not the world? That would be going over the top - although, according to sources on the Savile Row front, there's a suspicion they may have gone too far already.

There is no doubt, however, that their action is sending shock waves through Kroll's network of 22 offices worldwide - in Hong Kong, Singapore, Sydney, and North and South America - and that the ripples will be felt throughout the world of the corporate gumshoe.

Jules Kroll did much to pioneer corporate intelligence, winning his spurs in major battles such as Jimmy Goldsmith's assault on BAT and fending Hanson off ICI.

Who are these bold ex-SAS men? Step forward Arish Turle, senior managing director of Kroll UK since the summer of 1995, and Richard Bradley, the man he brought in as chairman. There are at least two more from the regiment in Kroll UK's executive echelon, but they are not believed to be part of the spearhead.

And their chosen weapon of attack? A proposed management buy-out (MBO). And why are they triggering it now? For two of the oldest reasons in the military book, insiders say - surprise and the moment of maximum vulnerability.

As the Independent on Sunday revealed in November, Kroll - employing more than 300 people full-time and already 25 per cent-owned by American International Group - has been in takeover talks with the US credit- information company Equifax.

Sources within Kroll have since confirmed that a takeover by Equifax has not only been agreed in principle, but was due to be sealed by the end of this month. But, because of the opposition of the ex-SAS officers and the proposed MBO, the timetable and the takeover itself may now be in jeopardy.

"For the past few weeks, Jules and Arish have been in a state of war," says a senior US source at Kroll. "They've each got their followers, but for most of the 46 or 47 others in London caught between them, the atmosphere is obviously appalling, laden with doom and gloom and uncertainty, which does good for none of us."

This weekend, neither Mr Turle nor Mr Bradley was available for comment. However, a senior source said neither their departure nor Kroll's break- up was on the cards. But the fall-out is likely to be considerable and, for some, the pickings rich in the small but incestuous private investigation world.

For takeover battles, fraud investigation, security advice or checking out the competition, companies and their City advisers have several established firms to choose from. Ask any forensic accountant, and the names Network Security, Control Risks, Bishops and Carratu trip off the tongue.

All share a reputation for being more discreet than Kroll, none more so than Argen, the oldest firm of all, founded in 1968, which prefers to keep a low media profile.

"Kroll is high profile. They talk about their clients. Often clients don't like that," says one Kroll rival. "Publicity cuts both ways. It wins business, but it makes serious clients very nervous," says another.

Discretion is the approach preferred, too, by several small ex-Kroll splinter groups, such as Ciex, which also stand to gain from any further ructions at their alma mater.

Jules Kroll founded the company in New York in 1972, opened his first London office in the former headquarters of MI6 in 1985 and employed Mr Turle to be its joint managing director, with an ex-Irish Guards officer, Patrick Grayson.

Mr Turle, commissioned into the Greenjackets, served with the SAS in Aden. Having left the army in the mid-1970s, he joined rival Control Risks, which had been founded by another ex-SAS officer, David Walker.

Having been "eased out", Mr Walker formed another company, Saladin Security, while Mr Turle expanded Control Risks before joining Kroll.

Mr Grayson, meanwhile, had previously worked with yet another ex-SAS man, Alastair Morrison, at another new firm, Defence Systems Limited. DSL, along with a former Customs and Excise-led investigation company, Network, was later acquired by Hambros, the merchant bank.

When Hambros tried to sell them both in 1994, the SAS connection emerged again, in the shape of Mr Walker at Saladin, who tried to broker a deal bringing in an American partner. He failed.

For Kroll UK now, what happened then to the much smaller DSL may not provide the happiest of portents. DSL did an MBO and is said to have saddled itself with pounds 5m of debt. In consequent internal skirmishes, military blood has been spilt on its executive carpet. However, with offices around the world and some 20 staff, DSL still survives as "an SAS club".

There was a certain coolness between Mr Turle and Mr Grayson at Kroll UK, insiders recall. In 1990, Mr Grayson and others - though not Mr Turle - first attempted an MBO for Kroll UK, but it was sabotaged by New York loyalists.

By then, having accrued a list of blue-chip clients, Kroll UK was the clear leader in its field. But after one of its biggest cases - tracing Saddam Hussein's ill-gotten gains from Kuwait - came recession, which hit the London office hard.

By 1995 several of its key personnel had left. Some were lured by rivals like Control Risks, which has more than a dozen offices and 200 employees worldwide. Other Krollites took their expertise and clients with them and formed splinter companies such as Asmara in London and Alsco in Brussels.

Mr Grayson was among the leaders of the exodus and, with Michael Oatley, another Kroll UK director and former head of MI6's Middle East department, set up Ciex, which is said to have garnered a lot of the mergers and acquisitions business which six or seven years ago would have gone to Kroll. Similarly, some of the lucrative K&R (kidnap and ransom) business has been taken by another "lean and mean" outfit, Neil Young Associates, whose staff have all worked at Control Risks and Kroll.

Mr Turle, meanwhile, had been dispatched to revive Kroll's ailing 50:50 joint venture with Jardine in Hong Kong. There he again met Richard Bradley, with whom he had served in the SAS in Aden. Bradley - who had left the army for the City and made "millions" as a stockbroker - was appointed chairman of Kroll UK after Mr Turle's return.

The sums involved in the proposed MBO are not yet known. But it is said that Mr Bradley, apart from his own fortune, has "very useful" contacts and lines of credit. So does David Crichton-Miller, the ex-McKinsey man who was brought in by Mr Bradley and who is also understood to be backing the MBO.

There could, according to the insiders, be a sensible argument for such a move. Whereas much of Kroll UK's work used to involve cases generated in the US and other offices, perhaps as many as half those now handled by it are said to have been generated in London. Paris, however, is not as successful, and Frankfurt is too new to have a track record. Moscow, with a staff of three, is "doing well".

"On its own", says one source, "Kroll London would have a good chance because New York has always been a financial drain and become too much like a law firm. Take Kroll London away from that, and from some of the other US offices which don't perform, and switch the emphasis back to corporate investigation, and it could perform better."

The MBO, though, could create as much difficulty as it might solve. Quite apart from the possibility of it killing the Equifax deal stone dead - hitting Kroll's value and causing New York to retrench or cut budgets in reprisal - one problem is that, whatever deal is reached, Mr Kroll plans to sell his name and seat on the board as a package.

"The MBO is a non-starter. Kroll is of less value to a buyer unless it comes as a whole. Jules is not interested in it as it would devalue the business," one senior Kroll insider says.

Another problem is that, although the London office now has a beefed-up component of former senior policemen, Mr Crichton-Miller is said to be trying to push Kroll UK increasingly away from investigation, where it is has always been strong, down the path of his own preferred speciality, business intelligence.

But perhaps the most serious problem facing Kroll UK post-MBO, according to the same senior source, is that "Arish is simply not the right man to run it. His management style is too rigid and military and leads to over-staffing." As another senior colleague says: "He's a Crom-wellian soldier, with all those strengths - and weaknesses."

So, for winning battles against wily old-time legal politicos like Jules Kroll, the SAS may not prove the best training ground.

But, whatever happens, tensions within the world's biggest firm of corporate sleuths are running deep. The most obvious immediate beneficiaries of the battle may not be Arish Turle and his special forces, but the platoons of Kroll "deserters" and, more particularly, the bigger battalions such as his former command, Control Risks.