How Eversheds Became Tyco's Firm of Choice in Europe
U.K. firm won two-year mandate estimated to be worth more than $20 million in total
Little more than a year ago, Paul Smith, a partner in the U.K. firm Eversheds, received a call from the irate head of a European law firm. Up until then, the European firm had regularly worked for Tyco International Ltd. Now, the caller informed Smith, Eversheds had just taken 37 percent of his Tyco business. What, he asked, did the Eversheds partner intend to do about it?
As he recounts the story, Smith rolls his eyes at yet another example of a European firm failing to grasp some basic fundamentals of client service in the modern world. But the caller did have reason for concern. Smith had just led Eversheds' successful pitch to become Tyco International's adviser of choice for Europe, the Middle East and Africa (EMEA). At a stroke, the American security and fire business slashed its legal advisers for day-to-day matters in the region, such as commercial contracts and intellectual property, from around 250 to one. It handed Eversheds, which had revenues of $650 million in 2007, a two-year mandate estimated to be worth more than $20 million in total.
Tyco's move wasn't unique. E.I. du Pont de Nemours and Company's innovative partnering model, established in the early 1990s, is widely credited as the pioneering effort. The logic is simple: The client gets reduced hourly billing rates from a smaller pool of external advisers, while the firms who make the cut get the promise of more work and, therefore, potentially more fees. (Eversheds declined to comment on how much of a discount it has given Tyco.)
What Eversheds and Tyco claim, however, is that their relationship has taken the DuPont model to another level. (The British firm is also one of DuPont's preferred advisers in Europe.) Other corporations in the United States and Europe have been reluctant to commit so much to just one firm, preferring instead to appoint firms by jurisdiction or practice area. Consumer products giant Unilever did just that when it entrusted the management of its global IP portfolio to Baker & McKenzie in 2006. But Tyco handed Eversheds the vast majority of its ongoing legal work across 34 jurisdictions, including 1,000 live matters, when the relationship began in January 2007.
Arrangements like the Tyco deal represent an opportunity tailor-made for upwardly mobile, midmarket firms with a strong international presence. Eversheds, which has expanded overseas by affiliating with local firms in more than a dozen mostly European countries, is strongest in practices such as real estate, labor law, or areas where the emphasis is on a steady stream of work from clients. The kind of lower-grade, increasingly commoditized work that the firm is doing for Tyco probably wouldn't interest the United Kingdom's Magic Circle or New York's top corporate firms -- but the competition for such work from firms like Baker & McKenzie, CMS Cameron McKenna, and DLA Piper is as fierce as anything between the leading M&A players.
Not that Eversheds isn't interested in higher-profile matters. Although bet-the-company M&A isn't part of the current Tyco deal, Eversheds' hope is that the current relationship will allow the firm to work its way up the food chain. "We recognized from the start that M&A was separate from this deal," admits Smith.
"But we also knew that we would have a shot at winning it," chimes in Stephen Hopkins, the relationship partner with Tyco. "The key is building the relationship over time," he adds.
Eversheds' initial introduction to Tyco International came via Gardner Courson, the company's deputy general counsellitigation from 2002 to 2005. Formerly a partner at one of DuPont's preferred firms, McGuireWoods, Courson knew the London-headquartered British firm from its work for DuPont in Europe. So, when Courson's boss, Tyco general counsel William Lytton, set out to review the structure of the company's legal team and its use of external advisers in EMEA, Eversheds was one of a handful of firms invited to lend some advice.
Tyco had already overhauled its outside counsel relationships in the U.S. in 2004, when Lytton chose a group of firms to advise on specific specialties: Shook, Hardy & Bacon in product liability, for example, and White & Case as the corporate adviser of choice. For a company that had become a byword for accounting fraud under former CEO Dennis Kozlowski, revamping its legal team and its external advisers was as much about improving compliance as extracting better value for money.
However, Tyco's GC for EMEA, Trevor Faure, who joined the company from Dell Inc. in 2004, was determined to take the U.S. model one step further under a model dubbed "Segment and Subject Management, Regional Teams and External Resources," or "SMARTER." Faure revamped his in-house team, hiring new senior counsel to head regional teams covering Southern Europe and the Middle East, one focused on Eastern Europe, and another on Germany, Austria and Switzerland. A single firm would be designated to take on work in areas such as commercial contracts, employment, or IP that the internal teams could not handle because of lack of resources or expertise. During the pitch process, Eversheds beat out 11 other firms, including DLA Piper in the final round, to become the "External Resources" in Tyco's acronym.