Corporate Counsel: Has Eversheds found what corporate clients really want?
Eversheds has been investing in its client service. Michelle Madsen asks if its brand of partnering is a far of the future
May 16, 2007 at 08:07 PM
7 minute read
Grand forecasts of the modernisation and slicker delivery of legal services for major companies have, it is generally agreed, proved so far premature. Despite the rise of legal panels, the evolution of more rigorously packaged and process-driven legal services has been patchy outside the most commoditised areas of law.
Yet one UK firm, national giant Eversheds, has shown signs of taking forward the model to create a package that allows the firm to provide a genuine one-stop shop for major clients.
In part this has involved adapting the much-touted partnering model that the firm pioneered with US chemicals giant DuPont 11 years ago. But Eversheds has gone further over the last two years with a series of imaginative ventures aimed at boosting the firm's appeal to corporate counsel under pressure to show more rigour in their purchasing decisions.
This approach was most recently in evidence when US conglomerate Tyco this year appointed Eversheds to handle all of its legal work in Europe and Asia, thanks partly to commitments from Eversheds to project manage its work.
The unusual arrangement, which is expected to be worth around £8m over two years to Eversheds, saw Tyco Europe general counsel Trevor Faure praise the firm's progressive credentials and commitment to giving clients billing transparency.
Still, it has been a long road since Eversheds' much-publicised link with DuPont. First piloted in the US, the rationalisation of the chemicals giant's roster of legal advisers slashed its panel from more than 400 firms to 30, with Eversheds stepping up to handle much of DuPont's European work.
Applying what DuPont describes as 'business discipline' to the practise of law, the system is based, somewhat vaguely, around a 'partnership' between the in-house team and external counsel rather than a list of preferred suppliers.
The emphasis of the model lies in sensible resourcing rather than overzealous thoroughness, with the motto being "Don't turn over every stone, turn over the right ones".
DuPont was also associated with Six Sigma, a business process developed in the 1980s to improve efficiency and cost control at manufacturing companies, though the concept was not to gain widespread popularity for procuring legal services.
Underneath all the management speak lies a simple concept: cut the number of firms you work with and build long-term relationships with a handful of advisers. The theory, which was influential in the wider adoption of panels, aimed at allowing clients to push down costs and demystify legal services procurement.
Eversheds partner Paul Smith, client contact for DuPont and Tyco, argues that more strictly managed relationships can work for both sides, not just force law firms to churn out low-margin commoditised work.
"Once you are appointed you have a foot in the door," he says. "Some firms think that we are simply farmed out all the mundane, run-of-the mill work when in fact we are the principal lawyers to the business. When we won the work with DuPont, we worked on a £3bn acquisition and a massive refinancing in the first year – I do not call that bread and butter work."
By consensus, Tyco has taken the process much further than DuPont, in the most obvious sense by handing all its work in one region to a single law firm.
That move is being watched closely by rivals and corporate counsel alike. Some firms argue that arrangements such as Eversheds/Tyco are simply uneconomic for advisers. One national rival claims it stood down from the pitch to secure Tyco's work when certain conditions that the company was expecting became clear.
And if the system is so cost effective and beneficial to both advisers and clients, why have more companies not adopted similar approaches?
Smith argues that until now the model has only really been adopted by US companies with global reach that want to rationalise their relations with advisers outside the US and that the trend has yet to catch on in the UK market.
"The trend is in response to the environment in which we work," agrees DLA Piper chief executive Nigel Knowles. "As some multinational clients adopt an increasingly global approach, the role of their general counsel becomes strengthened and they seek to get more value. General counsel cannot run a string of panels in different regions without considerable difficulty, as they simply do not have the resources to manage them."
That trend suggests the Tyco/DuPont concept 'has legs' since there is a growing band of large commercial cross-border firms like Eversheds and DLA Piper with the capacity to offer such services outside of transactional practice, often to US companies moving to expand in Europe.
But there is also a risk for client and adviser of having too many eggs in one basket should the relationship fail to prosper. As Knowles comments: "There is a danger that you can fall into a one-sided relationship, be squeezed too tightly and asked to invest too much for little return. Fair arrangements are the essence of partnership."
Despite having some reservations, DLA Piper clearly shares common ground with Eversheds and is likewise seeking to position itself as a broad provider to large corporates.
DLA Piper joined Eversheds on the pitches for work for both Tyco and DuPont, but itself secured a similar client win as primary global legal provider to a major company in February when it was appointed by gas and engineering giant Linde. Although Linde's general counsel, Nick Deeming, named a further four firms to the panel, DLA Piper secured 80% of the company's legal work across Europe, Asia Pacific and the US.
"I have not really seen any other corporations adopt this strategy," says Knowles. "Anything less than this sort of radical rationalisation is no different to what we have been doing with other clients for years. To get to a point where both sides are comfortable you have to put in a lot of effort and time. These companies, which are constantly trying to drive down costs and get better deals, are responding to their size and are seeking firms that have a similar strategy."
However, Eversheds partner and former Asda general counsel Denise Jagger predicts more clients will follow, arguing that elements of the procurement model can be applied to companies regardless of size, jurisdiction or sector.
"I think Tyco is an extreme example in terms of its size and the extent to which it has adopted the model," she said. "But it is not just something that is relevant to big companies – some of our small clients are also asking about it as they do not have the time to work out what is the optimum split of work across a large number of firms."
A partner at one national rival was sceptical saying: "The challenge for Eversheds is going to be making money out of the Tyco deal. The pricing structure is incredibly hard – you wonder if it has not simply taken on the work to carve a place for itself in the market."
But even if not everyone is convinced that the economics of arrangements like Tyco stack up, Eversheds' complementary initiatives to develop client tools for communication, project management and training arguably have wider appeal.
The firm has also made much of its investment in its RAPID Resolution and DealTrack processes, which were designed respectively to manage litigation and transactional work. The firm claims these two project management processes can offer predictable costs, tailored and detailed fee information according to client requirements.
Given the reams of unfulfilled hype from advisers regarding client services, Eversheds has much to prove. But the firm has already shown more commitment to the cause than most rivals and, on current showing, some clients are impressed with what they are seeing.
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