A year ago Tyco struck a pioneering deal to channel the bulk of its European work to Eversheds. Twelve months on, Richard Lloyd assesses how the venture is working – and if other clients will follow suit Little more than a year ago, Paul Smith, a partner at 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. Now, the caller informed Smith, Eversheds had just taken 37% 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 law 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's adviser of choice for Europe, the Middle East and Africa. At a stroke, the US security and fire business slashed its legal advisers for day-to-day matters in the region, such as commercial contracts and intellectual property, from a high point of 250 to just one. In early 2007, Tyco handed Eversheds a two-year mandate estimated to be worth more than £10m in total.

Tyco's move wasn't unique. DuPont'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 that make the cut get the promise of more work and, therefore, potentially more fees (Eversheds declines 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 (Eversheds is also one of DuPont's preferred advisers in Europe). Other corporations in the US and Europe have been reluctant to commit so much to just one firm, preferring instead to appoint firms by jurisdiction or practice area. Unilever did just that when it entrusted the management of its global intellectual property portfolio to Baker & McKenzie in 2006. But Tyco handed Eversheds the vast majority of its ongoing legal work across 34 different jurisdictions, including around 1,000 live matters, when the relationship began in January 2007.

Arrangements such as the Tyco deal represent an opportunity tailor-made for upwardly mobile, mid-market firms with a strong international presence. Eversheds, which has expanded overseas by affiliating with local firms in more than a dozen countries (mostly in Europe), is strongest in practices such as real estate, employment, or areas where the emphasis is on a steady stream of work from clients. The kind of lower-grade, increasingly commoditised work that the firm is doing for Tyco probably wouldn't interest top-tier corporate firms but the competition for such work from firms like Bakers, CMS Cameron McKenna and DLA Piper is becoming as fierce as anything between the leading M&A players in London and New York.

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 recognised 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 (pictured), the relationship partner with Tyco. "The key is building the relationship over time," he adds.

Eversheds' initial introduction to Tyco came via Gardner Courson, the company's deputy general counsel, litigation from 2002 to 2005. Formerly a partner at one of DuPont's preferred firms, McGuireWoods, Courson knew Eversheds 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 places like Europe, the Middle East and Africa, Eversheds was one of a handful of firms he invited to lend some advice.

Tyco had already overhauled its outside counsel relationships in the US 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 chief executive 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 general counsel for Europe, the Middle East, and Africa, Trevor Faure, who joined the company from Dell in 2004, was determined to take the US 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 – one team to cover 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 11 other firms, including DLA Piper in the final round, to become the 'external resources' in Tyco's acronym.

Both sides needed to make some initial adjustments. "To begin with, it was very intensive," Hopkins says. "We took a lot of cases on overnight, but after a while Tyco said, 'We need to control [the work flow]. We can't keep just incurring costs.'"

On the Eversheds side, handling the volume of work presented a "major logistical exercise", Hopkins admits. Software developed by Eversheds' tech experts, Global Account Management System, or GAMS, became crucial to managing the relationship and assessing every new instruction. Data is entered by an Eversheds lawyer for each new Tyco matter sent to the firm, including a brief description of the case, the number of junior lawyers and partners likely to be involved, and the time it is predicted to take. This data yields an estimated cost that must be approved by Tyco before Eversheds can start work.

A year into the deal, Tyco-related work regularly involves around 200 Eversheds lawyers and support staff, a significant commitment even for a 2,000-lawyer firm. "I've got 5,000 e-mails in my Tyco mailbox," says Hopkins with a sigh, giving some indication of the volume of work flowing from Tyco. In regions where Eversheds does not have one of its own offices or an affiliate, it turns to a local practice for assistance. It is Eversheds' responsibility to manage that relationship so that in Tyco's eyes the other firm appears to be part of a seamless whole.

For Eversheds, there is no reason the IT and administrative systems as part of the Tyco relationship cannot be utilised for future clients interested in similar volume deals. The current trends in the market certainly suggest that general counsel will continue to reduce the number of preferred firms that they use.

Shortly after it lost out on the Tyco pitch, DLA Piper got some revenge when it beat Eversheds to win the majority of The Linde Group's work worldwide. Lovells, meanwhile, picked up a prime mandate last year when it was appointed to advise Honeywell International on most of its external legal needs across Europe. At the start of this year, Eversheds marked the first anniversary of its Tyco success by announcing that it has won the pitch to advise healthcare company Brady Corporation on the brunt of its work across Europe, the Middle East and Africa. The competition between a raft of UK and US firms for preferred adviser status looks set to intensify.

DLA Piper co-chief executive Nigel Knowles says that the Linde appointment has led to a significant increase in attention from in-house counsel. "Following the Linde pitch, we have received a lot of interest from corporates inquiring about our ability to service them across a range of practice groups and countries," he says.

In this pecking order forming below the corporate finance elites of London and New York, law firms are being asked to give clients not just lower bills, but instead better value for money.

Tony Williams, head of legal consultants Jomati Consultants, believes that all of this shows a lack of bargaining prowess among lawyers. "General counsel and private practice lawyers have to think of a way of not only cutting costs but also trying to get more value out of a relationship," he says. "Few lawyers are good at that."

With its Tyco appointment due for review at the end of the year, Eversheds is hoping to prove that working smarter can be just as powerful as working cheaper.

A version of this article also appears in the March edition of The American Lawyer, Legal Week's US sister title.

More news, deals and comment on Eversheds

Eversheds on the Legal Week Wiki