Tite & Lewis Breaking Boundaries” boasts the website of Ernst & Young’s (E&Y) law firm. Well, messrs Tite and Lewis broke a few boundaries by spending £22m in the four years it took to build up an 11-partner law firm for E&Y. For a law firm, £22m sounds a lot. After all, you could probably buy a small Premiership football team for that – Leicester City say – if you could stomach the Spanish scandal.
All the accountants, as Andersen would testify if it were still around, spent millions on their foray into the legal sector. KLegal, for instance, had spent around £6m in salary start-up costs by June 2000. Where Tite & Lewis (T&L) differs is firstly in terms of value for money; Andersen, KPMG and even, whisper it, PricewaterhouseCoopers (PwC) got more, if not better, lawyers per pound invested. Secondly, E&Y financed T&L in a different way from the other firms, which tightly linked subsidies to performance. T&L agreed business plans with E&Y, but the law firm could draw as required on an overdraft facility underwritten by E&Y and non-recoursed to T&L. The overdraft is understood to be around £22m.
So how did T&L negotiate a sweetheart deal under which E&Y leased it some of the plushest offices in the City, where partners got bowls of fresh fruit every day and Tite and Lewis enjoyed a free rein? Look back at the Coopers & Lybrand and PwC merger. Tite and Lewis came from the Coopers side and even though Tite beat PwC’s man Chris Arnheim to the top job, he was unhappy with the bean-counters’ attitudes, money being a key gripe. Tite went into seclusion for three months and came out with a deal with E&Y. Crucially, E&Y was the only big-four accountant that hadn’t yet bagged a law firm and its head Nick Land was apparently an easy sell for Tite and Lewis.
Today, E&Y and T&L won’t be negotiating over who pays the overdraft – there could only be one winner: T&L. Meanwhile, E&Y partners have already been told to treat T&L like any other outside law firm, so its only hope lies in a quick deal for a core of lawyers.
The reality is, though, that many partners, support staff and lawyers will have to fend for themselves. And what information have they been armed with? Tite and Lewis released an internal statement claiming that contrary to press reports, it’s business as usual. From two partners who are primarily managers, you have to ask whose interests they are managing.