Ernst & Young’s (E&Y) UK legal arm Tite & Lewis (T&L) is about to be split from its accounting parent.
Sources say the 11-partner accountancy-tied firm was in “intensive negotiations” with E&Y all last week. However, given that headhunter Melton Legal Search has been appointed to find a new home for T&L, a split with E&Y is understood to be inevitable.
Sources say that the current negotiations centre on the financial aspects of the split. As revealed by The Lawyer last week, E&Y has sunk around £22m into T&L since 2000.
E&Y took a 10-year lease on T&L’s Noble Street office at the height of the property market in 2000. In a complex agreement, the accountant sublet it to T&L, which then assigned parts back to E&Y.
The burden of the lease will almost certainly fall on E&Y, further increasing its losses. However, E&Y makes provisions for losses on property and other matters in its annual accounts.
Melton’s founder Vassos Georgiadis has approached several law firms over the past two weeks. Melton is offering the whole firm or a group including managing partner Christopher Tite, chairman Mark Lewis and the most profitable partners.
Rival headhunters were also moving last week to pick off the firm’s most attractive partners.
T&L, with 11 partners – including the highly-rated Charles Proctor, Jon Edgell and Malcolm Hurley – and 32 assistants is a potentially attractive merger prospect. It has credible clients, including ABN Amro, Land Securities Trillium and Lloyds TSB.
The partners brokering the deal, Tite and Lewis, have recently concentrated on management rather than fee-earning; the pair earn £650,000 a year, plus bonuses.
T&L equity partners have made incremental capital contributions to the firm in the past two years. It is thought that those at the top of equity, including the name partners, have invested at least £75,000.
However, T&L partners, rather than E&Y, will be entitled the firm’s work-in-progress and book debt, so could offset this against their capital contributions.
E&Y and T&L declined to comment.