See a graphic of the path to Caroline Michel

The last time Britain’s literary establishment felt this exhilarated, engaged, appalled or obsessed by a story was in 1995, when Julian Barnes terminated his friendship with Martin Amis, in a terse Dear John letter in which Barnes expressed the “hope” that his old tennis partner would be happy being represented by a man (Andrew Wylie) whose clients included a victim of fatwah (Salman Rushdie), another who died of Aids (Bruce Chatwin), and another who had spent time in an asylum (a famous American novelist). On this small point Britain’s agents, authors, editors and publicists can agree.

On every other point, the usually sedate, dignified, slow-moving world of books is in uproar, transfixed by one of the bitterest and most gripping feuds to have affected the literary world. Phones are ringing off the hook, rumours are flying about rampantly, long-held grievances are aired as knives are sunk deep, and usually anonymously, into the backs of old rivals. “On the surface we all get on brilliantly, but on a personal level we all f***ing loathe each other,” as the editorial director of one of the country’s largest publishing houses cheerfully confided yesterday. “I’ll tell you everything but it’s career death if I go on record. In my view what’s happening in publishing in the past few days is a catastrophe. Everyone is horribly excited.”

Battle commenced on August 24, when Pat Kavanagh, a legendary figure at Britain’s oldest and most venerable literary agency, Peters Fraser & Dunlop, quietly resigned after negotiations for an attempted £4 million buy-out by the firm’s agents failed. By coincidence, both PFD and Kavanagh were at the centre of the Amis/Barnes falling-out in the 1990s, which had been provoked by Amis when he left Pat Kavanagh, his long-standing agent and Barnes’s wife, for Andrew “The Jackal” Wylie, who had negotiated a more handsome, £500,000, advance for his novel The Information.

Kavanagh, now in her sixties, neatly rose above that little disagreement and remains a commanding and terrifying presence in literary circles. The much-envied list she has built up over the years includes many prominent names: as well as her husband she represents William Trevor, James Fenton and Ruth Rendell.

To CSS Stellar, PFD’s parent company, Kavanagh’s resignation might have been tolerable had it not been for two crucial factors. First, as a rule, when an agent goes her clients go with her. Second, Kavanagh did not resign alone. Rather, she precipitated a slew of resignations that now threatens to destroy the firm. David Buchler – an accountant and insolvency expert, former vice-chairman of Tottenham Hotspur football club and chairman of CSS since August – downplays the affair and claims that only six agents have resigned, but documents confirm that 18 agents have now given in their notice, the most recent yesterday morning. Combined, the agents claim they account for 75 per cent of PFD’s business.

On September 11, Caroline Dawnay, Nick Hornby’s agent, handed in her notice. Soon after, Maureen Vincent resigned. What has not so far been publicly revealed is that the crisis has permeated through to the firm’s other departments: its entire actors’ department has also resigned – although not yet literally walked out, as they are contractually bound to work out their notice. On September 6, Keira Knightley’s agent, Lindy King, handed in her notice. The next day, Dallas Smith, who looks after Kate Winslet, did the same. Together, the “rebel agents” are said to be scouring London for new premises in which to set up a rival firm around Christmas. A property in Covent Garden looks to be ideal. Their spokesman, Anthony Cardew, confirms: “Many of the agents have been increasingly unhappy about what has been happening at PFD. It is their view that although PFD is very profitable, not enough money is being reinvested in the business. When the buy-out didn’t look like it was going to happen, the agents resigned and started thinking of setting up on their own. Yes, they have since worked out a business plan to set up a new agency. They have identified suitable premises but have yet to sign the lease.”

Robert Harris is in no doubt about whether the firm’s authors will stay, or follow the mentors who have bolstered and shaped their careers for decades: “I’m loyal to the individuals I have worked with over many years, I trust their judgment and integrity if they decide to set up their own agency. I believe Tom Stoppard feels the same. My hunch would be that the great majority of the writers would leave because they don’t have great confidence in what would be left behind. Whoever these people are, making the decisions at the very top – if they think they can get by without their agents, some of the most respected names in the industry, they are hugely naive. Writing is not a corporate thing – we are not assets.”

Clare Alexander, one of the country’s most powerful agents and former editor-in chief of Macmillan, now works at PFD’s rival firm Gillon Aitken Associates, who represent Sebastian Faulks, V.S. Naipaul and Pat Barker, agrees: “PFD is nothing without its agents. If the agents leave, the authors’ allegiance is not to the agency it is to the individual.”

So who will succeed? The largely Oxbridge-educated coterie who brought us Flaubert’s Parrot, About a Boy and Enigma? Or the besuited, golf-awayday-loving perusers of Accountancy Age?

It is a cliché in this context to claim that a written narration of these events would make a bestseller. The story that is rapidly unfolding on their doorsteps is making it difficult for those working in publishing to concentrate on their manuscripts, so dull do they seem in comparison – and now one of the most glamorous and polarising women in publishing has joined the fray, buoyed by an estimated £450,000 salary and given the task of dragging the literati screaming and kicking into the corporate world.

Elegant, independently wealthy and super-charming, Caroline Michel announced only last Wednesday that she would be abruptly leaving her post as managing director of the rival firm William Morris Associates in the UK to become chief executive of CSS Stellar. David Buchler announced that Michel’s appointment formed “part of the long-term reshaping of CSS”, while PFD’s agents merely raised a cynical eyebrow: “I think David Buchler and Caroline Michel have some sort of vision that I don’t share," Kavanagh says.

The literary elite, increasingly depressed by publishing’s love affair with the mass market, its desertion of the mid-list, the relinquishing of their power by publishers to the booksellers, identified in this move a plan to further “streamline” this still vaguely eccentric and mercurial industry into a profit-driven conveyor belt in which authors and actors would be expected to become all-singing, all-dancing “products”. A world in which glamour models can dominate the bestseller lists with autobiographies that they happily admit to not having written. A world in which the oversixties, that is to say more than a handful of PFD’s leading agents, would be considered well past their sell-by dates and where authors such as Louis de Bernieres, who became widely read only with the publication of his fifth book, Captain Corelli’s Mandolin, would, in these more marketing-orientated days, never have retained the complete confidence of his publishers unless by happy chance he had been discovered by Richard and Judy. The intellectuals hate to admit it, but this is what a meritocratic, market-driven landscape looks like. Literary agents have been known to open their advice seminars aimed at aspiring novelists with the words: “You don’t have to live in Hampstead to write.”

Neither CSS nor Caroline Michel were available to speak, but many of those involved in the business say they assume that CSS, a publicly listed sports and events company that bought PFD in 2001, was in part keen to follow the American model in which talent agencies such as ICM and CAA pursue a hugely aggressive recruitment and deal-making policy. Working for a publicly listed company means effectively working for shareholders, a state of affairs with which it seems that some of PFD’s agents, having made a fortune from the sale of the company to CSS in 2001, have now decided they are not entirely comfortable.

British agents and authors alike fear an environment in which agents would spend more time managing their client’s profiles and dealing aggressively with the media than copy editing. It has not been unknown for an American agent to hire a private detective to stalk rival clients. To the disgust and irritation of even those agents who are intending to stay at PFD, the parent company has already brought in the management consultants. “If someone comes from outside you’ve got a problem. They’re there to do something even if nothing is wrong,” says the head of one of PFD’s big rivals. “But from where I’m standing there’s nothing at all wrong with that company, it is hugely profitable and is run by agents who know what they’re doing. Why are they bringing in the consultants? That company doesn’t need juicing.”

Duncan Heath, chairman of the Independent Talent Group, whose clients including Daniel Craig, Michael Caine and Steve Coogan and who engineered the company’s £4 million buyout from the American giant ICM five year ago, puts it more plainly: “The idea of streamlining the agenting business is bullshit. It’s just incredibly ignorant. It’s a very simple business and the key to it is the relationship between clients and agents. Agents tend to know how to run things very well. It’s a tougher and tighter market today, but the corporate route is wrong.”

It is not clear whether Caroline Michel was fully aware of the extent of the defections at PFD when she agreed to leave William Morris Associates, her employer of barely two years – or whether, as one of her allies put it last night, Michel’s move to PFD was “like the Americans going into Baghdad”. Or indeed whether there were other motives in her leaving the American giant: there have been rumours preceding her CSS appointment that she had intended to leave WM, and that it was Michel who, via her old friend Michael Sissons (one of the few agents who have not retired from PFD), who initially approached CSS.

Others speculate that Michel may be orchestrating some sort of merger between CSS and William Morris: “The question is, what can she add?” one leading leading agent says. “If you want to run a salon, then marvellous, but Caroline isn’t an agent. Does she not have a notice period at William Morris, and if not then why not? I’m referring to gardening leave. You can’t just go from one job to another, so I’m wondering whether William Morris is still involved.”

What is clear is that the Chanel-wearing publicist-turned-publisher-turned-MD and wife of Lord Evans turned up for an introductory meeting at PFD last week, but walked into a suspiciously empty office. Cardew says: “My feeling for Caroline Michel is one of sympathy.”

To properly understand the psychological impact on some of the world’s most experienced and respected agents of having Caroline Michel – a woman still sniffily (and inaccurately) referred to behind her back by her peers in publishing as a “glorified PR girl” with “a management-type profile” – parachuted in over their heads, look first into her history. The daughter of a German commodities dealer, she never went to Oxbridge but studied Sanskrit at Edinburgh. Next she joined the publicity department of tktk, where she displayed a natural flair for marketing: as a lowly minion, she was lumped with a book on kitchen utensils but managed to arrange a book tour and television coverage within 48 hours.

Envy, the inevitable byproduct of any meteorically successful woman’s career, has accompanied Michel wherever she goes. Her less immaculately connected rivals are said to be excessively envious of her marriage to the Labour peer and former chairman of Faber, Lord Evans of Temple Guilting, with whom she has three children.

Insiders at PFD report that Michel is doing what she does best: assiduously attempting to win over the renegade agents and persuade them to change their minds, in discreet one-on-one chats in their offices. To authors, her charm is formidably persuasive. She famously persuaded Alan Clark to place his diaries with the publishing house Orion in 1992 by wearing a very short skirt to the meeting, and later clinched Helen Simpson’s short-story collection by wearing a Voyage dress – a reference to one of Simpson’s stories. It may initially seem odd that when an author is at the receiving end of a hyperbolic letter from Michel that reads: “The biggest misery for me is finishing a book by you” (as Jeanette Winterston was), they do not react with cynical suspicion. But that is to underestimate the susceptibility of often lonely housebound authors to the beam of flattery from a beautiful and intelligent woman. Male writers regularly drool over Michel. “She was tanned and smelled gloriously expensive...she did not walk down the stairs so much as descend to earth, a deus ex machina in Dolce e Gabbana.” Last week the popular philosopher Alain de Botton is understood to have been reprimanded by his agent Caroline Dawnay after he publicly compared Michel to Eve.

Will her charm work on the agents? We now know the outcome of a conversation between Michel and the PFD agent St John Donald earlier this week in which Michel is reported to have perched on his desk and said: “I always knew you were very talented but I never realised you were so good-looking.” Donald, PFD’s co-chair, resigned yesterday morning.

Had Michel not been quite so successful, rich, attractive, ambitious or ruthless, no doubt fewer of her rivals would have been so ready to report her sins. Former colleagues at Granta talk fondly of the time Michel sent a memo to the the Polish author Ryszard Kapuscinski in which she misspelled his name three times (“We keep it in a drawer and look at it every time we needed cheering up”); the time she fell out with her then close friend and colleague Frances Coady, now editor of PicadorUSA. More recently, she ruffled the feathers of one of literature’s grandes dames when she told her that Eric Fellner, the film-maker, had assured Michel that she was the only literary agent worth anything in London. The grande dame in question is one of the country’s top ten agents. Further, she is thought to have overpaid Jon Snow and Greg Dyke for their autobiographies, although she has defended the mistake as a “group decision”. A typically backhanded compliment about Michel goes like this: “She’s an absolutely lovely woman who has close friendships with Ian McEwan and Salman Rushdie. Seamus Heaney is godfather to one of her children. It’s funny how they don’t follow her.”

One other question preoccupies those following the PFD case. What, in the long run, is going to happen to the authors? Are we on the brink of a literary future in which Tom Stoppard presents cookery programmes and Richard Harris appears in a new series of Rome, dressed for the part in a toga?

Nonsense, says one top agent: “How many of the authors are multi-platform authors? It is fine if you are JK Rowling or Dan Brown or Jamie Oliver, but most authors are just not like that. It sounds like a wonderful idea and I think it’s inevitable if you’re in Hollywood. They’ re talking as if they’re William Morris or CAA, but we’re in England. Try dealing with the BBC with that attitude. It is English hubris to pretend to be American players.”

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