The schism between ICM and Ed Limato, which manifested itself in a parting of the ways on Friday, is already causing ripples within the agency business.

If Limato becomes a free agent – with clients like Mel Gibson, Denzel Washington and Steve Martin, to name just a few, and their commissions – then the balance of power in Hollywood is about to change.

But who would get Limato, a well- respected – and expensive – dealmaker who has three assistants and big overhead…not to mention one polarizing client in Gibson, who may turn people off at other agencies. Of all the players, seems Wiliam Morris is emerging as the candidate with the right appetite. (WMA’s topper Jim Wiatt could not be reached over the weekend.)

The three-decade relationship between ICM and Limato ended Friday, with both parties expected to battle it out in an arbitration hearing tentatively scheduled for Aug. 1.

A key issue is a non-compete contract clause that Limato is expected to challenge. That clause would keep him tied to the agency as a consultant for several years and forbid him from taking star clients like Gibson, Washington, Martin, Liam Neeson, Richard Gere and Billy Crystal to another agency.

Enforcing non-compete clauses on talent agents is tricky, and there ore other issues like contractual ones: ICM was unsuccessful this spring when it petitioned a Federal Court in Manhattan to keep book agent Richard Abate from leaving with a year left on his contract to start a publishing division at Endeavor.

Another issue will be commissions. Attorney Tom Hansen is pressing the case for Limato, but both sides expect a settlement to be reached before a case goes to court.

Rumors of a Limato departure have been in the air for more than a month, but the incident that triggered it came Friday. While chairman-CEO Jeff Berg and co-prexy Chris Silbermann were in Sun Valley, Idaho, attending the Allen & Co. mogul fest, they issued a short press release from ICM’s Century City headquarters that Limato had been stripped of his co-president title and demoted to movie agent. It was a move that Berg said in the press release was designed to “support the next generation of leadership.”Limato, who was working out of ICM’s offices that day, didn’t know the announcement was coming until an assistant read him the missive over the phone. Almost immediately, Limato’s lawyers and the agency began discussing ways to negotiate a settlement of his contract.

Limato was long the face of ICM’s film department, a dealmaker as storied as Swifty Lazar, Stan Kamen, Freddy Fields and Ted Ashley, known for his effectiveness and skills at social networking. (He was noted for hosting an exclusive pre-Oscar party, admission to which was greatly sought after. The agency paid for the affair.)

Limato’s exit is the latest seismic personnel change for the agency since Berg recapitalized the company, bought out the tenured shareholders and then acquired Broder Webb Chervin Silbermann.

Limato suddenly found himself sharing a president title with Chris Silbermann, who was given the mandate to overhaul the culture at the agency to more closely replicate the one that had worked for BWCS, which was known primarily as a TV packaging powerhouse boutique.

This meant, in effect, that a TV vet with little film background was trying to shake up Limato’s three-decade format for the film division.

The vast change that has occurred at ICM since the recapitalization is evidenced by the fact that most of the agents who made the deals that empowered the cash infusion are no longer there. Aside from an equity investment by Suhail Rizvi, the bulk of recapitalization funds came from Merrill Lynch, with ICM pledging receivables from some of the biggest deals it made over the last two decades.

The plum items included commissions from the “Lord of the Rings” trilogy that came because the agency repped Peter Jackson; a packaging fee for the long-running NBC hit “Friends”; proceeds from the Gibson-directed “The Passion of the Christ”; and “The Simpsons.”

Berg remains the longtime rep of “Simpsons” exec producer James L. Brooks, but Jackson left with agent Ken Kamins when the latter became a manager; “Friends” dealmaker Nancy Josephson was fired right after the BWCS acquisition and moved to Endeavor; and “Passion” director Gibson will be leaving with Limato,. ICM also lost top-tier filmmaker agent Robert Newman to Endeavor.

Despite the loss of film agents and clients, ICM leadership bristles at any notion that its attempt to graft a new culture onto its film business has at least temporarily made that department weaker than its major agency rivals.

The agency plans to make an aggressive attempt to lure a star dealmaker who could bring a windfall of clients, and insiders feel that landing that star may be easier without the long shadow cast by Limato.

Finding such an agent and coaxing him to leave with clients doesn’t happen all that often, though. Endeavor made a blockbuster deal to lure CAA agent Patrick Whitesell, who has helped transform a film talent stable from a liability to a strength. More recently, CAA put itself in the comedy game by luring UTA agents Dan Aloni and Jason Heyman and their comedy clients. Newman bolstered Endeavor’s filmmaker business.

ICM is also counting on its younger film agents to step up, and the agency points to its current client list of thesps, filmmakers and writers as a sign of stability. The filmmaker list includes Brooks, Stephen Frears, Rob Marshall, Roman Polanski, Nancy Meyers, David Cronenberg and Brian De Palma and emerging stars like “Live Free or Die Hard” helmer Len Wiseman and “Wild Hogs” director Walt Becker. Acting talent includes Halle Berry, Jodie Foster, Samuel Jackson, Beyonce, Jennifer Connelly, Paul Bettany and Laura Linney, and the writers include Peter Morgan, Ronald Harwood and David Mamet.

There are very different explanations for why Limato’s relationship with Berg and Silbermann deteriorated. Limato supporters said he was disrespected and marginalized from the moment Silbermann came aboard. Others said that Limato, set in his ways, had become an impediment to Silbermann and Berg’s attempts to change the culture of ICM.

When the first rumors of a Limato exit cropped up and were denied by both the agent and ICM, speculation had Limato landing at either Endeavor or CAA. More recently, William Morris and UTA have been mentioned as possible landing spots as well, though CAA has long coveted Limato and his clients.

While no discussions can take place until Limato is free from his contractual obligations, a move to Endeavor is complicated by the fact that that agency chief Ari Emanuel encouraged an industry boycott against Gibson following his anti-Semitic comments after a drunken driving arrest in Malibu.

Friday’s press release was short and hinted at no discord. “Ed Limato is no longer co-president of the agency. Mr. Limato will continue as a motion picture agent at the company,” it said.

The release indicated it was simply “part of a restructuring of ICM’s motion picture department to deliver long-term growth” and that “Further developments with regard to the department’s restructuring for growth will be announced in due course.”