February 27, 2024

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Allen & Overy and Shearman plan to merge to create a $3.4 billion law firm

Allen & Overy and Shearman plan to merge to create a $3.4 billion law firm

The New York law firm “Magic Circle” Allen & Overy merges with Shearman & Sterling to form a practice with combined revenues of approximately $3.4 billion, in one of the largest transatlantic legal relationships in history.

The merger, which is subject to a vote by the partners of the two firms, would create one of the largest law firms in the world by fee income and comes just months after the 150-year-old Sherman abandoned merger talks with Hogan Lovells.

Allen Overy Shearman Sterling, as the newly merged firm will be known, will have approximately 4,000 attorneys spread across 49 offices.

The proposed deal marks the first merger between London-based Magic Circle and an American competitor since Clifford Chance joined Rogers & Wells in 2000. It is also a major step forward in Allen & Overy’s attempt to conquer the lucrative US market following the collapse of its merger bid with O’Melveny & Wells. Myers in California four years ago, after the two sides failed to agree on the assessment.

The engagement comes on the heels of a turbulent period for Sherman, who lost several attorneys after her miscarried talks with Hogan Lovells earlier this year and has been undergoing a difficult restructuring.

In a statement, Allen & Overy Senior Partner Wim Dejonghe said, “We believe A&O Shearman will be a company unlike any other in the world.”

Speaking to the Financial Times, Dejonghe made it clear that this link-up would give both companies crucial scale in London and New York. Allen Overy Sherman Sterling “will bring in over $1 billion in revenue in the US, 30 per cent [coming from] UK and 40 percent in the rest of the world, and I don’t think anybody has that.

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London-based Allen & Overy — which had revenues of £1.9 billion in the year to the end of April 2022 and employed around 5,800 staff globally — has long sought entry into the lucrative US market, which has proven difficult for London-based companies. crack based.

Meanwhile, Sherman — which has 1,350 employees in total and reported revenue of $907 million in calendar year 2022 — has been looking for a way to grow and increase its profitability, having found its existing global network brought higher costs but insufficient scale.

Allen & Overy’s number one strategic priority [has been] To have the same depth and strength on the bench in the US, specifically New York, and that gives us that all at once,” Dejonghe said, of a number of lawyers the new firm would boast. Enough in the US, and Sherman has been lacking on the bench in the rest of the world.”

The companies said they are seeking to build stronger expertise in private equity, life sciences and energy transition. Sherman will have representation across global leadership positions in the combined company.

Sherman’s senior partner, Adam Hakki, said the two firms “know each other well and have explored things for years and years,” but have approached serious proposals through “focused discussions in recent weeks.”

Once one of Wall Street’s most powerful advisors, Sherman has been making cuts in recent months due to falling demand. It is also undergoing a restructuring aimed at focusing on its most profitable regions, such as the United States, and lucrative sectors, including private equity.

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The company experienced a lack of economies of scale in its network of offices, and had difficulty competing with more profitable American competitors who could offer higher salaries to partners. Allen & Overy has had a similar problem when seeking growth in the US market, and in recent years it has made changes to its bonus system that allow it to pay premium partners more.

Shearman’s equity partners earned $2.48m in average earnings last year, compared to just under £2m for partners at Allen & Overy. Both companies said the pay structures would not be difficult to tie together.

The deal is expected to be pitched to partners at both companies before the summer, with the goal of closing the transaction within six to 12 months.