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Allen & Overy posts pace-setting 25% rise in PEP with top line reaching £1.52bn

Allen & Overy (A&O) has soared ahead of its Magic Circle competitors, increasing its revenues by 16% to £1.52bn, while profits per equity partner (PEP) also rose by a significant 25%.

Despite a year which the firm described as a ‘challenging’, and as a result of a ‘concerted drive’ by management to expand A&O’s client base beyond banking, revenue rose £209m from last year’s £1.31bn.

A&O is now the second largest Magic Circle firm in revenue terms. Alongside Linklaters, the firm has now overtaken Freshfields in revenue size.

PEP jumped from £1.21m to £1.51m for this financial year. Profits at the firm, which has grown substantially in revenue from a position below its rivals a decade ago, also shot up 27% to £716m.

On a constant currency basis the firm increased its revenues by 6% for the 2015/16 financial year while PEP saw a 14% percent increase.

The firm’s highest paid partner will receive 25% more than figures for the previous year, taking home £3.519m, including a retirement payment which averaged £2.808m last year. In this financial year, a one-off foreign exchange gain meant the reported average PEP increased by around £109,000.

Managing partner Andrew Ballheimer (pictured) pointed to the UK, Africa, Middle East, Australia, the US and Hong Kong as stand out regions for the firm this year.

He highlighted its strong performance across litigation, arbitration, capital markets, banking, leveraged finance, M&A, restructuring regulatory and project finance.

Ballheimer told Legal Business: ‘It’s a combination of things: all of our practice groups have done extremely well; over the last ten years or so we’ve opened a net of 20 offices, when other firms shrunk their footprint.’

‘Our alternative areas of businesses like Aosphere, MarginMatrix, Peerpoint, our legal services centre in Belfast’ also performed well, Ballheimer said. He attributed this to ‘having made these investments early on. These businesses are now scaling up and maturing, and it’s paying off.’

He also cited demand for multijurisdictional work as a driver for growth, with 74% of revenue deriving from matters involving two or more countries and 30% of revenue from five or more countries.

The firm has made a number of high-profile appointments in the last year, including the lockstep-breaking hire of a five lawyer US finance team, led by leveraged finance partner Scott Zemser from White & Case. The team was made up of two further partners from the US firm, one from Proskauer Rose, an associate from Milbank, Tweed, Hadley & McCloy, who was promoted to partner in the move.

Just seven months later, A&O broke its lockstep again, hiring a US-based three-partner Paul Hastings team led by the US firm’s leveraged finance head Bill Schwitter.

However, high-profile banking lawyer Stephen Kensell and M&A partner Edward Barnett both departed for Latham & Watkins during the year. Milbank, Tweed, Hadley & McCloy also raided the Magic Circle firm for a three-partner team in New York, including the firm’s US senior partner Kevin O’Shea.

A&O is the fourth Magic Circle firm to post its financial results, following Clifford Chance, which on 5 July recorded revenues up 11% to £1.54bn and a £1.37m leap in PEP.

Linklaters’ increased its revenues 9.8% over the last year to £1.44bn, while its PEP rose 8% to £1.51m. Freshfields Bruckhaus Deringer posted a stable turnover for 2016/17, with a top line of £1.33bn. Its PEP, however, grew 5% to £1.547m, an increase from £1.473m.