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Big Apple takes a bite out of partner profits as Allen & Overy breaks lockstep for US hires

Allen & Overy (A&O) has broken its lockstep for its new Manhattan hires as the firm made a major finance play to compete with the US elite earlier this month.

Legal Business understands the firm broke its lockstep for the hires, about two years after introducing remuneration changes which were aimed at bringing in star laterals.

The Magic Circle firm announced the new team in July led by finance partner Scott Zemser, who joins with Alan Rockwell and Judah Frogel from White & Case.

Proskauer Rose partner Rajani Gupta also moved to A&O with Todd Koretzky, an associate from Milbank, Tweed, Hadley & McCloy who has been made up to partner by the firm.

At press time the firm declined to comment on which hires the lockstep was broken for or how much they would be paid. The firm’s lockstep ladder runs from 20 to 50 points, with partners at the top of equity picking up £1.9m last year.

In order to reward lateral hires with the bonus, the sponsoring partner is required to put a proposal to a committee set up by former senior partner David Morley in 2014 which focuses on how to award partners for ‘outstanding performance’. The committee will then decide whether or not to award the lateral with extra points. This remains subject to a full partnership vote when bringing in any lateral hire.

The new team’s clients include Bank of America, BNP Paribas, Credit Suisse, Deutsche Bank, Goldman Sachs and JP Morgan.

The US is a high priority for A&O’s management team, senior partner Wim Dejonghe and managing partner Andrew Ballheimer. Following their election, the pair told Legal Business: ‘There’s a misconception that it’s just about New York, it’s about growing US law capability across the world. It’s not about how big your US office is, it’s about how credible your US law offering is around the world.’ A&O plan to ‘steadily build’ its US offering, with management open to all possibilities.

The move follows its big four peer Freshfields Bruckhaus Deringer which broke its lockstep for star high yield partner Ward McKimm last year. He joined the firm from Kirkland & Ellis for a reported $6m per year pay packet.

For more see the comment piece: ‘Lockstep has to go for Magic Circle to enter new global elite’