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Not easy out there: A&O adds £75m to its top line amid muted PEP showing

Bringing up the rear of the Big Four City firms to post solid but unspectacular financial results, Allen & Overy (A&O) has increased its top line by 5%, sending revenue up by £75m to nearly £1.63bn.

A&O’s £1.627bn turnover relegated it from second to third largest Magic Circle firm in revenue terms after Clifford Chance (£1.693bn) and Linklaters (£1.629bn) but above Freshfields Bruckhaus Deringer (£1.472bn).

A pacier 8% growth in profit before tax to £708m was more heartening, even as profit per equity partner (PEP) rose just 1% to £1.66m amid a 2.4% uptick in headcount for the year. The firm has 2,300 lawyers and 550 partners.

Andrew Ballheimer, A&O’s managing partner, pointed to significant investments in the firm’s global platform and in its new consultancy business, A&O Consulting, part of the City giant’s advanced delivery services business which also includes Peerpoint, aosphere, and Fuse. Those businesses have grown more than 20% in the last year.

Geographically, Asia has been a particular standout along with other emerging markets, while international capital markets, and corporate were the most prolific practice areas.

‘We have acted on more deals, by a significant margin, than anyone else around the world and are ramping up the international platform,’ Ballheimer told Legal Business. He said multi-jurisdictional transactions were a main driver for the firm: ‘Very few law firms have a comparable offering.’

On the firm’s outlook, and market sentiment more broadly, Ballheimer commented: ‘The pipeline is good, but it’s not easy out there. There are headwinds including increased protectionism and the threat of trade wars. But if we focus on clients and ensure our platform is high quality, our business will be ok.’

He added: ‘Activity in the M&A market has to come to an end eventually, it’s been the longest bull-run in memory. Our business is in a good place but there is an understanding that it is not at all easy out there. We aren’t being complacent.’

Looking ahead, investments in innovation and technology, as well as diversity and inclusion, will be focal points for the firm. Deal highlights for 2018/19 include advising BMW on its €3bn acquisition of its passenger car joint venture with Brilliance China Automotive, Blackstone on its €1bn acquisition of a majority stake in Luminor Bank from Nordea and DNB and Virgin Money on its €4.4bn merger with CYBG.

The results follow hot on the heels of Linklaters’, which by far outstripped its peer group against every metric with a 7% revenue uptick to £1.63bn and double-digit profit growth.