Legal Business

‘US firms have more buying power’ – Allen & Overy tight-lipped as partnership ushers in lockstep reform

‘US firms have more buying power’ – Allen & Overy tight-lipped as partnership ushers in lockstep reform

The partnership of Allen & Overy has voted through reforms to its lockstep in a bid to increase rewards for star performers as market pressure from US competitors continues to take its toll on London’s big four international firms.

Partners voted through the changes last week after being presented with the proposal earlier this month. It comes at a time when the dual market pressures of the coronavirus pandemic and competition from US rivals on compensation show no sign of abating. A&O declined to comment on the reform but sources within the firm describe the key changes as the ability to stretch the top of the lockstep and accelerate high performers at the bottom of the ladder. 

One partner told Legal Business: ‘It is in essence a proper points allocation where people get a profit share in advance, so if you are a superstar, you know you will be getting more points going into the year. You know how much you’re getting, rather than being at the whim of a compensation committee.

‘There are not many places left that can claim to be pure lockstep and what we have already isn’t really lockstep. But if you tell partners at a Magic Circle firm that you’re taking away lockstep, they would be up in arms. This is just another iteration of lockstep.’

A&O’s leadership is unafraid of potential overhauls of its remuneration structure. Protracted and eventually abortive merger talks with West Coast firm O’Melveny & Myers prompted inevitable questions over how the thorny issue of aligning compensation with a US firm would be tackled. The firm did at least thrash out much of the detail on what major reform would look like during the O’Melveny process, including a model that could have paid a few select stars $8m a year, with the understanding the model could deliver $6m deals for a wider pool of high performers.

And it is true that A&O has historically gone further in the war for talent than Magic Circle peers, having the capacity to pay top performers above its core lockstep, with above-plateau deals and ‘eagle points’ bonuses.  Partners in London are rumoured on average to be on 20 to 50 points, with each point worth around £45,000 before eagle points are taken into account. A&O’s highest earners can take home $3.5m-$4m.

Although more flexible than peers, it hasn’t stopped partners shopping around for more lucrative deals. The O’Melveny deal collapse was not without collateral damage, with Alan Rockwell and Michael Chernick leaving A&O’s New York office for Shearman & Sterling just a month after A&O lost well-respected London corporate partners Simon Toms and George Knighton to Skadden, Arps, Slate, Meagher & Flom. That blow came only 10 days after merger talks collapsed.

More recently in July, New York banking heavyweight Cahill Gordon & Reindel hired Jonathan Brownson, head of Allen & Overy’s much-vaunted leveraged finance practice, and Jake Keaveny, high-yield specialist and partner.

Projects and energy head Gareth Price could hardly have taken the managing partner helm from Andrew Ballheimer at a trickier time, having been voted in in February, shortly before lockdown in London started in March. Yet he and senior partner Wim Dejonghe have clearly not let that upheaval get in the way of executing their strategy. For many in the City elite, the reform will be seen as the only logical solution to a niggling problem.

‘You have got to accept that US firms have more buying power in pure money terms and if you think that you’re going to lose a material amount of partners because of money, then you have to think of a way of closing the gap,’ concluded the A&O partner.

Legal Business

Mixed results for A&O on gender pay gap but disability disclosure shows the right attitude

Mixed results for A&O on gender pay gap but disability disclosure shows the right attitude

Allen & Overy has become the first of its peer group to reveal its pay gap statistics and, while gender disparities are still concerning, the firm has made a positive statement of intent by disclosing its disability pay gap for the first time.

On gender pay disparity, A&O’s figures are a mixed bag, with the firm moving in the wrong direction on partner pay. Women – which make up just 20% of the partnership – are paid on average 18% less than male counterparts, compared with a 16% disparity last year. 

However, it is worth remembering that the data captures partner numbers to 5 April 2020, before the May promotion round kicked in. As it stands, women currently account for 22% of the partnership. The median gap has also grown to 26% after progress in 2019 saw it reduce to 17%.

A&O’s report comes in spite of the government easing pressure on companies to divulge their statistics this year as they come to terms with increased business challenges posed by the coronavirus pandemic.

Disability data shows that of a 74% response rate among UK staff, 3% have identified as having a disability, putting them on average at a 20% pay disadvantage, or 9% if considering the median figure.

Combined employee and partner numbers show nominal improvement on last year, with the average gender pay gap closing to 60% from 61.5% in 2019, notwithstanding the median has increased to 46% from 44% last year.

Ethnicity figures are based on 96% of employees in the UK responding and show that on average, black, Asian or minority ethnic employees are paid 22% less, while the median stands at 41% in favour of ethnic minorities.

The firm said 74% of employees recorded sexual orientation and, of these, 5% identifying as LGBT+. On average, those identifying as LGBT+ earn 8% more while the median figure puts them at a 10% disadvantage.

In 2018, A&O redoubled its diversity efforts, including opening up a so-called ‘hub’ office in southwest London’s Vauxhall to facilitate remote working, an initiative that was later abandoned through lack of interest. Senior partner Wim Dejonghe simultaneously set a target for 30% of partnership candidates to be women, starting by 2021. In its partnership promotions this year, 45% of new partners were women.

The firm’s stated ambition of having 30% of its board female has now been achieved, while 31% of its executive committee are now women. 50% of A&O’s risk committee is female and 42% of its people and performance board is female.

A&O said it wanted to see progress translate to an increase in the overall proportion of women partners, working towards an initial target of 30% globally.  Sasha Hardman, global HR director of A&O said: ‘During a crisis there is a risk that diversity and inclusion could become less of a priority but we are determined not to let that happen. We have maintained our action in this important area in recent months during the pandemic and we are focused on continuing to engage with the issues to bring about positive change within A&O.’ 

Legal Business

Legal Business Awards 2020 – Restructuring Team of the Year

Legal Business Awards 2020 – Restructuring Team of the Year

The entries were reviewed and our panel of general counsel judges delivered their verdicts: we are now delighted to reveal the winner of Restructuring Team of the Year for the 2020 Legal Business Awards.

This award recognises teams that have played a critical role on the most complex restructuring mandates of the year. In choosing the winner, judges were looking for clear examples of innovation and where the lawyers had achieved crucial outcomes for their clients.




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Winner – Akin Gump Strauss Hauer & Feld

This feted City restructuring team won kudos from the judges for its work advising Croatian food and drinks, agriculture and retail conglomerate Agrokor on its landmark restructuring, led by partners James Roome and Liz Osborne.

Agrokor was Croatia’s largest corporate group, with more than 150 companies, 50,000 employees, annual revenues in excess of €5bn and around €5.2bn of debt owed to third parties. The transaction, which completed in April 2019, was complicated by a highly complex corporate structure and a diverse creditor group that included international and regional financial institutions, and roughly 6,000 trade and other non-financial institution creditors.

A new law was drafted and enacted by the Croatian parliament to deal with the impending liquidity and balance sheet crisis within the group, leading to the introduction of an extraordinary administration procedure into Croatian bankruptcy law.

Akin Gump advised Agrokor on the negotiation and implementation of a settlement plan under the new law, represented the interests of creditors and devised structures to deal with issues arising from international sanctions concerns and challenges to the claims of international creditors. Akin Gump also structured and documented the new equity and convertible bond arrangements.

The plan was approved by the statutory majority of creditors on 4 July 2018, and confirmed by the Commercial Court of Zagreb on 6 July 2018. This ground-breaking two-year restructuring was completed with the implementation of the settlement, enabling the new holding company, Fortenova Group, to take over the operative parts of Agrokor.

This highly-complex and large-scale process was a first for Croatia and saved a company of major importance to the country, the Balkans and Central and Eastern Europe.

One testimonial read: ‘Agrokor was a complex and fraught restructuring taking place in a charged and political atmosphere. The team at Akin Gump… did a superb job in representing the interests of the lenders by building consensus with the pragmatic solutions the various interested parties could work with.

‘The AG restructuring team worked well across their firm to bring together finance, corporate, antitrust and regulatory experts. They worked under enormous pressure to a fixed statutory deadline and were instrumental in getting the settlement plan over the line.’

Highly Commended – Allen & Overy

Taking a lead creditor role in the $9.6bn restructuring of Steinhoff International’s European business following the group’s announcement of accounting irregularities in December 2017 has been a high point for A&O’s restructuring team.

A group of eight lenders to Steinhoff’s European businesses instructed the A&O team led by Earl Griffith, managing partner of A&O’s London restructuring group, to handle a multi-faceted and complex process that saw some 38 instruments of European debt having to be restructured.

A&O’s advice included a proposal to use an English company voluntary arrangement because no suitable creditor cramdown procedure exists in Austria; a novel accordion feature in the finance document and a permitted settlements regime that provides the Steinhoff group with the flexibility and scope over the next few years to seek to settle around €10bn of potential class action, shareholder and vendor litigation claims by accessing a ‘settlement basket’ of asset value without needing to seek creditor consent.

Other nominations


Obtaining a landmark Supreme Court victory on behalf of creditors in the disputed restructuring of the International Bank of Azerbaijan. The bank had successfully applied to the English court to have its restructuring process recognised as a foreign main proceeding.

Kirkland & Ellis

Acting on behalf of Debenhams’ lead investors on the retailer’s successful restructuring. This involved a pre-pack administration to a creditor-owned Newco and the successful defence of the first-ever challenge to a CVA.


Advising the ad hoc group of noteholders on the restructuring of Nyrstar, a global multi-metals business with over 4,000 employees, devising a strategy that returned greater value to the bondholders.

Pinsent Masons

Appointed by the administrators, Quantuma, to advise on all aspects of the pre-pack administration of Ince & Co, including providing regulatory guidance to Gordon Dadds on its takeover of the distressed law firm.


Shoosmiths’ corporate restructuring and advisory team has had a stellar year in the retail sector. It has acted on more retail CVAs than any other law firm over the past 12-18 months and has become widely known in the restructuring community as the go-to law firm for retail CVAs.

Legal Business

Legal Business Awards 2020 – Commercial Litigation Team of the Year

Legal Business Awards 2020 – Commercial Litigation Team of the Year

After much back-and-forth between the judges in a keenly contested category, we are now delighted to reveal the winner of Commercial Litigation Team of the Year for the 2020 Legal Business Awards.

This category identifies one outstanding piece of commercial litigation work undertaken by the winning team. The key requirement is not necessarily a substantial award of damages but rather an impressive result for the client, which could include an important out-of-court settlement or avoiding a costly appeals process.




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Winner – Dentons

The next time you are withdrawing cash from an ATM, you may have global giant Dentons to thank. In 2018, the firm’s real estate litigation division secured victory for supermarket chain Sainsbury’s and the Co-Operative Group in their Court of Appeal dispute against the Valuation Office Agency, in a case which could have seen thousands of stores lose ATMs.

At stake was the retailers’ ATM sites being treated as separate units for the purpose of business rates. However, with Dentons’ UK head of real estate litigation Bryan Johnston spearheading the claim, the Court of Appeal rejected a decision made by the lower tribunal; that retailers only controlled ATM sites facing into the store, not those facing outwards. The appeal also successfully argued that the spaces occupied by ATMs lack sufficient definition and permanence to be considered a property unit for rating purposes.

Such was the robustness of the firm’s representation of Sainsbury’s and the manner of the resulting victory, The Co-Operative Group instructed Dentons on the same appeal. Had the case gone the other way, liability for retailers would have meant a severe financial impact during a torrid time for the UK high street. Moreover, photo booths, vending machines, and children’s rides could have been next in the firing line. Dentons’ success now means its clients are owed rebates worth billions.

The case now sets a vital precedent, having been showcased at the Royal Institution of Chartered Surveyors’ annual rating conference due to its importance in determining the meaning of a piece of property in a ratings context.

Throughout the matter, Dentons took the lead in liaising with other claimants in order to agree test-case parameters to avoid litigating many thousands of different valuation appeals. Further consistency was achieved by ensuring junior barristers were the same between clients, while different QCs were retained. Dentons also helped manage their clients’ spend by avoiding duplication of representation and allowing one client to benefit from the experience and knowledge gained from working with the other. By being in the trenches for both of them, each client saved hefty sums.

Highly Commended – Allen & Overy

A close contender was Allen & Overy (A&O), which advised Lloyds Banking Group on a landmark pensions case concerning GMP equalisation.

The matter concerned whether pension schemes have to equalise benefits for the effects of unequal guaranteed minimum pensions. All in, the industry-wide implications are estimated to be worth up to £20bn and affect millions of members in thousands of schemes.

A&O fielded partners Neil Bowden and Jane Higgins on the matter, which also saw the firm develop a matrix system to ensure seamless co-ordination with other stakeholders in the case. As a result of A&O’s advice, the industry now has clarity over a perennial issue in the pensions sector: scheme benefits in excess of GMP must be adjusted so that the total benefits received from male and female members with equivalent age, service, and earnings are equal.

Other nominations

Baker Botts

Securing a Court of Appeal victory for Marathon Oil in a high-profile dispute concerning an operating agreement for a large oil field in the North Sea.

Boies Schiller Flexner

Represented Apple on the UK aspects of its industry-defining global dispute with Qualcomm over chipsets and IP licences central to Apple products, which reached global settlement while UK proceedings were underway.


Achieving a favourable settlement for client Allergy Therapeutics in its High Court dispute with Inflamax Research concerning a clinical study in the US for an allergy vaccine produced by the firm’s client.


Achieving an appeal victory for executive recruitment firm Egon Zehnder in the Supreme Court in what was the first employment competition case to reach the UK’s highest court in 100 years.

Watson Farley & Williams

Advising Bester Generacion UK in a groundbreaking Technology and Construction Court decision where a fraud defence was successfully deployed for the first time to defeat an application for summary judgment of an adjudication award.

Legal Business

Life During Law: Andrew Ballheimer

Life During Law: Andrew Ballheimer

I’m the son of immigrants and they were intent that I had an education, so I had to become a professional. To be honest, I was only going to practise law for two years and then do something else.

The first thing I ever did as an associate was spend all night perfecting a document, checking every page. Two-months qualified at the signing, I handed over the execution page. I’d misspelt the client’s name. You spend all this time getting it right and everything’s perfect except for the most important word in the document. His bloody name!

Two years in, I was asked to go to our New York office. I was 26 and the chance of going there as a single guy was fantastic. I was 18 months off partnership so I thought: ‘I’m so close, I should go for it.’ New York was edgy, pre-clean-up. Exciting, if a bit dangerous in parts. It was a small office. I was the second associate ever there. A real adventure.

Happily, I made partner. Then I went to Tokyo for two years, started a capital markets practice there. I went back to the States for seven years to relaunch our New York office.

Tokyo was the most alien place I’d ever been but I loved it. I didn’t know where to go because all the street signs are in Japanese and I didn’t speak any. To start a business was a great opportunity and challenge. The people are lovely. It teaches you a style of doing business that is the antithesis of what I’d grown up with here and in New York, where everything is boom, boom, boom!

I was prepped on etiquette so I didn’t screw up too badly. We had client lunches or dinners and they’d bring out food to test us. I had a prawn, which was still alive – in its death throes. It dies on your plate and then you eat it. And they’d all stop and watch you. I can eat anything. Had blowfish. If it’s not prepared properly, it can kill you. They watched to see if you had the nerve.

I’ve unfortunately seen a series of tragic events. The Kyoto earthquake and 9/11. I was heading the New York office in the middle of that. Truly awful, truly sad. We had a bunch of clients die, friends die. Things happen and you have to be calm and also decisive. It’s hard. When 9/11 happened our building was in a high-rise and we had to make a decision on whether to send people home. We didn’t because they couldn’t get home. All the bridges and tunnels were closed so we found people beds at colleagues’ houses.

I came back here in ’03 during a mini-recession. Building a practice here as partner in a recession had its challenges but I was lucky. I brought back a client [the Glazers] from the States who bid for Manchester United and that was the highest-profile public M&A deal in years. They didn’t have a target in mind, they were just keen to invest outside the States. Random, in many ways.

At the height of the takeover of Man Utd there was an AGM and I had 80 million proxy votes to vote off a third of the board. Our head of security insisted on coming because the fans were after me. We went to the AGM and I went to the bathroom and he assumed I’d been kidnapped. He called the police.

At the Legal Business Awards we won the M&A Team of the Year for that. We went up and the banking partner went up ahead. He fell off the back of the stage! He bounces up, thinks no-one’s noticed, but he’s covered in dust and dishevelled, oblivious to the fact. That was amusing.

I support Spurs. I have done a lot of deals involving football clubs. You can always get staffing for that.

I also did the takeover of Liverpool Football Club. The BBC arrived for the press conference. The documents got lost at the law firm acting for the target and the trainee went AWOL. The clients were going mad. They ended up having to sign a blank bit of paper and pretend it was the document.

I was doing an IPO and the banker emailed: ‘If this clown [the client] is in charge, it’s never going to get done.’ But instead of me, he’d emailed ‘the clown’. The client answered: ‘I am a clown and we will get this done!’

Trust will help a deal happen immeasurably. The antithesis is a destructive influence. Act with integrity, be reasonable and keep your ego out of the room. There’s confidence and then there’s grandstanding.

I hope almost everyone I’ve dealt with has come away and said: ‘I like Andy. He’s reasonable. He was looking after his client, he wasn’t doing anything else.’

How would I like to be remembered as managing partner? I didn’t screw it up! Not too much, at least. It’s for others to do my obituary.

The priority was driving revenue growth in a profitable manner and we’ve achieved that. In a four-year period, we would have increased our turnover by half a billion dollars. I’m proud of that.

Leadership style? I try to be open, fair and decisive. I think of myself as a friendly person and a person who has integrity. I want to be accessible, open and fair.

Wim [Dejonghe, senior partner]’s style? We’re different and not different. He’s a visionary and brave. I think of all the pros and cons and how we go there and he just thinks: ‘We’ve got to get there!’ Wim’s big picture and I’m about the detail.

Innovation started in 2010. I would say this, wouldn’t I, but A&O is at the forefront of innovation in our industry. I don’t think any other firms are anywhere close.

A&O is a special place and we’ve kept that going. We’ve kept up with and maybe overtaken many of our peers. I’ve played a small part in that and I’m proud.

Biggest inspiration? My family – my father, my wife. My father was always very positive, though he had a hard life. He arrived in England aged 11 and his father passed away two weeks after that. He had to work from then onwards. Always humble, unselfish, with a great work ethic.

My wife has had to put up with a lot with me. She is wise and calm and holds it all together. Incredibly insightful. Our job is great but you have to work out how your home life works, and that’s not always easy. You have to make sure it’s a dynamic arrangement and talk about it.

No idea what I’m doing next. I’ll work out my next gig. Mixture of public interest, the community, and some more commercial stuff. It’s time for a new challenge. I want to stretch myself.

My son is a disappointment – he’s becoming a lawyer! He studied classics and never asked about the law and then a year ago said he was thinking of internships at law firms. I said: ‘I do that!’, to which he said: ‘No, you don’t – it’s different!’

I had no idea how hard it is to get these internships. In our day, if you were breathing, people hired you. He’s got a training contract at Herbert Smith Freehills.

His twin sister is becoming a doctor. Nowadays jobs are so hard, unless it’s a vocation, it’s not worth doing. As long as they are good people, I don’t really care. And as long as they look after their father!

I play tennis once a week but it’s not enough. Theatre, family and friends. I travel a lot in this job. That’s hard on catching up with friends and family.

My favourite film is The Godfather. Watched it a squillion times. I know every word, sadly. I like reading biographies and autobiographies. It gives you insight into people. Leaders and their foibles, idiosyncrasies.

It’s possible to pull off a merger on an integrated basis but it takes creativity and courage and time is against you. If it takes too long, it becomes a hurdle. You have to move at a decent clip, that’s hard, unless one of the firms is in trouble, and neither of them were.

I’m glad we tried. We got incredibly close. It would have given us the opportunity to accelerate away from our peer firms. It didn’t hurt our business. If we had our time again we’d do it again.

Gareth Price is incredibly clever, brimming with ideas. Partners are very positive about him taking over [as managing partner]. He’ll have a lot of fun.

There are tinges of sadness. I’ve been extraordinarily happy here but it’s healthy it comes to an end. We have to pass it to the next partners, the future.

No regrets. It’s not who I am. Have I screwed up on occasion? Absolutely. I’ve been incredibly lucky. Worked with amazing people all over the world. I’ve had the privilege of leading A&O. It’s been amazing. I choke up at this stage!

All of us are so institutionalised. I’ve been coming to work since 1985. Had a desk, a PA, a boss, an income. It’s been nice and secure. You just get on with it. In a year’s time I’ll either be a broken person or very happy. My wife is seriously anxious about my retirement but my dog is very pleased. A golden retriever. He understands.

I had these amazing adventures. All these opportunities and all of a sudden, 33 years later, I’m now thinking, ‘Hang on, I was meant to have left 31 years ago!’

Andrew Ballheimer is the former managing partner of Allen & Overy. This interview took place prior to the Covid-19 lockdown.

Photography by Brendan Lea

Legal Business

Life During Law: Andrew Ballheimer

Life During Law: Andrew Ballheimer

I’m the son of immigrants and they were intent that I had an education, so I had to become a professional. To be honest, I was only going to practise law for two years and then do something else.

The first thing I ever did as an associate was spend all night perfecting a document, checking every page. Two-months qualified at the signing, I handed over the execution page. I’d misspelt the client’s name. You spend all this time getting it right and everything’s perfect except for the most important word in the document. His bloody name!

Legal Business

A&O aims to tackle ‘uncomfortable truth’ with 2025 ethnic diversity targets

A&O aims to tackle ‘uncomfortable truth’ with 2025 ethnic diversity targets

Allen & Overy is confronting the must-solve issue of achieving ethnic diversity in City law with a raft of new targets aimed at levelling the playing field by 2025. 

The set of targets includes having 15% of partners and 25% of lawyers and support staff identifying as ethnic minority in the next five years. 

Ambitiously, given the lack of traction in attracting BAME candidates to the London offices of elite law firms, the targets would also see 35% ethnic minority trainees, including 10% black trainees, each year, as well as equal retention rates, especially  for black associates. 

The move comes after Clifford Chance (CC) threw down the gauntlet in mid-July with its own set of diversity targets that would see 15% of its UK and US partner promotions and lateral hires from minority ethnic backgrounds by 2025. CC is also aiming for 30% representation for senior associates and senior business professionals by 2025 as a whole, not just hires and promotions. 

A&O has also published its ‘ethnicity Stay Gap’, which reveals the worrying trend that black, Asian and minority ethnic lawyers leave the firm seven months earlier than their white colleagues and that black lawyers leave two years and five months earlier than their white counterparts.  

The report followed analysis by consultant Rare Recruitment, which found that the average BAME lawyer’s tenure at a law firm is around 18 months shorter than that of the average white lawyer. A&O plans to publish the Stay Gap every year. 

Jo Dooley, the firm’s head of diversity and inclusion, told Legal Business that ethnic minorities make up 9% of the firm’s partners and around 32% of its trainees, figures that are not a far cry from A&O’s stated goal, with the greatest challenge being around addressing these unfavourable retention statistics.  

‘Everything points to the retention issue so that is where we have decided to focus our efforts,’ said Dooley. This gives us a metric to measure whether the work we are doing to rectify it is working or not.’ She added that the attrition of ethnic minority lawyers was more of an issue at junior level. 

Ian Field, A&O’s UK diversity and inclusion partner, said: ‘We must all play our part in creating a truly inclusive workplace and for us that starts with accountability. The Stay Gap figure is an uncomfortable truth for us and the legal industry but it gives us an objective way to measure the success of our efforts in this area. We want to be clear that we recognise the problems within our own firm and are committed to tackling them head on.’ 

With CC and A&O nailing their colours to the mast on what is arguably one of the most controversial but pressing matters facing the legal profession, it seems inevitable that peers must follow suit with similar ambitions or face awkward scrutiny for not doing so. 

For more on the challenges to creating ethnic diversity in City law, see our 2019 analysisTicking boxes – Is City law going beyond the platitudes on ethnic diversity?’


Legal Business

A&O shrugs off lockdown to hike revenues 4% to £1.69bn in first post-pandemic results from UK law elite

A&O shrugs off lockdown to hike revenues 4% to £1.69bn in first post-pandemic results from UK law elite

There has been much speculation about the impact of the coronavirus pandemic on the profession but the first set of results from a leading law firm has confirmed the gist of months of market chatter: they’re doing fine.

Allen & Overy (A&O)’s financial results for the 2019/20 year show that the City giant managed the remarkable feat of driving revenues up 4% to £1.69bn, despite nearly two months of its crucial year-end period catching the full brunt of the Covid-19 lockdown.

The results are the first yet for the 2019/20 season from a leading City player and confirm the remarkable resilience of the industry’s elite as plc clients kept their lawyers busy with disaster response work… and largely kept paying bills on time.

Issuing the results today (16 July), the 550-partner firm said that profit before tax edged down 2.5% to £690m, while profit per equity partner was down 1.7% to £1.63m. For context, the results are barely down on A&O’s 2018/19 performance, when it increased its top line by 5%.

It barely needs saying that the figures will be seen as a strong result for A&O’s c-suite, which also had to contend with the distraction of its long-running merger talks with O’Melveny & Myers, which were abandoned in September.

The firm said that growth was spread across its practice areas and regions, with its New Law division, advanced delivery and solutions, increasing revenues by 15%.

Deal highlights include acting for Refinitiv on its proposed $27bn acquisition by the London Stock Exchange, advising the banks on the EUR15bn finance for the acquisition of Tiffany & Co and work for ISDA on a major overhaul of its credit derivatives framework.

With A&O’s peers expected to issue 2019/20 results within days the industry will soon have its first true indication of how the profession has stood up to the global Covid-19 outbreak and resulting economic slump.

Previous indications are that leading firms are so far coming through with flying colours, though most managing partners are budgeting for a tougher 2020/21 as the impact of the pandemic is felt through the entire year and pipelines of new deal work clog up.

Nonetheless, many law firm leaders have reported better-than-expected trading through May and June, demonstrating again the ability of commercial law firms to ride out economic shocks that deliver devastating blows to many other sectors.

In common with many peers, A&O announced a raft of belt-tightening measures as the crisis hit, including injecting more capital into the business, slowing payouts to partners and cutting pay rates for incoming junior lawyers.

A&O’s leadership will be feeling bullish as the team of new managing partner Gareth Price (pictured) and recently-re-elected senior partner Wim Dejonghe gear up new terms with US strategy expected to be at the top of their agenda.

Discussing the results with Legal Business, Price set an understated tone, noting: ‘How can anyone be happy given what’s going on in the world? But, yes, we’ve had a good year.’

Price further noted that A&O’s trading had held up well over the summer, with a line of new-money M&A now hitting its books. Setting out his priorities, he noted the need to keep investing in talent and service lines and the need to move on new opportunities, such as the potential for a post-pandemic surge in investigations work.

The new managing partner also pledged a strong operational grip under his leadership, noting: ‘Improving a law firm is about the aggregation of marginal gains and then applying those marginal gains in local contexts. The team is sick of hearing me talk about continual improvement but that is a lot of my focus.’

Summing up the A&O mantra for the years ahead, Price concluded: ‘We’re not going to be big for the sake of being big, we’re about quality.’

Hard to argue with those sentiments or numbers.

For more comment see, ‘After their lost decade, the current crisis should see the Magic Circle back on world-beating form’

Legal Business

Comment: Allen & Overy’s election delivered an all-star line-up but have the big issues been resolved?

Comment: Allen & Overy’s election delivered an all-star line-up but have the big issues been resolved?

Towards the end of 2019, Legal Business remarked that the issue at the heart of Allen & Overy (A&O)’s looming leadership election was if the process would resolve whether the winners could achieve the right to genuinely lead the City giant. Now that the election has concluded, with the re-election of Wim Dejonghe (pictured) as senior partner and the elevation of projects and energy head Gareth Price as managing partner in place of Andrew Ballheimer, it is far from clear that the point has been settled.

That is not a criticism of the calibre of the candidates and winners. Generally regarded as the best managed of the Magic Circle’s four internationalists, A&O certainly attracted a line-up of heavyweight candidates, by no means a given in law firm leadership run-offs. This was most obvious in the contest between Dejonghe and banking co-head Philip Bowden for senior partner and Price and litigation head Karen Seward for the managing partner brief.

Being saddled with the difficult baggage of A&O’s marathon-but-recently-abandoned bid to merge with US firm O’Melveny & Myers, a re-election for Dejonghe that would have a year ago been a shoo-in was regarded instead as a knife-edge call against the much-liked Bowden. Had Dejonghe not been aided by Ballheimer’s decision not to go for re-election, increasing the case for a continuity figure in the core leadership team, it may have tipped the other way.

Seward-versus-Price appeared another close contest, with some disappointment that A&O didn’t become the first Magic Circle firm to elect a woman to its c-suite. But in truth Price brings a very strong consistency, being cited for his energy, intelligence and drive both inside the firm and by informed outsiders. Having led one of A&O’s most celebrated practices, Price has also supported its global drive in projects and pulled off the notable feat of establishing himself after celebrated figures like Graham Vinter and Anne Baldock departed. He also benefited from A&O’s preference for having a finance figure in senior management.

This is not the time for split-the-difference attempts to fudge the choices A&O is facing.

‘Lots of energy and a fizzing brain. Fierce intelligence,’ notes one former partner, while another former A&O man at a US firm observes: ‘Gareth is a smart guy, really clever and a good choice. Personally, I’m surprised they didn’t elect Karen. It’s about time the Magic Circle elected a woman managing partner. All things being equal, Karen should have got it, but maybe all things weren’t equal.’

Which brings us to the unresolved issue. Many feel that Seward’s candidacy would not have been helped by being seen as too close to Dejonghe – both are viewed as committed globalists with a strong working relationship, while Price is seen as more likely to stand his ground on key strategy points. There are mixed views on how committed Price will be to expensive foreign expansion. But certain key matters of policy certainly need to be resolved, most pressingly around governance, US strategy and, for obvious related reasons, remuneration. The abandoned O’Melveny talks dragged on for so long largely because it would have involved wholesale reform of A&O’s partnership to accommodate the Americanisation of its business.

What remains to be seen is how effective the pair will be at providing the clarity that A&O needs if it is to keep competing in what has become a more challenging global market. A few cynics have claimed Price will undercut Dejonghe’s determination to secure a US breakthrough and push forward the kind of governance reforms needed to speed up decision-making. A bigger pool of opinion is that all the candidates were on board with the need for A&O to materially raise its game in the US but that still leaves difficult questions about the pace of investment that the A&O partnership is ready to stomach.

All of that indicates A&O – like its City peers – is potentially still stuck at the same strategic roadblock. These firms, with the exception of Linklaters, which has been consistently bearish on US investment, in theory accept the need for a dramatic improvement in their US businesses, without being willing to accept what will be required in practice to make such aspirations a reality.

But this is not the time for split-the-difference attempts to fudge the choices A&O is facing – the last leadership contest at Freshfields demonstrated the limitations of that approach in a more competitive global market. A&O did at least thrash out much of the detail on what major reform could look like during the O’Melveny process, including a model that could have paid a few select stars $8m a year, with the understanding the model could deliver $6m deals for a wider pool of high performers. There will also be a tricky debate about lowering voting thresholds, currently as high as 90% on some matters, to a level more conducive to effective decision-making, such as the 60% to 75% range.

Moreover, it barely needs saying with the coronavirus outbreak spreading disruption and fear across Europe, A&O is now facing the kind of severe upheaval that it last encountered during the banking crisis. That was a period in which A&O distinguished itself with clarity and clear communication. The firm is fortunate to have two-highly regarded individuals at its helm. Now they must find a common cause and move A&O decisively forward while there is still time.

Legal Business

A&O takes coronavirus threat to task with raft of belt-tightening measures

A&O takes coronavirus threat to task with raft of belt-tightening measures

 Allen & Overy has pre-empted a likely financial hit from the coronavirus crisis with a host of measures, including altering profit distribution to partners, increasing partner capital levels and freezing some investments and recruitment. 

The firm confirmed today (31 March) what it described as prudent management measures’ as part of its ‘ongoing scenario planning’ as the Covid-19 continues to affect international businesses.  

In a statement, the firm maintained it was in ‘a very strong financial position but given the unknown nature of the evolving challenges, and their long term impact on our markets’, the move was sensible. 

‘[The measures] include adjustments to the phasing of profit distribution to partners, increasing partner capital levels, deferring certain investments and recruitment, and cancelling events,’ the firm said. 

For staff, including fee earners and business support staff, we have decided not to undertake annual salary reviews in the first quarter of the forthcoming financial year.  We will still award bonuses for this financial year, with bonus payments for fee earners and our more senior support staff split between our normal payment date in July and October’s payroll,’ the statement added. 

A&O said it was ‘confident in our resilience if economic conditions worsen’ due to its good diversification across practices and broad international offering. 

Nevertheless, the Magic Circle firm has struck a defiant note in the face of the crisis, yesterday going some way to fulfilling its transatlantic ambitions with the re-appointment of IP litigation partner Paul Keller from Norton Rose Fulbright in New York. 

Last year, A&O’s financial performance was on trend with the pace set by its Magic Circle peers to post solid but unspectacular financial results, increasing its top line by 5%, sending revenue up by £75m to nearly £1.63bn. 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.

As the full extent of the pandemic’s impact is unlikely to be known for months to come, it seems inevitable that firms will continue to make financial contingencies to minimise the fallout. 

Earlier today it emerged that Reed Smith has ringfenced a portion of its cash reserves against partner distributions as the crisis unfolds. The measures will see monthly drawings reduced by 40% for full equity partners and 15% for fixed share partners globally.