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Partners at “magic circle” law firm Allen & Overy and New York’s Shearman & Sterling have voted overwhelmingly in favour of a merger between the two groups, clearing the path for one of the industry’s biggest-ever tie-ups.
The merger, which creates a legal giant with roughly $3.5bn in combined revenues, will push ahead after more than 99 per cent of partners on both sides backed the plan, according to a statement from the firms on Friday. The deal creates an outfit with nearly 4,000 lawyers in total.
“This is a historic moment for both firms and our profession,” said Wim Dejonghe, senior partner at Allen & Overy, in the statement. “We are delighted that our partners have voted so resoundingly in favour of this merger, which is a transformational step for the legal industry.”
The deal, announced earlier this year, is the first between one of the UK’s so-called “magic circle” firms and a US rival in more than two decades, and creates one of the world’s biggest law firms by revenue. Allen & Overy will be hoping the merger can give it a leg-up in America, where UK law firms have long struggled to gain traction in a market dominated by a group of top tier US law firms.
For New York’s Shearman, the deal brings an end to a tumultuous period that saw the firm lose a number of lawyers after merger talks with Hogan Lovells fell apart earlier this year. The firm, which is dwarfed in size by Allen & Overy, has also undergone a restructuring aimed at boosting its profitability.
The new firm will be known as A&O Shearman, with the tie-up set to close by May 2024. The firm has not disclosed how management will be structured.
The deal came together in a matter of weeks after Shearman’s senior partner Adam Hakki called his Allen & Overy counterpart Dejonghe not long after the US firm’s proposed merger with Hogan Lovells collapsed in March. For Allen & Overy, it brought a fresh opportunity to seal its American ambitions after merger talks with California-headquartered O’Melveny & Myers failed four years ago.
Nothing has yet been communicated about exactly how the profit structures of each firm will be merged, even privately, according to one senior Allen & Overy partner, who described the mood as “excited”. Equity partners at Shearman took home $2.48mn in average profits last year, compared with £1.82mn for partners at Allen & Overy. Both firms have said previously that their pay structures would not be difficult to knit together.
The new outfit will operate a so-called modified lockstep pay model, according to an Allen & Overy spokesperson, which involves elements based on performance and on time served.
Shearman, a well-known 150-year-old firm that once advised the cream of corporate America, is the far smaller entity, with $907mn in revenues in calendar year 2022 and about half of Allen & Overy’s more than 40 offices. Together they will have 48 offices and about 800 partners.
Partners had two weeks to vote on the deal.
David Morley, a former A&O senior partner, said the high level of support from both sides “augurs well for their future together”.
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