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A&O bucks City trend with plan to hike fees

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  • Policy reversal?

    Whilst this may be a case of "bucking the trend" given the current economic circumstances, my experience (as a senior lawyer at another magic circle firm) is that the A&O policy in the past couple of years has been to undercook fee quotes significantly (certainly we have lost out on mandates because A&O were offering a price that we were unable to get anywhere near matching in light of our own internal strategy - often 30-50% lower) and to adopt a volume based approach to profitability (lots of deals, utilising lots of juniors at highly competitive rates).

    The problem with that approach is that if the volume dries up so do the profits. Given that one cannot rely on volume of deals in the current market, I think this is a sensible reversal of that policy and I imagine we will once again see A&O quoting fees similar to ours. There is a careful balance to be struck in the current market if a firm wishes to remain profitable and that is a balance between securing as many of the few big mandates that are available and ensuring that fees are maximised on such mandates. On these bigger deals, the concept of "reassuringly expensive" can still work if you have the CV to warrant it.

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  • but are the clients really going to pay?

    a higher official hourly rate also allows you to offer a bigger percentage discount and still make the same amount of money...

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  • losing the plot

    It is the same old story - law firm economics dictated by the hourly rate - what do we wish to earn, how many people do we have, how many hours should they be required to record (offering bonuses as incentive, so they record fully...) and on that basis where should we set our rates? No risk and, more significantly, no idea.

    Old school thinking reins supreme from the comfort of the City. For firms selling commoditised services such as M&A, project work, litigation etc, enhanced utilisation and leverage is king but ultimately these services are being judged and bought on cost alone. Has the City considered the concepts of risk and value? Too challenging and daunting?

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  • Re: losing the plot

    I think you are out of touch with the pricing structures adopted by most of the big law firms. You'll find that in many practice areas, the concept of hourly rates (whilst still important as an internal measure of time/value) is already outdated. For instance, most firms use risk/reward structures to price project finance deals whereby legal fees are partially or fully contingent during bid phases and success fees payable on completion. It might be correct to say that law firm budgeting is dictated by hourly rates but the economic success or failure of the big firms is nowadays dictated more by innovation in billing and pricing models.

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  • Fees B*llocks

    This is a typical bollocks Lawyer non-story. Do you seriously imagine that any global law firm is planning to reduce its fees (voluntarily)? Every firm increases their charge-out rates year-on year (or at least not less frequently than every 18 months). That does not mean they're "increasing their fees", it just means they're increasing the unit cost at which hey charge out their people (probably at or close to the rate of inflation).

    Bulk discounts, volume deals and simple market competitive pressures meant that notwithstanding the rates increase, their fees may (in some cases, will) go down in any event. The ultimate Storm in a tea-cup. No doubt The Lawyer's electronic diary had a note to kick A&O cos you haven't done so for a while - is this the best you could do? Pathetic.

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  • re losing the plot

    granted, some (a few) project finance groups do not take an innovative approach; but it remains the minority and, even so, culturally the behaviour of partners remains tied to hourly rates and their own short term take home pay rather than building value for the longer term.

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