Allen & Overy (A&O) has thrown down the gauntlet in its annual report, published last Monday (8 September), with senior partner David Morley vowing to make A&O “the most successful of the emerging global elite of law firms”.
In terms of figures alone, A&O is some way off achieving its dream of being the most successful of the global elite.
The Lawyer’s Transatlantic Elite of Sweet Sixteen firms (10 May) shows that the firm’s finances are undoubtedly solid. However, with average profit per equity partner (PEP) sitting at £1.12m, A&O is bottom of the range compared with its Sweet Sixteen counterparts. At the bottom of the table, Cleary Gottlieb Steen & Hamilton had an average PEP of £1.05m in the last financial year, while Wachtell Lipton Rosen & Katz topped the table at £2.24m.
In the UK, with turnover of £1.02bn, A&O is the smallest sibling in the magic circle family. But Morley argued that size is not a determinant of success.
“We don’t need to be the largest to be the most successful, although we do need to be of a certain scale to fulfil that ambition,” he said.
Morley’s definition of the global elite are firms that are “beginning to set themselves apart when defined by scale, geographic reach, quality of people and concentration on high-end, premium work for the largest clients”.
A&O’s strategy for getting to the top lies in “broad international cover and deep local roots; client trust; motivated people; new ideas and responsible business practices”.
The majority of the firms in the Transatlantic Elite will have the same ambitions. As A&O’s annual report points out: “But isn’t it hard for the best law firms to distinguish themselves from each other in the quality of their matter management, documentation and legal advice?”
For Morley diversification is simple: the answer lies in getting the entire package right and in implementing “new ideas”.
Among these new ideas, in its bid to become trusted boardroom adviser to corporate clients, A&O will focus on litigation, having identified it, along with risk and compliance, as the main “issues that keep [general counsel] awake at night”.
A&O has set itself the target of dramatically increasing the size of its litigation practice from around 10 per cent of global turnover to 15 per cent over four years (The Lawyer, 1 September).
Another cornerstone of A&O’s ambition is to be the “number-one finance practice”. Reputationally, this is something it still can, and has always been able to, lay claim to.
In terms of sheer size, however, Clifford Chance’s finance practice far outstrips A&O’s in turnover terms, while Linklaters’ finance practice overtook A&O’s for the first time this year.
A&O’s new mantra of “broad international cover and deep local roots” may be the main secret of its hoped-for success. The firm now has offices in 29 locations across 21 countries, which compares favourably with its magic circle rivals’ coverage.
Clifford Chance has a presence in 30 locations in 21 countries and towers above Freshfields’ coverage of 16 countries. Linklaters’ office count of 23 countries will soon decrease to 19 when the firm completes the decoupling of its central and Eastern Europe offices (TheLawyer.com, 2 June).
A&O is certainly not sitting still globally. It hopes to open in Sao Paolo within months, subject to approval from the Brazilian licensing authorities.
“We always keep a close eye ;on ;potential ;new markets,” explained Morley.
And A&O has put its money where its mouth is, having invested £100m in its global network in the past five years.
Moscow, meanwhile, has doubled in size in the past year, mostly through internal relocations, ;and ;the firm’s Middle East offices have ;recently ;secured reinforcements from six partners and 14 associates after a concerted recruitment drive (TheLawyer.com, 8 September).
Morley himself will relocate to New York full-time for three months in October. Former Belgian managing partner Wim Dejonghe has relocated to London as global managing partner, while spending half of his time in overseas offices.
However, Morley denies that his declaration of becoming the “most successful” of the global elite is a message of war to others. But does he think there is room for more than one “most successful” firm? “It depends on how they define success,” he said. “It’s something that each firm has to determine for itself.”