Lockstep principle jettisoned to save partner jobs; magic circle firm blames weak dollar for poor financial performance
Allen & Overy (A&O) has moved to slash the number of equity points awarded to its London-based project finance partners as part of its strategy to make the practice more competitive.
The reduction in equity points is in response to the increasing competition in the global projects arena and the weak US dollar.
Head of projects Graham Vinter told The Lawyer: "The group works in pounds but mostly bills in dollars, and a year ago we decided that if we weren't careful it could be damaging in the long term. If a firm does an oil and gas deal virtually anywhere in the world and it's acting for a US client, it's not possible to bill in pounds or euros."
Vinter added that A&O is looking at other tactics aimed at combating the weak dollar, including running deals out of the firm's Dubai office, which operates in dollars.
It is understood that profit per partner in A&O's projects group lags behind the rest of the firm. A&O refused to divulge any financial information relating to the firm's projects practice.
Vinter said: "People don't like hearing that they're going to take home less money. But there's a grudging acceptance."
The new points will take effect from 1 May 2006.
A&O managing partner David Morley said: "Our position in the market is something of which we're immensely proud and is something we want to keep."
A&O is the latest magic circle firm to review the profitability of its projects practice. Linklaters completed a wholesale review of its projects practice after global projects head Bruce White took the helm in May 2005. Linklaters encouraged several senior partners to take early retirement as a result (The Lawyer, 12 September).