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25 March 2014
The perennial problem for Allen & Overy's (A&O) Richard Cranfield is how to take his corporate team out of the shadow of the finance boys. In a bid to beat the corporate holy trinity of Freshfields Bruckhaus Deringer, Linklaters and Slaughter and May, A&O overhauled its corporate structure five months ago. The twin planks of the corporate manifesto were a restructured management team with a pan-European triumvirate in charge, and the introduction of sector-focused corporate subgroups.
Actually, Cranfield is halfway there already: over the past few years the corporate department has expanded exponentially. In the five years preceding the review, the practice grew by 100 per cent in London and 300 per cent outside the UK. A&O - and for that matter Clifford Chance - are now seen on the biggest deals, although unlike the holy trinity they still do not appear as a matter of course.
With some justification, A&O and Clifford Chance argue that on corporate prowess they are the victims of an inevitable delay between reality and perception. The top two finance firms can call on statistics to back up their corporate departments' claims. Last year's Thomson Financial M&A figures are: Linklaters, number one in Europe; Freshfields, number two; Clifford Chance, number five; Herbert Smith/Gleiss Lutz number six; Slaughters, number seven; and A&O, number nine. The Lawyer 100 notes Clifford Chance's global corporate turnover as £265m; Freshfields' £211m; Linklaters' £199m; and A&O's £197m.
But despite a great year, A&O is not quite there yet, hence the strategic review. Five months on, it is still far too early to judge whether the review will work or not; but the decision to focus its corporate department along sector-focused lines is odd, making A&O an anomaly among the top UK firms.
A&O corporate lawyers will no longer just be M&A lawyers - they will now be M&A plus private equity, equity capital markets, energy, financial institutions, telecoms, media and technology (TMT), and, most esoterically, environment. The antitrust lawyers will presumably carry on doing what they always did. In the bigger offices, lawyers will have just one specialisation, but it is accepted that in smaller outposts some lawyers will have to double up.
The strategy is the antithesis of Slaughters' purist line that corporate lawyers are generalists, who frankly should be able to do anything a multinational throws at them. Slaughters has a TMT group and the rest of the magic circle has some sector focus, particularly in areas such as private equity. In general, though, the magic circle has left strict sector focus to Wragge & Co and KLegal.
The rationale for A&O's decision is that it is the best way to maintain quality standards across a firm whose tentacles are spread across the globe. The benefits that specialisation brings to lawyering are the key, rather than a new sectoral marketing drive. While increased specialisation is a bit of a gamble, the changes to A&O's management structure make perfect sense and reflect the firm's increased Continental focus. Cranfield, previously a solitary figure, has been joined by Milan-based partner Roberto Casati and Sietze Hepkema from the Amsterdam office in a bid to bolster Continental input.
Short of sending a hit squad into the Slaughters client party and kidnapping all the guests, A&O's London practice is not going to win more than one or two new FTSE 100 clients every year. Imperial Tobacco, the firm's biggest client win last year, came through Germany. London is a tough market and A&O knows it is easier to win top corporate clients on the Continent and then cross-sell London and the other global offices.
Rivals will hope that A&O will trip up - after all, who wants a top banking firm to hoover up all the corporate jobs too? Despite recent success in the M&A market and an excellent corporate performance in the key German jurisdiction, A&O knows there are of plenty of potholes on the road to M&A glory. It remains to be seen whether marching in teams of energy, environment and TMT lawyers will help or hinder the campaign.