Allen & Overy

UK 200 RESULTS 2010

Having stripped out some 450 staff from the ­business and booked the associated costs in the 2008-09 financial year, Allen & Overy (A&O) was perhaps the most expansionist of the magic circle firms in 2009-10, opening in new jurisdictions and making significant lateral hires at home and abroad.

One of the firm’s major points of focus has been the Asia-Pacific region and it caused ripples in the tight-knit Australian legal market in February 2010 with its announcement that it would be launching there.

In contrast to rival Clifford Chance, which just flirted with alleged merger partner Malleson Stephen Jacques two years ago, A&O went all the way with its Australian ambitions, raiding Clayton Utz to launch a niche banking and energy and natural resources practice.

Not content with Australia, a week later it opened in Qatar with a focus on high-end corporate and finance work, adding to a credible Gulf offering in the United Arab Emirates and Saudi Arabia.

It also expanded its Singapore offering by merging with local firm and former White & Case ally Venture Law, while partner Srinivas Parthasarathy left A&O’s Singapore office to move to its Indian alliance firm Trilegal, thereby strengthening ties between the two firms.

This expansiveness seen across the Asia-Pacific region was not necessarily in evidence in the firm’s operations in more mature markets. It lost its entire Milan-based employment team to local boutique Lablaw and its Mannheim office to Quinn Emanuel Urquhart Oliver & Hedges.

It was also hit by the departure of corporate ace Rolf Koerfer to Linklaters spin-off Oppenhoff & Partner. Meanwhile, in the UK, finance partner Alan Rae Smith left for Freshfields Bruckhaus Deringer and leveraged finance partner Neil Caddy moved over to Mayer Brown. However, A&O did hire in ­France, ­Germany, the UK and the US.

The firm led on a number of sophisticated finance deals during the year, with partners Alun Eynon-Evans and Stephen Miller advising longstanding client Bank of Ireland on a e3.4bn (£2.79bn) ­integrated debt and equity capital raising; and Vanessa Hardman assisted Alliance & Leicester on a £1.4bn residential mortgage-backed securitisation deal.

A&O replicated this success with a number of panel wins, including BAA, ­Nationwide and Virgin Group.

The litigation department reported one of the best performances in the market, with the department’s revenue growing by 24 per cent, from £110m to £136.6m.

A&O also broke new ground by outsourcing ­litigation document review work to Integreon in a move that is expected to generate a 30-50 per cent cost saving.

Under the terms of the firm’s lockstep, partners enter the equity on 20 points and gain two a year for 15 years until they accumulate a maximum of 50. Last year a point was worth roughly £33,000.

Strengths
Investment in litigation paid off, with substantial growth in that department. A&O’s reputation as a go-to adviser in times of crisis was demonstrated by the fact that it acted on a UK Government panel on how to handle its stake in bailed-out banks.

It was also lead counsel to the creditors of Dubai World, which requested a debt standstill at the end of 2009.

Weaknesses
The firm was left exposed by its reliance on financial institutions, as evidenced by the disproportionate impact of job cuts

on the leveraged finance department during the firmwide restructuring. Meanwhile, there are questions about its Australian operation, including the viability of trying to enter Asia through the back door, and A&O is still considered a little lean in the US.

UK 200 RESULTS 2009

Allen & Overy’s 2008-09 financial year was characterised by one of the largest redundancy and restructuring programmes ever undertaken by a UK law firm.

The magic circle firm’s financial institutions client base left it more exposed to the economic downturn than most. As a result, by the start of 2009 management accepted the inevitable and began a process that would ultimately see 450 people leave the firm, including 47 partners. On the flipside, the firm promoted 20 new partners in May 2009, 70 per cent of them outside the UK. The restructuring cost A&O £46m last year.

Typically, A&O's 2009 annual review did not shy away from admitting that the firm had been “in the teeth of the economic storm”.

Turnover for the year rose by 7 per cent to £1.091bn but profit before tax dropped 4 per cent, while average profit per equity partner fell 9 per cent to £1m.

Senior partner David Morley said the firm was working on the assumption that growth would remain very weak until the end of 2010.

Aside from reshaping the firm, last year’s restructuring was also a catalyst for A&O to review its legendarily long lockstep. Currently this is still 15 years – longer than any other major UK firm.

A&O sees this as one of the glues that holds the equity partnership together, but it has examined alternative options for lawyers who for a variety of reasons may not wish to spend 15 years of their life working towards plateau.

These include introducing a modified lockstep for special cases such as female lawyers who want to have children.

Currently A&O has two types of partner: salaried partners on one point plus salary, and equity partners. The lockstep goes from 20 to 50 points with partners gaining two points a year over 15 years.