Allen & Overy (A&O) is to cut up to 247 lawyer jobs and jettison its private client business in a global restructuring expected to cost the firm £44m.
The firm is culling 9 per cent of its global partnership, 9 per cent of fee-earners and 9 per cent of support staff while headline client billing rates and pay for all staff will be frozen at this year’s levels. Around half the cuts will be in London.
A total of 47 partners will lose their jobs while an additional 35 partners will have their position on the firm’s 15-year lockstep reviewed. Remaining partners will inject a total of £11m into the firm, with the sum equating to £1,000 per equity point.
The firm’s global managing partner Wim Dejonghe said: “In the rapidly changing environment in which we operate, the reality is that there is simply not enough work to keep all our people sufficiently busy and we do not see that changing in the near to medium term.
“We’ve reluctantly taken the difficult decision to act now, from a position of financial strength, so that we can offer better terms to our departing people than might otherwise be the case.
“This plan is about the long term sustainability and competitiveness of our partnership, our ability to continue to recruit and retain the best people and our capacity to offer the best service to our clients at competitive prices.
“Our priority is to minimise the impact on the morale of our remaining people and continue to serve our clients well.”
The partnership review is expected to be concluded by the end of A&O’s financial year on 30 April, with the full cost of the restructuring to be met out of cash reserves and recorded in this year’s financial results.
The private client department, which is made up of five partners, will be spun off into an independent firm named Maurice Turnor Gardner on 1 May.
The firm will be led by name partners Clare Maurice, Richard Turnor and Ceris Gardner.
Trainees in the private client department will remain at A&O while the 11 associates in the group, while at risk of redundancy, will be able to negotiate transfers to the new firm.
The news comes after fellow magic circle firm Linklaters confirmed that between 100 and 120 of its City lawyers will lose their jobs as part of its so-called New World strategy, while 130 to 150 members of business services staff will also be affected.
Linklaters is seeking to drastically overhaul its structure in a bid to become a smaller, more profitable operation (29 January).
Earlier this month Clifford Chance announced that it is to dramatically scale back its partnership in a bid to become the world’s top international law firm (4 February). The firm is also looking to cut its associate headcount by 80 (8 January).
Freshfields Bruckhaus Deringer is now the only magic circle firm not to have announced widespread job cuts. The firm confirmed earlier this month that it is reversing its associate salary bands with all associates set to receive the same level of pay from May, despite gaining a year in post qualification experience (9 February).