Allen & Overy‘s (A&O) growth has steadied for the 2017/2018 financial year, with the firm posting modest single-digit results compared to its magic circle peers.

Average profit per equity partner (PEP) edged up by 4 per cent to £1.64m, following on from a record 2016/2017 when PEP soared by 26 per cent. Managing partner Andrew Ballheimer described the PEP growth as “very healthy” and said that it had to be looked at “over two years to reasonably assess how strong PEP has been”.

The firm’s revenue continues to elude the £1.6bn mark, as it climbed nearly 4 per cent from £1.52bn to £1.57bn. In 2016/17, A&O trumped both Linklaters and Freshfield Bruckhaus Deringer, after long being the smallest magic circle firm in terms of revenue figures.

This year it comes in under Clifford Chance, which remains at the top of the magic circle, posting a five per cent rise in revenue to £1.62bn. Clifford Chance also clawed back this year with a 16 per cent rise in PEP,  after it fell behind A&O in 2016/2017. Freshfields’ PEP shot up by 12 per cent, while Linklaters is yet to report.

Ballheimer said that despite this, A&O has a much bigger profit margin than Clifford Chance. The firm’s profit before tax has risen by three per cent to £690m.

Ballheimer pointed at growth coming from the firm’s corporate and M&A practices, as well as international capital markets, with much of the rise “fuelled by cross-border M&A activity”. Cross-border work has been a particularly profitable area for the firm. Ballheimer said: “Three quarters of our income is from matters involving more than one country, which has always been a good area for us.

“We are currently in 44 worldwide locations and are seeing great strides in our Continental offices”.

The firm, for example, fielded lawyers from 20 of its offices to work with alternative payment platform Worldpay in its £9.3bn merger with Vantiv.

Ballheimer acknowledged Spain and Italy as locations that have had a particularly good years, though he stated that due to political issues, the Istanbul office has not seen quite the same success. “The office has been affected by the political climate in Turkey, though it is one of our smallest, with only two or three partners, so this hasn’t made much of an impact”.

He added: “There is more investment to be made in France and Germany, as well as in areas where there is rich growth opportunity such as Asia”. A&O is also looking to further spread its wings in the US, where Ballheimer anticipates there will be more hires. This week, the firm strengthened its M&A practice in New York with the hire of corporate partner Stephen Besen from Shearman & Sterling.

Figures from Thomson Reuters published this week demonstrated that A&O is the most prolific magic circle firm to advise on global public M&A bids so far this year. Its growth has sprung from big M&A mandates, including the firm’s position as the main adviser to 21st Century Fox in its ongoing battle with Sky. Ballheimer also pointed to the work the firm has done with HSBC, in one of the largest ever UK financial service industry projects, as the bank restructures its legal and business structure to meet new ring-fencing requirements.

The firm’s managing partners have recently returned from a partners’ conference in Miami, where Ballheimer said that “in spite of the distractions of Miami”, the team discussed “opportunities for growth and talked about where new investments are to be made”.

The Lawyer understands that discussions regarding A&O and O’Melveny’s merger are still afloat, though Ballheimer declined to comment on whether a conclusion was reached in Miami.