Of all the magic circle firms Allen & Overy (A&O) is probably the most transparent when it comes to reporting figures. It was the first of the group to become an LLP under senior partner Guy Beringer, an ardent advocate of transparency.
In a partner conference call in 2005/06 Beringer said LLP reports were “an opportunity, not a burden” and that they would foster a more business-like approach.
Unfortunately, A&O’s disposition towards openness does not extend to revealing how revenue is divided among practice areas or geographies. That is a shame because the firm’s imperative to build a corporate department to equal its market-leading banking group has been a big story. Also struggling with this was Clifford Chance, which is generally thought to have been quicker off the mark and more successful in addressing the problem.
But estimated figures show that, if anything, A&O is slightly better hedged than Clifford Chance. In 2001/02 corporate work (including competition and general commercial) accounted for 33.9 per cent of A&O’s £580m turnover. In 2011/12 the figure was 32 per cent. Compare that with corporate, which contributes nearly 47 per cent. Over the same period, Clifford Chance’s corporate practice contribution rose from 26.5 per cent to 30 per cent of total turnover.
It was A&O’s and Clifford Chance’s reliance on banking that meant they were hit harder than Freshfields Bruckhaus Deringer or Linklaters in the early days of the credit crunch. In 2009 A&O went through a restructuring that saw it slash 247 lawyer jobs – in particular scaling back in leveraged finance – at a cost of £46m.
Indeed, as recently as 2005/06 A&O was considered a bit of a slouch among its magic circle brethren. In 2001/02 it led the way in profit per equity partner (PEP) – at £735,000 compared with second-placed Freshfields’ £715,000 – but had fallen to the back of the pack by 2006. That year the firm is even thought to have approached Freshfields with regard to a merger, but to have been snubbed.
Since then things have been looking up for A&O. Indeed, the firm has been one of the most slickly managed in the market. In 2010/11 it ceased to be the smallest magic circle firm by turnover, overtaking Freshfields by £4m.
It increased that lead to £44m in 2011/12.
The near-6 per cent rise in turnover in 2011/12 was achieved by expanding lawyer numbers, meaning that staff costs also rose in line with the top line, at 7 per cent. At 38 per cent, A&O’s profit margin is still lower than Freshfields and Linklaters, however.
In the past six years A&O’s top line has grown 33.4 per cent. Compare that with 9 per cent at Clifford Chance, 8 per cent at Linklaters and 15.5 per cent at Freshfields.
Far and wide
Without a doubt, A&O’s biggest differentiator has been its international expansion. In 2012 alone the firm launched offices in Istanbul, Morocco and Washington DC, and in May that year revealed that it would open two offices in Vietnam.
One of A&O’s biggest plays was in Australia, where it launched after taking a 14-partner team from Clayton Utz in 2010. The firm also launched an office in Turkey in 2011.
Back when A&O approached Freshfields with a view to a merger in 2006 it did so with a US link-up at the back of its mind. As things stand A&O is still no closer to finding a Stateside mate, but now it is A&O that looks more like the prime catch.
Key recent A&O lateral hires
- Nov 2012: Strengthened its German IP team, hiring Joachim Feldges, who was Field Fisher Waterhouse’s German managing partner
- Sept 2012: Poached two energy partners from Freshfields Bruckhaus Deringer in New York: Kent Rowey and Dolly Mirchandani
- Jul 2012: Appointed John Terzaken, ex-director of criminal enforcement for the US Justice Department antitrust division, head of its US cartel defense practice
- May 2012: Hired Mayer Brown JSM Vietnam managing partner Dao Nguyen, who will help launch the magic circle firm’s foray into Vietnam
- Mar 2012: Took on Hogan Lovells litigator Lawson Caisley in a bid to boost the firm’s international disputes platform