All change at Allen & Overy

As Allen & Overy's plans for European expansion come good it has ousted its senior partner for a younger man. Ryan Dunleavy reports on the goings on at A&O.

You can forgive John Rink, Allen & Overy's managing partner, for feeling just a little bit pleased with himself. The magic circle firm has just announced its merger with the Amsterdam and Luxembourg offices of top Benelux firm Loeff Claeys Verbeke. And two weeks ago, A&O decided to join forces with Spanish firm Satrustegui & Asociados.

Rink's master plan for achieving a comprehensive European network, offering top drawer legal advice at top tier practices, is falling nicely into place.

Rink says that he decided years ago that A&O should expand into five key European countries – Germany, Italy, France, The Netherlands and Spain.

From these vantage points he hopes the firm will be able to dominate the European marketplace.

He says: “This is part of our strategy to become a pan-European firm.

“Given our move in Spain and now these two moves, we have covered those five jurisdictions.” A&O's Paris office was set up in 1989, and the firm's Frankfurt practice was established in 1994.

The Italian practice was created last year by a merger with Italian firm Brosio Casati e Associati, which gives A&O offices in Milan, Rome and Turin.

But while Rink fails to include Loeff Claeys' four-partner Luxembourg practice in his blueprint for domination, its importance to the strategy should not be overlooked.

When drawn on the point, he says: “Luxembourg plays an important role.” The office handles significant finance and corporate work in the country and is fourth in terms of size.

It is hard to foresee how smooth the mergers will be. Loeff Claeys has been torn apart by its union with A&O. The partnership was dissolved in the summer following talks by a majority of the partners with A&O.

The Belgium office decided to become independent and is now in talks with A&O about referral work. The Rotterdam branch is set to merge with Dutch firm Loyens & Volkmaars. The Luxembourg practice is joining A&O on 1 January 2000 along with 32 partners from the firm's Amsterdam office. But two partners from the Amsterdam branch – M&A specialist Jan Willem van der Staay and IP litigation expert Hub Harmeling – have decided to go to Freshfields.

We may yet see further fall-out from the mergers. But Sietze Hepkema, Loeff Claeys' partner in charge of international strategy, insists there will not be any more departures because the merger is evolutionary rather than radical.

He says: “Our association [with A&O] went back to 1991. At the outset we have always had in the back of our minds that there may be a transition to an integrated firm.”

Rink sees his role now as ensuring the new firms run smoothly.

He says: “We have not put the last piece in the jigsaw puzzle. The challenge is integrating them. The eight years of association helps us to feel we can do that.

“We are building this with people we know.

“And we must be seen to put something together that can be truly integrated because some Continental law firms fear they will be swamped by the Brits.”

This merger-friendly approach hints that there may be further amalgamations in the pipeline. Rink refuses to be drawn on the issue.

But A&O's European regional managing partner Stephen Denyer says: “Each step in European growth helps with the next. Loeff Claeys works because we have already integrated the Italians into our practices.

“We do not know if there will be further mergers but one way or another we need to be bigger than we are.”

Rink admits that one of the first things Loeff Claeys partners did during the merger talks was approach partners from Brosio Casati. Hepkema says: “It was part of what inspired confidence in us.”

He thinks the best way to achieve synergy is to swap lawyers between the European offices. “We will have UK lawyers in Holland, and we will have Dutch and Luxembourg lawyers in London and other places in Europe. We will broaden this integration by having joint client teams,” he says.

One legal analyst says A&O's policy of slow growth by osmosis is an effective way of ensuring merged firms are harmonious while maintaining the A&O brand, but that it is not a good way of competing with the rest of the magic circle.

He says: “The challenges for A&O are that they are still behind the rest of the magic circle in terms of planting their flags internationally, and a strategy of organic growth is difficult to maintain.

“They will have to do something in Germany. Their office is quite strong but they may have to still do a mini-merger or bring in German players to strengthen that area because Frankfurt is a key area.

“And a management structure will be needed to manage the firm globally. Right now they tend to be managed from London.

“There are a lot of firms with international management people but they are essentially operating through London. The different offices are not autonomous. A fundamental difference in terms of shift in power is needed.”

He says that all of the top five firms, except Slaughter and May, are more organised on a global level than A&O. “Freshfields is moving in that direction, and Clifford Chance and Linklaters have done it.”

But he adds: “I don't think Slaughter and May's position is sustainable.”

Slaughters has made a policy of not getting involved with the race for a network of global offices. As another source says: “Most of the firms vacillate between whether to put geography before culture, but Slaughter and May is worried about culture but not at all about geography.”

Another expert says the only way to dominate the European legal market is to have a sizable presence in the US.

He says: “If Europe is the battleground then it is quite clear that in order for firms to compete they need a strong US practice, because US capital is financing European business.”

A&O currently has a New York office and 70 US qualified lawyers dotted around the globe.

Rink says: “We are recruiting heavily in the US: 40 per cent are in London, 40 per cent in New York and the rest are in places like Hong Kong.”

But one analyst thinks that all of the UK magic circle firms, including A&O, are neglecting to expand enough in the US.

He says: “I think the move of Clifford Chance and Rogers & Wells is a Trojan Horse strategy.”

Rogers & Wells provides Clifford Chance with an entry point into the US, he says, but on its own the firm is fairly innocuous in the US corporate marketplace.

“Rogers & Wells is not on the radar map as far as corporate is concerned.

“I suspect Clifford Chance will have to strengthen its corporate side.

“US firms are so strong on the best international work. They do so much bigger deals.”

A&O's latest acquisitions in Spain, Luxembourg, and Amsterdam complete its European expansion plans. But if the firm is to continue competing with Clifford Chance, Linklaters and Freshfields, it will need to look further afield, expecially in the US.

And A&O knows that running on the spot will leave it at the back of the field in the magic circle race for global domination.