A&O profit surges 31 per cent to reach £1m PEP landmark

Allen & Overy (A&O) has caught up with the rest of its magic circle rivals, posting an incredible 31 per cent increase in average profit per equity partner (PEP) and a 20.5 per cent rise in turnover, it was revealed today.

For the first time its partners will on average take home more than £1m. A&O, the last magic circle firm to release its financial performance in 2006-07, now boasts a PEP of £1.03m and a turnover of £887m.

Firmwide managing partner David Morley told The Lawyer: “We’re very happy. We think the strong results are a function of our heavy investment across our international network. It’s now paying off.”

At Freshfields Bruckhaus Deringer, A&O’s closest rival in financial terms, this compares to PEP of £1.03m and a turnover of £986m in 2006-07. Not only has A&O caught up with Freshfields’ PEP but it has sneaked past Clifford Chance, which posted a PEP of £1.02m.

This is the second year that A&O has posted double-digit growth in PEP and turnover.

Last year A&O lagged behind the rest of the magic circle. Its PEP stood at £788,000 and turnover was at £736m, respectively 5 per cent and 16.6 per cent behind Freshfields at the time.

This is the third year that A&O has released its figures as an LLP. Morley challenged his rivals to be as “transparent and consistent” as A&O in its financial reporting.

Meanwhile, pre-tax net profit at A&O has leapt by 36.3 per cent to £395m from £270m. Freshfields and Linklaters still top the profitability table, netting £490m each.

The growth comes at a time of aggressive expansion for A&O, which has recently opened offices in Riyadh, Abu Dhabi, Düsseldorf and Mannheim. It also added its first Japanese law capability by hiring corporate partner Nobuo Nakata from Freshfields.

The firm’s corporate group in particular has had stellar improvement in real terms and in reputation. It has scored deals such as advising Macquarie on its £8bn consortium bid for Thames Water and co-advising Nasdaq on its two approaches for the London Stock Exchange last year.

Senior partner Guy Beringer told The Lawyer: “Corporate deserves a lot of credit for pulling itself up. But the finance and equity capital markets teams deserve credit for maintaining their market-leading position, which is a very hard thing to do.”

A&O runs a 15-year lockstep, one of the longest in the City. The firm’s 354 equity partners start on 20 points and accrue two each year until they have 50 points, with one point this year equalling £30,800. The equity spread runs from £616,000 to £1.54m