When you introduce your new pal Shearman to the gang.
The combination will create the “only global firm with U.S. law, English law and local law capabilities in equal measure, and the world’s third largest integrated law firm”, said Shearman and A&O.
A&O brings around 5,800 people to the table, including 590 partners and 2,500 lawyers, while Shearman is considerably smaller, with 850 lawyers and approximately 200 partners.
Their merged beast of a firm would comprise around 3,900 lawyers across more than 49 offices, with approximately $3.4 billion in revenues.
The benefit for Shearman & Sterling, which has its headquarters in New York, is gaining access to a “dramatically expanded ‘rest of the world’ offering across practice areas”, while the Magic Circle firm would receive “increased board-level recognition and expanded access to a corporate client base in the U.S.”, said the firms in a statement.
Other motives are available. The number of lawyers which Shearman has haemorrhaged following its failed merger talks with Hogan Lovells - a five partner team defected from Shearman to Ashurst just this week - has suggested to some that the needle on its merger dial is pointing closer to 'must-have' than 'nice-to-have'.
If the merger does complete, an awkward reunion beckons for M&A partner Guillaume Isautier, who abandoned Shearman in March for... A&O.
The Magic Circle firm has long sought a significant US platform to complement its outposts in New York, Boston, Silicon Valley, San Francisco and Washington D.C.. It suffered a setback in 2019 when merger plans with O'Melveny & Myers flopped after 18 months of talks.
A leading figure in the sector told RollOnFriday that snagging Shearman would satisfy Allen & Overy’s ambition to obtain a high-grade US presence, but that staff at both firms would have questions around the security of their roles given the opportunity for ‘synergies’ which such a merger would present.
“A&O have been looking at US merger for at least 10 years”, said the source, but the key for the merger’s architects “will be who stays at both firms and how quickly they can eliminate overlapping people. It’s two big, historically bank-led businesses, which isn’t the direction of travel - so how they can turn that around will be interesting to watch”.
Shearman is indisputably the weaker partner, said the source, and while the relative profitability of the two firms meant a merger arguably made sense, “S&S have lost a lot of good people”.
Although the merger is still subject to a vote which, at A&O, will require 75% of the partnership to get onboard, it has been presented to the world as a sure thing. Indicating how confident they are that they have the numbers, the leadership teams have staked their credibility on the merger occurring by unveiling the name(s) of the firm and its logo.*
That element required careful thought. Plump for 'A&O SS' and the Magic Circle firm sounds like it’s become a division of the Wehrmacht. But opt for 'Allen & Overy & Shearman & Sterling', and there won’t be any ampersands left for anyone else.
The firms have hit upon an unusual compromise – two names. There’s ‘Allen Overy Shearman Sterling’, which no-one will use, and “A&O Shearman for short”.
Wim Dejonghe, Senior Partner at Allen & Overy, said, “This combination of two great firms is such an exciting step for us. Both firms have a history of excellence, and together we think A&O Shearman will be a firm unlike any other in the world. We have listened to our clients and their requests for the highest quality advice to help navigate the demands they face, and to do so in an integrated and globally consistent way. We, A&O Shearman, will do this by accelerating our ability to bring the best of both firms, regardless of geography”.
Praising Shearman & Sterling as “an incredible group of legal minds; a firm built on integrity and excellence, founded like us in a premier global financial capital and with an extraordinary group of longstanding clients”, he said that “What excites me about this merger is the complementary cultures of our two firms. We have striking similarities across the board, and I believe we are going to be wonderful partners to one another on this journey”.
If it comes off, A&O will succeed where plenty of other UK firms have failed. Ashurst aborted attempts to hook up with Sidley Austin, Fried Frank, and Latham & Watkins (not all at once), before finding love with Australian firm Blake Dawson, while Freshfields and Debevoise wooed each other many moons ago, only for things to go cold.
UK firms which have pulled off transatlantic couplings include Lovells with Hogan & Hartson (in a sweeter parallel universe its nickname is LoveHart not Hoglove), Norton Rose Fulbright with Chadbourne & Parke, Eversheds with Sutherland Asbill & Brennan, DLA with Piper Rudnick, BLP with Bryan Cave, and Bond Dickinson with Womble Carlyle.
A merger in which the UK business occupies the driving seat may appeal to A&O's partnership more than a tie-up in which a bunch of eat-what-you-kill US partners are dominant, which usually ends with a bloodbath as Blake ('Billy') T Crebshaw Jr III and his pals jettison any partner who's been billing under 5,000 hours or taking more than one week off a year.
Adam Hakki, Senior Partner at Shearman & Sterling, said “Client need for global elite firms has never been greater. They are calling for integrated global legal solutions and advice: merging with Allen & Overy will dramatically accelerate our ability to meet their needs in an increasingly complex environment”.
“This is truly a game-changing moment for both firms”, he said, trying not to bite A&O’s hand off too obviously, selling it internally as “a fantastic opportunity for our people to be part of a transformative transaction and an institution of such significance, and we look forward to recruiting even more stellar talent [translation: not losing any more] in the coming years”.
*Saatchi even got involved.
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