In a significant move in the legal sector, partners at UK’s Allen & Overy and US-based Shearman & Sterling have given the green light to the merger of the two firms. This merger paves the way for a formidable new entity in the legal industry. According to insiders, the deal was almost unanimously approved by partners at each firm.
The newly-formed entity, A&O Shearman, will be amongst the world’s largest law firms. It is set to have approximately 3,900 lawyers and combined gross revenue of $3.4 billion. The merger comes on the heels of prior negotiations by both firms seeking strategic expansion opportunities.
Historically, A&O sought to increase US presence and Shearman aimed to broaden its scale in response to dipping market share. With prior tie-ups not pushing through, A&O and Shearman’s combination brings a new chapter in their respective journeys.
While the merger presents a formidable legal entity, it was also a strategic move to assuage any doubts on leadership following failed talks with other firms in recent times. As Tony Williams, a consultant and former leader at Clifford Chance mentioned in a June interview, not going through with the merger after public discussions would have been “cataclysmic in terms of the credibility of the leadership.”
The merger, however, is not just about survival for Shearman & Sterling. The firm has seen a decline in revenue by over 10% last year, largely due to a slowing deals market and partner departures. With the merger, the hope is to bolster the firm’s standing in the global legal market.
The strategy of US expansion has also been followed by other UK law firms. Magic Circle firms, namely, Clifford Chance and Freshfields Bruckhaus Deringer, have largely focused on individual and group hires for US expansion. These firms have had to face considerable poaching from top American firms in their own legal markets.