As we delve into the details of Allen & Overy’s recent merger with Shearman & Sterling, it becomes evident that the decision wasn’t so straightforward. The two firms, long-standing pillars in the legal realm, announced their merger in September. Overcoming of one of the most challenging roadblocks involved a significant sacrifice from Shearman partners, who had to agree to a steep reduction in their pension provisions.
It appears that Allen & Overy was leery about the potential of inheriting a significant liability posed by the Shearman pension scheme. This could have made the merger more than a little unattractive. One key solution to this problem materialized when Shearman’s leadership conducted negotiations with its retired partners, which led them to agree to make adjustments to their pensions. It’s worth highlighting that this decision involved more than 150 retired Shearman partners.
One now-retired Shearman partner provided some insight into the gravity of the situation, stating, “It was clear that if we didn’t approve the pension [adjustment], the [Allen & Overy] deal wasn’t going to go through.” This seemingly underlines the extent to which the pension issue was a make-or-break element of the merger negotiation between the two firms.
Ultimately, Shearman partners’ willingness to take the so-called ‘pension haircut’ smoothed the way for the merger to proceed. This instance provides a noteworthy example of sacrifice for corporate progression and partnership arrangement in the global legal industry.