The February 9 merger of Allen & Overy and Shearman & Sterling marks the birth of a transatlantic law giant – A&O Shearman. However, while the move positions the firm as the world’s fourth-largest law firm with $3.5 billion in annual revenue and a robust army of 4,000 lawyers, penetrating the big league of the legal industry remains an uphill battle.
Historically, consolidations within the legal fraternity have been notoriously challenging due to contradicting pay structures, corporate cultures, and governance systems. The two firms’ integration will demand an immense level of care for successful consolidation, as asserted by Siobhán Lewington, a partner at recruitment firm Macrae. The skepticism surrounding recent attempts by some London-based firms to establish new offices stateside and recruit Wall Street lawyers adds another layer to the complexities.
A&O Shearman’s performance in the United States – the globe’s most lucrative market for legal services – will be instrumental in shaping perceptions about the merger’s success. The combined entity’s U.S. operation is projected to generate $1 billion in revenue and includes around 200 partners. The U.S. business, headed by the New York litigator Adam Hakki as the stateside chair, brings to A&O Shearman an M&A team that has represented notable clients like CVS, JetBlue, and SAP SE, and a highly commended energy transactions team in Texas.
However, to truly compete with top competitors such as Kirkland & Ellis and Latham & Watkins, the firm must build a substantial private equity practice. Top firms have seen a surge in profits as they attract deals lawyers with promises of significant pay hikes.
In an interview, Hakki emphasized the firm’s commitment to invest and enhance its capabilities in private equity practice to compete at the highest level. While the firm’s private credit practice may provide interim support, a strong private equity practice will be crucial to mark its presence in the U.S. market.
Between the spectrum of leadership roles and retaining lawyers within an increasingly competitive environment, the transatlantic merger implies a multitude of challenges ahead. In compensation terms, A&O Shearman plans to be highly competitive, operating under a modified lockstep complemented by a bonus structure. However, the transfer of more than 30 partners since the merger announcement indicates potential risks.
Whether A&O Shearman manages to break into the elite echelon of the legal world remains to be seen, but there’s no denying that the landscape of Big Law is rapidly evolving.