A new landmark Merger has occurred. Partners at UK Magic Circle firm Allen & Overy (A&O) and New York’s Shearman & Sterling have voted through a landmark merger deal to create a transatlantic law firm with revenue of around $3.5bn, housing 3,950 lawyers across 48 offices.
A partner vote on the planned merger began in late September and was completed today. The merger required approval from 75% of each firm’s partnership, however, the firms said in a statement that more than 99% of the votes cast at each firm were in favor of the merger. It said that was “a powerful testament to the strength of the combination and partner support for it”.
The merged firm will be called A&O Shearman and will have approximately 800 partners working across 29 countries. Its combined revenues will catapult the firm ahead of its three global Magic Circle rivals: Clifford Chance, Freshfields Bruckhaus Deringer and Linklaters.
A&O senior partner, Wim de Jong, said: “This is a historic moment for both firms and our profession. We are delighted that our partners have voted so resoundingly in favor of this merger, which is a transformational step for the legal industry. We have long admired Shearman & Sterling for its outstanding reputation, talent, and client base, and we are confident that together we will create a truly exceptional global firm that will serve our clients’ needs in an increasingly complex and dynamic world.”
The two firms said they would “now embark on a period of active integration planning” with the final closing of the transaction expected in or before May 2024.
Shearman’s senior partner, Adam Hakki, added: “Our partners have recognized and welcomed this unparalleled opportunity to combine our individual market leadership and brands to serve clients as an integrated global law firm, preeminent in all our markets. A&O Shearman will be a firm unlike any other in the world, built to achieve exceptional outcomes for our clients through an intentional focus on quality, excellence, and collaboration. We are creating a new industry leader, with truly global capabilities, and we are excited for what is to come.”
The pathway to the proposed merger has not been smooth. Merger talks between Shearman and Hogan Lovells were called off in March. On either side of that announcement, Shearman has experienced multiple departures from its international network to rival law firms, including virtually its entire German arm, which decamped to Morgan Lewis on the day the Hogan Lovells talks broke down.
However, to date the vast majority of its partner losses have taken place outside of the US, meaning A&O’s strategic aim of securing critical mass in the US remains intact.
For A&O’s part, the ultra-slick presentation of the deal’s announcement, which featured videos of the respective senior partners extolling its virtues, was somewhat undermined by the unexpected resignation in July of global managing partner Gareth Price for personal reasons. He has been replaced by Khalid Garousha, whose role as interim global managing partner will last for an eight-month period from September 2023 to April 2024.
CM Murray partner and law firm merger specialist Zulon Begum said: “This is an enormous coup for A&O and hugely significant for the transatlantic legal market. Whether it achieves A&O’s key objective – deeper penetration of the lucrative US legal services market and achieving the capacity to compete with the US headquartered global law firms – remains to be seen.”
She added that the two firms’ focus would shift from securing partner support to implementation. Prior to the vote, the firms had promised to create an ‘unparalleled and fully integrated global elite law firm’, suggesting they will not pursue a verein-type structure, which is typically adopted by transatlantic firms created through mergers.
“Full financial integration on day one is likely to come at significant financial liability triggered by changes in accounting methods and accounting dates to align both firms, as well as an enormous operational strain on the merged firm,” Begum warned.
“A clear strategy, robust leadership, and effective integration of people, culture, finances, remuneration structures, and operations will ultimately determine how successful the merger is in the long term,” she concluded.