In anticipation of the $3.5 billion (£2.76 billion) merger between Magic Circle law firm Allen & Overy and US-based Shearman & Sterling, a significant departure of senior lawyers has been witnessed from both legal giants. The departure of at least 20 senior lawyers from Allen & Overy and an equivalent number from Shearman & Sterling highlights the turbulence accompanying major law firm mergers.
Allen & Overy Exodus
Since announcing the merger with Shearman & Sterling in May, Allen & Overy has seen departures across its global offices. Founded in 1930 and renowned for advising King Edward VIII during his abdication, the departures from Allen & Overy include five partners, nine counsel, and five senior associates. Seven of these departures occurred at the firm’s London headquarters, as reported by legal recruiter Macrae.
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Shearman & Sterling’s Parallel Departures
Parallel to Allen & Overy, Shearman & Sterling has experienced the departure of at least 20 senior lawyers, comprising nine partners and seven counsel. The exits from both firms have been particularly pronounced in foreign offices, spanning regions such as Europe, Asia, and the Middle East.
Industry Insights
According to Melinda Wallman, a partner at Macrae, the departure of partners during law firm mergers is not uncommon. She notes, “When law firm mergers take place, it is common to see partner departures, even entire office departures, where the merging firms both have a presence in a small legal market.” A mass exodus, Wallman suggests, could indicate a lack of confidence in the success of the combination.
Financial Incentives and Merger Details
Recent reports reveal that Allen & Overy and Shearman & Sterling have offered forgivable loans to partners to secure their commitment to the combined firm. These loans will not need repayment if the partners remain with the merged entity for a specified period. The merger, expected to be finalized by May 2024, received overwhelming support, with 99% of partners voting in favor of the deal in October.
Future of the Combined Firm
The merged entity, to be named A&O Shearman, is poised to become a legal powerhouse with nearly 4,000 lawyers and a presence in 48 offices worldwide. The firms have agreed to a “modified lockstep” compensation model, blending seniority and partner pay performance elements. This move signifies a departure from UK law firms’ traditional seniority-based pay model, aligning more with the “eat-what-you-kill” structure common among US rivals.
Leadership Dynamics
Allen & Overy’s recent announcement of the shortlist for senior partner and managing partner until April 2028 indicates the firm’s dominant position in the merger. None of Shearman & Sterling’s lawyers were nominated for these top positions. An Allen & Overy spokesman emphasized that Shearman & Sterling partners would hold significant leadership roles globally and regionally within the combined firm, with details to be disclosed in due course.
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