Allen & Overy and Shearman Plan to Merge to Create $3.4 Billion Law Firm

New York law firm “Magic Circle” Allen & Overy merges with Shearman & Sterling to form a practice with combined revenues of approximately $3.4 billion, in one of the largest transatlantic legal relationships in history.

The merger, which is subject to a vote by the partners of the two firms, would create one of the largest law firms in the world by fee income and comes just months after 150-year-old Sherman abandoned merger talks with Hogan Lovells.

Allen Overy Shearman Sterling, as the newly merged firm will be named, will have approximately 4,000 attorneys in 49 offices.

The proposed deal marks the first merger between London-based Magic Circle and a US competitor since Clifford Chance joined Rogers & Wells in 2000. It is also a major step forward in Allen & Overy’s bid to conquer the lucrative US market following the collapse of its merger bid with O’Melveny & Wells Myers in California four years ago, after the two sides failed to agree on the judgement.

The engagement comes on the heels of a turbulent period for Sherman, who lost several lawyers following her failed talks with Hogan Lovells earlier this year and is going through a difficult restructuring.

In a statement, Allen & Overy Senior Partner Wim Dejonghe said: “We believe that A&O Shearman will be a company like no other in the world.”

In a conversation with the Financial Times, Dejonghe made it clear that this link would give both companies crucial economies of scale in London and New York. Allen Overy Sherman Sterling “will bring in more than $1 billion in revenue in the US, 30 percent [coming from] UK and 40 per cent in the rest of the world, and I don’t think anyone has.

London-based Allen & Overy – which had revenues of £1.9 billion in the year to the end of April 2022 and employed around 5,800 people worldwide – has long sought to enter the lucrative US market, which has proven difficult for London based companies. crack based.

Meanwhile, Sherman, which has a total of 1,350 employees and reported revenue of $907 million in calendar year 2022, is looking for a way to grow and increase its profitability after finding that its existing global network came with increased costs , but insufficient scale.

Allen & Overy’s top strategic priority [has been] To have the same depth and strength on the bench in the US, particularly in New York, and that gives us that all at once,” said Dejonghe, of a number of attorneys the new firm would be proud of. Enough in the US, and Sherman has been missing from the bench in the rest of the world.”

The companies said they want to build stronger expertise in private equity, life sciences and energy transition. Sherman will be represented in global leadership positions in the combined company.

Sherman’s senior partner, Adam Hakki, said the two firms “know each other well and have explored the matter for years,” but have approached serious proposals through “focused discussions in recent weeks.”

Sherman, once one of Wall Street’s most powerful advisers, has cut spending in recent months because of falling demand. It is also undergoing restructuring to focus on the most profitable regions, such as the United States, and lucrative sectors, including private equity.

The company experienced a lack of economies of scale in its network of offices and struggled to compete with more profitable US competitors who could offer higher salaries to partners. Allen & Overy had a similar problem seeking growth in the US market, and in recent years it has made changes to its bonus system that allow it to pay premium partners more.

Shearman’s equity partners earned $2.48 million in average earnings last year, compared to just under £2 million for partners at Allen & Overy. Both companies said that the compensation structures would not be difficult to link together.

The deal is expected to be pitched to partners of both companies before the summer, with a goal of closing the transaction within six to 12 months.