In the 2016-17 financial year, Allen & Overy grew revenue by 16% and profit per equity partner (“PEP”) by 26%. It’s now the second-largest in the magic circle by turnover and just behind Freshfields and Linklaters in PEP.
But this isn’t just about one good year. Indeed, many of Allen & Overy’s rivals have posted good results one year, only to fall behind the next. No, Allen & Overy’s story revolves around something else: the firm’s aggressive international expansion.
To understand, we need to go back to a time when the world wasn’t so global: the early 2000s. That was a time when Allen & Overy was the smallest magic circle firm in revenue and PEP.
Although it was smaller than the others, Allen & Overy pursued international growth at a rate that surprised many of its rivals. Between the 2005/6 and 2014/15 financial years, the firm opened 22 offices, many of which were opened shortly after the financial crisis – a time when other law firms scaled back their international presence.
Allen & Overy was the first magic circle firm to open in Australia, South Africa, Myanmar and Canada. It was also the first to enter Africa after launching in Morocco in 2011. The firm’s investment in Australia proved to be an effective platform to serve the Asia-Pacific region, a move that was soon followed by a number of US and UK firms. The firm supported the rest of its network by a series of best friend relationships, such as its five-year referral agreement with Indian law firm Trilegal.
But key to all of this is the fact that Allen & Overy didn’t expand for the sake of it. It was always led by client demand and growth opportunities. Between 2005/6 and 2014/15 the firm had the highest growth in revenue, net profits and profit per equity partner among the magic circle. This helped it work on many of the biggest deals. Take Africa for example. The firm advised on Africa’s largest-ever project financing and one the largest acquisitions in South Africa. And in 2013, Allen & Overy became the only law firm to complete a deal in every country in Africa – according to its annual review.
Few law firms can compete with Allen & Overy’s banking and finance practice. The firm has longstanding relationships with investment banks including Deutsche Bank, Goldman Sachs, and JP Morgan, and a vast international platform to serve its clients.
Allen & Overy fought well to maintain its position in leveraged finance after the financial crisis. That was a time when many European corporate clients turned to high yield bonds to finance their deals – a domain normally reserved for US firms. Allen & Overy responded by investing heavily in its US presence, breaking its lockstep to hire a number of star finance partners, and investing in its high yield and leveraged finance teams. This investment has paid off; Allen & Overy is routinely ranked as one of the top two most active legal advisers for European high yield debt.
It’s no surprise that Allen & Overy’s collected five finance-related awards at the IFLR Europe Awards 2017. The team has had a number of recent achievements across its range of financial products. These range from general lending to complex financial structures. For example, in 2016 and 2017, the firm advised borrowers and lenders on more syndicated loans than any other law firm in Europe, the Middle East and Africa, according to Thomson Reuters and Bloomberg. The firm also advised on the largest residential mortgage-backed securitisation since the financial crisis in 2016. Meanwhile, Allen & Overy’s capital markets team topped the Thomson Reuters table for global deal volume and deal value in 2017.
Whilst the magic circle have traditionally led the UK market in corporate and finance, the same can’t be said for disputes, where the likes of Herbert Smith Freehills and Hogan Lovells boast equally competitive practices. Allen & Overy’s move into this market is interesting. The firm stormed Simmons & Simmons in 2016, hiring four partners and six associates for its IP litigation practice. Now the firm is looking to Germany and the US amid a growing demand for patent litigation capabilities.
Allen & Overy’s recent lateral hires have also bolstered the practice. In 2017, the firm hired a litigation team for its South African practice, three partners for its Investigations and Litigation practice in the US, and a patent litigator for its German office.
Although litigation contributes less to global revenue than rivals Linklaters and Freshfields, it has grown a lot since 2008. We’ve learned that the firm shouldn’t be underestimated: if Allen & Overy hires more litigators and continues on its growth trajectory, the picture may be very different in a decade.
Finally, this piece would be remiss if we didn’t mention the recent speculation about a merger with O’Melveny & Myers. The move would make Allen & Overy the first in the magic circle to complete a transatlantic merger. It would also give the firm the litigation capability it needs. But that’s precisely why some partners are allegedly unhappy with the proposal. Perhaps it’s not the elite US corporate law firm that they had in mind.
After the financial crisis, many clients cut back on their legal budgets and that was an issue for many top City law firms. But Allen & Overy adapted. The firm opened up its Belfast Legal Services Centre in 2012 to deliver cost-effective support to the rest of the firm. Today this centre has grown to employ over 500 people and it serves the firm’s 44 offices through a range of roles including HR. IT, marketing, and business support services.
The growth of Peerpoint is also an example of the Allen & Overy’s commitment to cost-effective legal services. The team of legal consultants are made up of many former senior lawyers at the firm who prefer a more agile style of working. They work on demand so Allen & Overy can tap into the team in times of need and clients can get access to a panel of experienced lawyers. The service has already expanded to Hong Kong and Australia, and there are further plans to move across Europe, the US and Asia-Pacific.
Throughout the 2000s, Allen & Overy was quick to identify the rising demand for international legal services. Today the firm looks to be pioneering legal technology. Whilst many firms have expressed an interest in field, it was Allen & Overy who dived in and built its very own tech incubator. The firm’s derivatives expert and entrepreneur, Shruti Ajitsaria, heads up Fuse, a tech space inside its offices, and Allen & Overy encourages its lawyers to get involved with the entrepreneurs-in-residence.
Its been a success story so far. The first company to work in Fuse, Nivaura, helped to launch the world’s first automated cryptocurrency- denominated bond issuance whilst at Allen & Overy. The platform automates the issuance of financial instruments and provides a cost-effective cloud-based service for SME’s. It’s no surprise that Fuse received 84 applicants in 2017 – successful start-ups get the exposure and resources of the magic circle firm.
Allen & Overy’s lawyers have also been involved in other initiatives. One of them built MarginMatrix, an automated system that helps banks to handle derivatives compliance across jurisdictions – banks across the world quickly signed up. The firm also backed the Legal Innovation Centre at Ulster University. It’s a centre that will be home to academics involved in the research of legal tech, and it’ll also train students and legal professionals in the field. These investments have led Allen & Overy to be rated the ‘Most Innovative Law Firm in Europe’ by the Financial Times. Five times.