Allen & Overy and Shearman & Sterling unveil ‘transformative’ merger plan to create $3.4bn firm

Deal would forge unique ‘integrated global elite firm’ both sides claim ahead of partner votes
Detail Of The The Allen & Overy LLP Building At Amsterdam The Netherlands 2018

Merged firm would be known as A&O Shearman Shutterstock; Dutchmen Photography

UK Magic Circle firm Allen & Overy (A&O) and New York’s Shearman & Sterling have announced plans to merge in a move that promises to finally hand one of the four elite international UK firms a top-tier US merger.

If voted through by both firms’ partners, the merged firm, to be known as Allen Overy Shearman Sterling – A&O Shearman for short – will have revenue of around $3.4bn and house 3,900 lawyers across 49 offices.

The merger deal is expected to be put to partners at both firms before the summer with completion in six to 12 months.

Announcing the proposed deal on 21 May, the two firms pitched A&O Shearman as an ‘integrated global elite firm’, the only such firm with ‘US law, English law and local law capabilities in equal measure’ and one that would be ‘perfectly positioned to capitalise on global macro trends including energy transition, technology and private capital’.

They added: ‘Shearman & Sterling will gain access to a dramatically expanded “rest of the world" offering across practice areas, and Allen & Overy will benefit from increased board-level recognition and expanded access to a corporate client base in the US.”

Notably, the combined firm would have 210 US partners and $1bn in US revenue, leaving A&O’s three UK rivals, Clifford Chance, Freshfields Bruckhaus Deringer and Linklaters, trailing in its wake in terms of the size of their respective US arms. 

Both A&O and Shearman have been in the market for merger deals. In March, talks between Shearman and Hogan Lovells were called off, but not before Shearman lost several big hitting partners from its international network, including virtually its entire German contingent, which defected to Morgan Lewis.

A&O, meanwhile, was in protracted talks with O'Melveny & Myers which were finally abandoned in September 2019. 

Commenting on today’s proposed deal A&O senior partner Wim Dejonghe said:Shearman & Sterling is an incredible group of legal minds; a firm built on integrity and excellence, founded like us in a premier global financial capital and with an extraordinary group of longstanding clients. What excites me about this merger is the complementary cultures of our two firms. We have striking similarities across the board and I believe we are going to be wonderful partners to one another on this journey.”

Adam Hakki, who took over as Shearman & Sterling senior partner shortly after the talks with Hogan Lovells ended, added: “This is truly a game-changing moment for both firms that will create an unparalleled offering for our clients. It is also a fantastic opportunity for our people to be part of a transformative transaction and an institution of such significance, and we look forward to recruiting even more stellar talent in the coming years.”

He told The Financial Times the two firms “know each other extremely well and have explored things for years and years”, but moved closer to serious proposals through “focused discussions in recent weeks”.

Shearman will have representation across global leadership positions in the merged firm, the FT reported.

It is clear, given the timing of the failure of Shearman's talks with Hogan Lovells, that the two management teams moved quickly to nail down an agreement before news of the talks leaked. 

Further reading: ‘Opportunistic and strategic’ – Allen & Overy’s bold move to crack the lucrative US market

Meanwhile, the departure in recent months of overseas-based individuals and teams from Shearman with less to gain from a merger with A&O, given the size of its network, looks set to smooth the way for a deal although the challenges associated with melding the cultures of two such long-established firms with different national identities will be legion. 

The two firms said they had conducted a ‘preliminary assessment of conflicts’ and ‘do not anticipate a significant number of issues’ adding that the leadership ‘would be seeking the support for this merger from within both firms, including through extensive discussions with our partners and our people’.

A spokesperson declined to comment on the threshold of support needed for partners at both firms to approve the deal.

Email your news and story ideas to: [email protected]