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Top partners at UK “magic circle” law firm Allen & Overy took home £2.2mn on average in the year before its $3.5bn transatlantic merger, as the sale of a legal technology unit to private equity boosted its earnings.
The group of 600 equity partners, who share in the firm’s profits, took home 18.6 per cent more in the firm’s financial year than the previous 12 months, it said on Thursday. The increase followed a 17 per cent jump in the firm’s pre-tax profits to £1bn and a 3.4 per cent rise in revenue to £2.2bn.
The firm, now A&O Shearman following its tie-up in May, said its results were boosted by the sale of its legal tech business, aosphere, to private equity, while a pick-up in deal flow in the first half of the year also benefited corporate law firms.
A&O announced in October that it had sold stakes in the unit to UK private equity firm Inflexion and US investor Endicott Capital, valuing the business at more than £200mn. The firm retained a minority interest in aosphere.
The firm has also acted on a number of big mandates over the past 12 months, including advising carmaker Stellantis on its €1.5bn investment in Chinese electric-vehicle manufacturer Leapmotor, and Dubai Taxi on its $315mn initial public offering in the emirate.
The legacy London-based firm’s results for the year to the end of April come two months after it merged with New York’s Shearman & Sterling, creating a behemoth of nearly 4,000 lawyers globally.
The tie-up, one of the biggest transatlantic legal mergers in history, followed decades in which UK-founded law firms had struggled to gain a meaningful foothold in the US legal market. A number have been investing heavily in the lucrative region in recent years in an effort to grow their market share.
On Wednesday, rival Linklaters said it had surpassed £2bn in revenue for the first time in the year to the end of April, with equity partners taking home £1.9mn on average, helped by the growth of its US practice. The firm said it had generated its “best ever results” in the region, with a 24 per cent increase in revenue.
Linklaters has in recent months hired a team of lawyers led by veteran dealmaker George Casey from legacy Shearman & Sterling. Clifford Chance is expected to report its results in the coming weeks.
UK-based law firms are attempting to expand while facing intensifying competition on their home turf. Top-tier US firms such as Paul, Weiss, Rifkind, Wharton & Garrison have been significantly growing their footprint in London over the past year, driving up salaries and the war for talent.
Most of the legacy UK “magic circle” firms, including A&O Shearman, have increased pay for newly qualified lawyers this year to £150,000 in a bid to compete with US-founded rivals that are offering salaries as high as £180,000 to their most junior recruits.