updated on 22 May 2023
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In a monumental transatlantic legal collaboration, renowned magic circle law firm Allen & Overy LLP is set to merge with New York-based Shearman & Sterling LLP.
The merger, subject to approval by both firms' partners, will establish a legal practice with a staggering combined revenue of approximately $3.4 billion, making it one of the largest law firms globally in terms of fee income. This development comes mere months after Shearman abandoned merger discussions with Hogan Lovells, solidifying the magnitude of this union.
By joining forces, Wim Dejonghe, Allen & Overy’s senior partner, has said the firm will be “unlike any other in the world”. Once the merger is finalised, the newly formed entity, Allen Overy Shearman Sterling, will encompass nearly 4,000 lawyers across 49 offices worldwide. This agreement marks the first fusion between a London-based magic circle firm and a US counterpart since the amalgamation of Clifford Chance and Rogers & Wells in 2000. The merger represents a significant stride for Allen & Overy's aspirations to conquer the US market, following an unsuccessful attempt to merge with California's O'Melveny four years ago.
For Shearman & Sterling, the merger comes at a critical juncture, as it faces ongoing challenges, including the loss of several lawyers after the abandoned Hogan Lovells talks and restructuring efforts. In contrast, Allen & Overy see the merger as a pivotal opportunity to enhance its presence in London and New York, with the new firm projected to generate more than $1 billion in revenue from the US market alone, comprising 30% of its income, while 40% will come from the rest of the world.
The merger addresses Allen & Overy’s long-standing strategic aim to establish strength and depth in the US, particularly in New York, an objective that’ll be achieved through the combined strength of the two firms. Both firms acknowledged the need for enhanced resources to achieve their respective goals. While Allen & Overy boasted quality, it lacked sufficient presence in the US, while Shearman & Sterling faced challenges in other parts of the world. By joining forces, they’ll overcome these limitations and create a legal powerhouse.
Allen & Overy, headquartered in London and employing approximately 5,800 staff worldwide, has pursued entry into the lucrative US market for years. While Shearman & Sterling, with 1,350 employees and reported revenues of $907 million in 2022, has sought avenues for growth and increased profitability due to the higher costs associated with its existing global network. The alignment of their aspirations and complementary strengths make this merger a seemingly perfect fit.
Dejonghe highlighted the critical advantage the merger would bring in terms of scale and expertise, enabling Allen Overy Shearman Sterling to establish a formidable presence in London, New York and beyond. The firm aims to strengthen its capabilities in areas such as private equity, life sciences and energy transition, with Shearman & Sterling holding influential positions across the merged firm's global leadership.
The proposed merger is scheduled for partner approval from both firms before the summer, with a completion timeline estimated between six to 12 months. Allen Overy Shearman Sterling is set to embody unprecedented scale, expertise and potential for global impact.