Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in the UK legal sector.
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1). Allen & Overy and O’Melveny & Myers call time on their merger talks after 18 months
18 months into negotiations about a possible transatlantic merger, Allen & Overy and O’Melveny & Myers have called time on their merger talks.
Although an agreement had been close, with some key terms such as name and governance structure being agreed by management, adverse macroeconomic conditions – foreign exchange rate volatility, and the reduction of US interest rates – were cited as the final nail in the coffin for the discussions. Such market conditions make it difficult to agree a valuation for each firm, and how financial integration and pay would work as a result.
Questions were also raised over whether O’Melveny was the right fit for the firm, with some observers believing the contrast between A&O’s lockstep pay arrangement and O’Melveny’s merit-based compensation system were too much of a hurdle to overcome. Either way, having partners sit on a lockstep ladder would require an agreed exchange rate, at least initially, which could easily upset one group of partners.
Another factor cited as a cause of the talk’s demise was the time it took to get core conditions of the deal agreed. In contrast to the majority of law firm mergers, which usually happen fairly quickly and have the backing of a lot of people, the A&O and O’Melveny talks dragged on for two years, with many partners on both sides complaining about being left in the dark or receiving conflicting messages about how talks were progressing.
Despite the success of management in getting a number of things agreed, securing enough support for them is another issue. Despite A&O’s senior and managing partners Wim Dejonghe and Andrew Ballheimer spending recent months discussing the merger with partners to shore up positive opinion (even suggesting an open ballot), a faction of corporate partners at A&O’s London office were said to be unhappy about the proposed merger, fearing a dilution of brand and divestment of power from the city base.
With the failure of the talks, eyes will be on both firm’s transatlantic strategy.
In a statement released on Monday, A&O confirmed that growing in the U.S. remains “the highest priority” for the firm, stating it will “significantly increase” its focus on lateral individual and team hires. The statement added that the firm “remains open to considering opportunities for larger combinations”. Whatever route the firm takes next – finding another suitable merger partner or building a US practice organically – no UK firm has cracked this strategy yet.
For O’Melveny, the series of departures from its London office leave it with a huge rebuilding exercise ahead. Many partners are likely to be disheartened by Monday’s announcement, with Legal Week reporting that some partners were encouraged to stay throughout the merger, anticipating more business as a result of the combination. Others were believed to have actually turned away work due to potential conflicts under a combined firm, showing that the progress of talks on the O’Melveny side were opaque to the partnership right until the very end.
The merger failure also holds implications for other top U.K. firms, particularly Freshfields Bruckhaus Deringer and Linklaters, which will now have to accept that even the second tier of U.S. firms are all but out of reach when attempting a full-blown, financially integrated combination.
2). Movers & Shakers
Digital workplace platform Smart Pension has hired Mark Howard from Clyde & Co, where he previously served as the firm’s head of pensions. Howard joins Smart Pension as its first ever general counsel
The Estée Lauder Companies hires Deirdre Stanley as executive vice-president and general counsel. She was previously EVP and GC at Thomson Reuters
Corporate partner Rupert Harper has left Clifford Chance to join Covington & Burling in its Dubai office
Banking and finance partner Alastair Gourlay has joined Baker McKenzie in its Sydney office. Gourlay is the fourth partner to CC in Australia in the last 12 months
Kim O’Reilly is set to join DWF from Mills Oakley as a principal lawyer (partner equivalent) in Sydney
Andrew Garard has joined engineering company Meggitt as its group general counsel and director of corporate affairs. He was the former head of legal for ITV for over a decade and previously headed up Reuters’ legal team globally for five years
The firm has hired Bas Vletter and Herald Jongen, two veteran corporate lawyers from Loyens & Loeff and Allen & Overy respectively
The firm has hired Alexander Odle, co-founder of Dutch outfit Nineyards Law
Mergers & Alliances