Leading London-headquartered law firm Allen & Overy (A&O) is in merger talks with US West Coast law firm O'Melveny and Myers to create what would be one of the world’s largest law firms.
The potential merger, which was reported by website Legal Week, would create a firm with a revenue of £2bn ($2.8bn), which would catapult the combined firm into the very front rank of global law firms, outstripping its London-based magic circle rivals.
The merged firm would be the third-largest in the world on currently available figures, behind US behemoths Kirkland & Ellis ($3.2bn) and Latham & Watkins ($3.1bn) and ahead of global firms Baker McKenzie ($2.7bn) and DLA Piper ($2.6bn).
A&O and its magic circle rivals Clifford Chance, Freshfields Bruckhaus Deringer and Linklaters all reported revenues between £1.3bn and £1.4bn last year so a deal would see A&O forging ahead to the £2bn mark and leave its competitors with serious questions about their future strategies.
Speaking to Legal Week in 2017 A&O managing partner Andrew Ballheimer predicted that the legal market would continue to globalise with a handful of firms pulling away at the top.
“If you look at the global market there is a concentration of a few firms that are moving away – A&O, a couple of others from the UK and a couple of the US firms,” he said.
He also said that “clients are crying out for a handful of global law firms that are equally at home in the US as they are around the world, and there are no firms in the world at this point in time who fit that mould”.
UK firms have struggled to make significant headway in the US which is the largest and most developed legal market in the world.
US firms are typically more profitable then UK firms making it difficult for the leading London firms to hire top partners in competitive markets such as New York.
A&O and O’Melveny have similar profitability with A&O’s profit per equity partner (PEP) hitting £1.51m ($2.1m) last year, while O’Melveny’s rose three per cent to $2m (£1.4m).
O’Melveny has five offices on the US West Coast and large bases in New York and Washington DC, while A&O has US offices in New York and Washington DC.
A spokesperson for A&O said: “While we have said for several years that we are open to considering a merger with the right partner in the US, we talk to many law firms in many countries all of the time and we do not comment on market speculation and rumours regarding any particular firm."
An O’Melveny spokesperson said: “We have no plans to merge and never have.”