Allen & Overy to Merge With Shearman & Sterling

The biggest transatlantic merger since 2000 could be about to happen in the legal sector, if a new deal proposed between the UK ‘magic circle’ firm Allen & Overy and well-established US business Sherman & Sterling goes ahead. While it is still subject to ratification from the partners of both companies, if the deal does go ahead, the newly merged firm (which will be called A&O Sherman) would be worth $3.4 billion (£2.7 billion), and have 3,900 lawyers and 800 partners, based in 49 offices in 29 countries around the world.

In a statement, the companies described the merger as:

“Driven by clients’ needs for a seamless global offering of the highest quality and depth to support them in navigating an increasingly complex legal, regulatory, and geopolitical environment.”

This isn’t the first time either company have engaged in discussions about merging with a firm on the other side of the Atlantic: only a few months ago, Sherman and Sterling were in talks with rival firm Hogan Lovells about merging, but these talks were abandoned, which some people blamed on leaks in the company. Allen & Overy have also had their fair share of failed mergers – four years ago, talks broke down between California-based law firm O’Melveny and Myers when the two sides failed to agree on a valuation. For both companies, this is the fulfilment of a long-held wish to get onto the other side of the Atlantic.

However, one company is in a stronger position than the other: Allen & Overy posting a revenue of £1.9 billion last year. Sherman & Sterling’s rather more modest, by comparison, profit of $907 million is also tempered by the fact that, in February, they announced they would be making staff in the US redundant (The nature of these redundancies hasn’t been made public), as well as losing several of their partners when their merger with Hogan Lovells fell through. However, combining Allen & Overy with Sherman & Sterling will still help to create the third largest integrated law firm in the world, based on their gross revenue, bringing in about $1 in US revenue. As a combined outfit, A&O Sherman will be the only global elite firm with US Law, English Law and Local Law capabilities in equal measure, with Sherman & Sterling getting greater access to the rest of the world across Finance, Corporate, Capital Markets and Litigation, while Allen & Overy will get access to a US corporate client base thanks to Sherman & Sterling’s brand recognition.

While there are still a couple of potential stumbling blocks, this new deal looks like it could be one of the largest in legal circles in the 21st century. However, like with all mergers, it may not be completely plain sailing. The complex nature of integration between UK and US firms means that there may be some clashes of culture and ethos during the transition. But, if all goes well, and the deal does go through, it will make for one of the biggest mergers in recent times and will surely have an impact on the legal market in the UK, US and right across the world.