A&O Shearman, the transatlantic law firm formed by the merger of Allen & Overy and Shearman & Sterling, has announced a significant increase in partner compensation despite reporting flat revenue for the 2024 financial year. According to the firm's financial results, average profit per equity partner (PEP) rose to $2.9 million, a 20% increase from the previous year's $2.4 million. This boost in partner pay occurred even as total revenue remained unchanged at $3.5 billion.
Revenue Flat, Profits Up
The firm's revenue stagnation contrasts with the strong performance of many Magic Circle and Wall Street rivals, which have seen revenue growth in the low to mid-single digits. However, A&O Shearman's cost-cutting measures and operational efficiencies allowed it to increase profitability. The firm's net income grew by 15% to $1.2 billion, driven by a reduction in non-partner costs and a focus on high-margin practices such as litigation, restructuring, and private equity.
“Our focus on operational efficiency and strategic investments in key practice areas has enabled us to deliver strong partner returns despite a challenging market,” said a spokesperson for A&O Shearman. The firm also benefited from a favorable currency exchange rate, as a significant portion of its revenue is in US dollars while costs are in pounds sterling and euros.
Merger Integration and Strategy
The merger, completed in May 2023, created a firm with over 3,900 lawyers across 48 offices worldwide. Integration costs of approximately $200 million were incurred in the first year, but the firm now expects to realize annual cost savings of $150 million from 2025 onwards. The firm's strategy includes expanding its US presence and cross-border capabilities, particularly in transactional work.
“We are seeing strong demand for our combined capabilities, especially in complex cross-border matters,” the spokesperson added. However, the flat revenue figure indicates that the merger has not yet translated into top-line growth, as the firm faced headwinds from a slowdown in M&A and capital markets activity in the first half of the year.
Comparison with Peers
A&O Shearman's PEP of $2.9 million places it below the top US firms, where PEP often exceeds $5 million, but above many UK-based rivals. For comparison, magic circle peers such as Linklaters and Clifford Chance reported PEP of around $2.2 million and $2.1 million, respectively, while Freshfields reported $2.6 million. The firm's revenue per lawyer was approximately $900,000, in line with industry averages.
The firm also announced that it has promoted 38 lawyers to partner, effective January 2025, continuing its investment in talent. “Our partner promotions reflect the depth of talent across our offices and practice areas,” the spokesperson said.
