Sterling work

Back in 2001 a former colleague broke the story that Bank of Scotland was merging with Halifax. In the Scottish media, stories didn’t come any bigger than that. Shortly afterwards, the chair of the bank approached him at an event in choleric mood demanding to know who had leaked it. My colleague smiled sweetly and said nothing. Of course he didn’t. He won two journalism awards on the back of it.

All of which sprang to mind when news broke last weekend that A&O plans to merge with Shearman & Sterling, creating a new global mega-firm. That came from nowhere. You lawyers really are good at keeping confidences. Part of the job I suppose.

But is it a good idea? Lex at the Financial Times is sceptical. ‘Big law firm mergers typically have the ominous air of a marriage of convenience,’ the Pink ‘Un sniffed. ‘Despite declarations of commitment, the sense may be that both sides would rather be somewhere else.’

True, Shearman’s net profits fell a third last year and the firm is viewed as a diminished force stateside. And there is the inevitable risk that the best lawyers will decamp – a four-partner projects team has already defected to Ashurst.

Yet the consensus seems to be that A&O has pulled off a very British coup. Chris Saul, the former Slaughter and May chief who last year published a provocative paper on what he believes to be the precarious future of the magic circle, certainly thinks so.

Then, Saul floated the prospect of a US merger for the so-called Big Four – A&O, Linklaters, Clifford Chance and Freshfields – ‘only to dismiss it’. Now, he concedes that he must ‘eat [his] words’, and praises A&O for a ‘smart move’.  

‘Shearman partners can hardly say no,’ Saul reckons.

A&O may reap the benefits of being a first-mover here, too. As Saul points out, the gauntlet has been thrown down to the rest of the billion-dollar quartet. They will now need anxiously to revisit their US strategies. But as Tony Williams of Jomati Consultants, a former Clifford Chance managing partner, told the Gazette, entering their own ‘marriage of convenience’ won’t be straightforward. Big US firms are not disposed to enter heavyweight merger discussions very often.