UK's Magic Circle has lost some of its sparkle in recent years as its five firms have been battered by competition from larger, more profitable U.S. firms. The term is bound to lose even more of its meaning as the A&O Shearman merger becomes final. The merger has created a behemoth firm with roughly 3,900 lawyers and a combined gross revenue of $3.5B. 

Adam Hakki, based in New York and newly appointed as the Co-Chair of the global A&O Shearman board, and Chair of its U.S. business, stated that the merger offers a competitive advantage that neither firm had before. “We are going to be competing at the highest level for the most complicated work,” added Hakki. “We need to be competitive from a compensation point of view, and we intend to be.”

The merger highlights the differing strategies the five firms have pursued to maintain their elite status and move on from the UK-centric moniker. As Scott Gibson, a Director at London legal recruiting firm Edwards Gibson, puts it, "The problem for UK firms is that there is only so much truly premium local legal work around. As long as US private equity continues to drive the market, the rest of the UK global elite will keep trying to break the US. They have no choice if they want to stay elite." 

The U.S. Market Is Seen as A Key Battleground

The U.S., being the world’s largest legal market, is a key battleground for these firms. Freshfields U.S. Managing Partner Sarah Solum notes that the firm’s build-out in the U.S. "has gone exceedingly well for our clients," indicating the importance of a strong presence in the American market.

“The U.S. is the biggest legal market in the world, so it’s clearly important if your ambition is to be a leading global firm,” said Roger Barron, senior advisor at Montresor Legal Recruitment. “Or you roll back your ambition and you want to be the leading firm in Europe for significant deals. But for that we just need sufficient capabilities in the U.S.”

However, the remaining three firms—Clifford Chance, Linklaters, and Slaughter & May—have declined to comment on their U.S. strategy in the wake of the A&O Shearman merger.

Freshfields Is a Case of Aggressive Expansion

Freshfields Bruckhaus Deringer has arguably pursued the most aggressive U.S. expansion among any Magic Circle firm in recent years, prior to the A&O Shearman merger. The firm has grown to more than 400 lawyers in New York, Washington, D.C., and Silicon Valley. This push has translated into revenue growth, with the firm’s U.S. business pulling in $388M last year in revenue.

A New Era Begins for A&O Shearman With Nearly 4000 Lawyers Globally

With the merger completing, A&O Shearman becomes one of the biggest law firms in the world, with $3.5B in revenue and nearly 4,000 lawyers globally. A&O ranks 12th in revenue according to the 2023 Global 200 rankings, with Shearman ranking 71st. The Global 100 rankings showing profits per equity partner, Shearman and A&O rank 42nd and 43rd respectively. The aim behind the merger was to give both firms access to more markets. The combined firm now has 48 offices in 29 countries.

The merger of A&O and Shearman & Sterling shocked the legal sector when it was first announced last year. A&O gains $1B in US business with brand recognition, while Shearman & Sterling gains a foothold in the UK and rest of the world.

“Our global clients increasingly are looking for an integrated legal solution, ideally from one firm, to support them in their global ambitions,” said Khalid Garousha, Senior Partner of A&O Shearman.

The new ‘megafirm’ has been integrating their operations for much of the last 11 months. The firms’ new Senior Partner, Khalid Garousha, and Paris-based Hervé Ekué were elected as Managing Partners of A&O Shearman. London-based Denise Gibson was appointed as Managing Partner for the UK.

The A&O Shearman merger marks a significant shift in the UK’s Magic Circle. As the dust settles, it will be interesting to see how this merger influences the strategies of other firms within the circle.

Mayer Brown Exits Greater China Markets

Reflecting the complexities of operating within the current geopolitical and economic climate, Mayer Brown is reportedly severing ties with its offices in Beijing and Shanghai, while restructuring its Hong Kong presence. This information comes from several individuals within the firm who are privy to the ongoing changes. The specifics regarding the future leadership and structure of the reorganized entities remain undisclosed.

While Mayer Brown's spokespeople have not provided comments, the firm's current Hong Kong operation, which includes 57 partners with expertise in diverse legal domains, is recognized for serving high-profile clients such as the Chinachem Group and AXA. Mayer Brown's other Asian offices in Tokyo, Singapore, Ho Chi Minh City, and Hanoi are expected to remain under the firm's control post-separation, according to the same sources.

Internal commentary suggests that the firm's decision to recalibrate its Greater China operations may be influenced by a confluence of factors, including economic headwinds, heightened data security concerns, and the increasingly complex relationship between the U.S. and China. The firm's Mainland China offices are notably smaller, but its established Hong Kong office is a substantial international law operation.

Historically, Mayer Brown's integration into the local market was solidified through its merger with legacy Hong Kong firm Johnson Stokes & Master in 2008, which led to the firm being viewed as a domestic entity. However, recent political challenges and a series of departures have contributed to a downsizing trend within the Hong Kong office.

The potential retraction of Mayer Brown from Greater China is anticipated to have a marked impact on the local legal market, which has already observed a pattern of U.S. law firms, including Dentons and others, retreating from the region due to regulatory changes.