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Allen & Overy enters merger talks with US law firm O’Melveny

Allen & Overy (A&O) has entered merger talks with US firm O’Melveny & Myers which could create a £2bn global law firm, Advisory Excellence understands.

The magic circle firm has long desired a US merger and talks are thought to have been progressing for a number of months with senior partner Wim Dejonghe and managing partner Andrew Ballheimer thought to be running the talks.

A&O has made several overtures towards the US in recent years, breaking its lockstep for the first time to bring in several US partners nearly two years ago.

Since then, rumours of need to expand in the US had circulated with O’Melveny frequently mentioned as a merger candidate for the magic circle firm.

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.”

A&O has hired from O’Melveny in the past, bringing in Barbara Stettner, Chris Salter and Charles Borden as partners in July 2011 to open the firm’s Washington DC office. Five years earlier, A&O turned to O’Melveny when hiring banking partner Elizabeth Leckie to bolster its New York office.

One West Coast-based partner at a rival firm told Advisory Excellence: “Everyone knows it’s been A&O’s strategy for a while to expand their global footprint. They need to do something, A&O hasn’t got the US presence that it would ideally like.”

“Does it surprise me?” added the partner. “No.”

While rumour has circulated for several years over A&O’s US expansion plans, the firm was thought to have been cool on the idea of merger.

Market sources indicated that Shearman & Sterling was being touted for a potential major US tie-up, though Ropes & Gray and Fried Frank had also been mentioned in the same vein.

Of its existing US relationships, A&O is thought to work frequently with Fenwick & West, primarily on intellectual property matters.

A spokesperson for O’Melveny said: “We have no plans to merge and never have.”

Data showed A&O generated £1.5bn in turnover for the 2016/17 year, making £666m in net profit with average per equity partner of £1.5m.

O’Melveny generated $738m (£524m) last year while bringing in $335.4m (£238.1m) with PEP of $2m (£1.4m).

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Jones Day and Skadden named strongest US law firm brands

Jones Day has been named the strongest law firm brand in the United States for the second year running. According to the Acritas US Law Firm Brand Index 2018, Jones Day extended its lead in the table, while second place Skadden strengthened its brand over the past year. Bubbling below the surface, though, is the rising threat to traditional law firms from alternative legal service brands.

Acritas’ index is derived from more than 600 interviews, conducted with respondents in $1 billion+ revenue organizations who have senior responsibility for buying legal services. It also includes the views of a 176 non-US-based senior counsel who were asked which firms they used for their US-based legal needs. Perhaps unsurprisingly, the key trend to emerge this year was of intensifying competition amongst law firm brands, with almost the entire top ten strengthening year on year.

In the press release announcing the latest findings, Acritas US vice president Lizzy Duffy observes: “Jones Day is more favoured this year for its practical style of delivery, along with its global coverage and breadth of services – all areas we know align with clients’ evolving needs, especially now that half of legal departments are assigning responsibility for optimising legal operations.”

The top 20 law firm brands in the US were revealed as:

Rank Firm Brand Index
1 Jones Day 100
2 Skadden, Arps, Slate, Meagher & Flom 85
3 Latham & Watkins 78
4 Sidley Austin 70
5 Baker McKenzie 64
6 DLA Piper 61
7 Kirkland & Ellis 60
8 Morgan Lewis 59
9 Hogan Lovells 54
10 Wachtell, Lipton, Rosen & Katz 48
11 K&L Gates 46
12 Norton Rose Fulbright 41
13 McDermott Will & Emery 38
13 Ropes & Gray 38
15 Weil 35
16 Sullivan & Cromwell 32
17 Mayer Brown 30
18 King & Spalding 29
19 Dentons 28
19 Ogletree Deakins 28

As with the global index, published last year, the majority of the firms in the top 20 boast a significant level of trademark expertise – 16 are ranked for their trademark services in the US chapters of the latest edition of the World Trademark Review 1000 – The World’s Leading Trademark Professionals. Of the remainder, K&L Gates were ranked in Australia, while Wachtell, Lipton, Rosen & Katz, Sullivan & Cromwell and Ogletree Deakins do not feature in the current edition.

As we argued previously, for those in the trademark space, the need for strong brand equity and recognition is particularly acute, and not just with respect to demonstrating to clients a deep understanding of the nuances of trademark law. On the flip side, where firms offering brand-related counselling find themselves embroiled in disputes centred on their own identity, this inevitably gets picked up in the media and can result in reputational challenges.

In short, brand really does matter. After all, in an increasingly competitive market for trademark services, any opportunity to stand apart from rival firms is to be seized upon – and that challenge is set to continue. For its latest ranking, for the first time Acritas scrutinised alternative legal service brands. While still not in a position to rival traditional entities, the data suggests that alternative brands in the legal space – particularly when they are tech-driven – are fast catching up. Duffy observes: “For now law firms still have a richer brand profile – they are seen as authorities in so many more areas of expertise, the current advantage the alternatives have is centred on technology and process efficiency. As clients look for ways to drive value in managing their legal work, the threat from alternatives will continue to rise. Our latest research study shows top of mind awareness of Axiom has almost tripled in four years in the US. Law firms must use this threat as an opportunity to adapt to clients’ current needs.”

As a reminder, Axiom offers lower-cost outsourced legal services. In the trademark space, new models have most commonly appeared in the form of low-cost online-based filing portals, which have come under fire from law firm practitioners cautioning over the commoditisation of trademark work. As we have reported on in detail, new outfits – many with their own dedicated trademark practices – have also entered the market to capitalise on practitioners’ growing dissatisfaction with the traditional law firm structure. Whether through the virtual or subscription-based law firm, an on-demand model or a gamified approach, disruptive innovation is throwing up new ways of doing (legal) business.

While strong, resilient legal brands will help traditional firms maintain market share in the immediate term, there is clearly a need to react to changing client needs and ensure that new technologies are properly harnessed in a bid to stave off new competitors.

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Ropes & Gray rebuilds in Hong Kong with Simpson Thacher hire

Ropes & Gray has hired Simpson Thacher & Bartlett finance lawyer Jackie Kahng as a partner in its Hong Kong office.

Kahng, who is dual-qualified New York and Hong Kong and was an associate at Simpson Thacher, focuses on borrower-side financing work, advising private equity funds and their portfolio companies.

The co-head of Ropes & Gray’s global finance practice Byung Choi said: “Jackie’s experience will enhance our global finance offering and we expect that she will play a key role as we continue to expand our acquisition and leveraged finance practice. Her appointment is a further step in building an integrated global finance practice that allows us to offer cross-border expertise across financing products.”

Ropes’ 2020 strategy, which it unveiled in 2015, has an emphasis filling in the gaps and creating links between London, New York and Hong Kong.

The firm opened in Hong Kong in 2008 and first began offering Hong Kong law advice in 2012, hiring Julian Chung and Gary Li from Norton Rose and Paul Weiss Rifkind Wharton & Garrison.

The office suffered a blow in April 2017 with the loss of four partners, including office managing partner Paul Boltz, to Gibson Dunn & Crutcher. Private equity partners Scott Jalowayski and Brian Schwarzwalder, and banking partner Michael Nicklin, also departed.