Blue-sky Beringer delivers on some of the hype

What a difference a year makes in commercial law. There was Allen & Overy (A&O) being written off in some circles after a tough 18 months that had raised genuine questions about its ability to keep pace with its three global rivals.

But as A&O’s financial results made clear this week, claims of the firm’s decline have been somewhat exaggerated, with revenue up 20.5% to £887m while average partner profits leapt 31%.

It is a good enough performance to close some of the gap that had begun opening with its key rivals. And as the first magic circle law firm to slip on the LLP straightjacket, A&O can rightly say its results at present carry more credibility than rivals that still enjoy more wriggle-room with their numbers.

In retrospect, you can see that the banking giant had made speedy progress from its low point last year. After a string of bad headlines and departures simmering away until the summer of 2006, A&O last October put together a sweeping review of pay and conditions that matched prudent generosity with some imaginative initiatives from the firm’s HR team.

At the time, some were sceptical – this magazine included – but the firm has proved the doubters wrong; indeed, its early move appears to a considerable extent to have set the agenda that rivals fighting to attract and retain associates have followed.

And what of A&O’s other high-profile statement to the market – senior partner Guy Beringer’s controversial assertion that PEP is outdated as a measure of law firm performance? Well, a cynic might wonder whether Beringer’s words were a smokescreen to distract clients from the fact that total profits rocketed by no less 36% to just under £400m. But what will be encouraging is that A&O has not just performed on the numbers – it has made progress on the key issues that had dogged it in recent years. Poor associate morale; a US practice haemorrhaging cash; an M&A team struggling to hit its stride; senior departures – the firm has made considerable strides on every front since last summer.

The firm has also shown consistent imagination in attempting to rethink how a modern law firm should engage with its clients and staff, even if such blue-sky thinking produced the odd clunker. Beringer, an unusually thoughtful man for a leader of a major City law firm, has come in for plenty of stick over the years. Perhaps he will have the last laugh.

alex.novarese@legalweek.com