A&O faces challenge to quell O'Melveny merger scepticism as doubts emerge among partnership

 

Allen & Overy’s (A&O) leadership could face an uphill battle to convince London partners of the merits of its proposed merger with US firm O’Melveny & Myers, according to sources close to the discussions.

It was revealed last week that A&O is in discussions over a tie-up with the Los Angeles-based firm, but multiple partners have since told Legal Week of reservations among the firm’s City ranks.

Although A&O partners were informed at the start of the year that the firm was in talks over a potential US tie-up, before last Friday no names had been presented to partners, and the news of discussions with O’Melveny has come as a surprise to many, with one source describing the initial reaction in some quarters as “quite violent”.

One A&O City partner told Legal Week that most of the firm’s London office are “dead against” the proposed merger, while another senior partner who recently left the firm said that “lots of people in London do not want this”.

Given O’Melveny’s strong focus on litigation and entertainment, partners in A&O’s flagship banking and finance practice and those in other transactional teams are understood to have particular concerns, with questions raised about the strategic logic behind the talks.

Two sources have told Legal Week that A&O’s management has acknowledged that an O’Melveny merger would leave more work to do to attain the presence it desires in the US.

One former A&O City partner, who said the discussions are “being sold as more of a disputes than corporate play”, said: “[Management] have said they would then have to build up more in corporate and M&A in the US,” while another current partner described the proposed deal as “a first step”, adding that the second step would be to focus on building the firm’s corporate and debt capabilities in the US.

Although details of the talks have so far been contained to only a small number of senior figures, partners are expecting to hear more details in the coming weeks and at A&O’s partner conference in Miami in June.

Others are more pragmatic about the reaction to the talks, with one ex-partner saying: “There are some mixed feelings within A&O. It’s not surprising that some people are excited and some are pessimistic.”

While a vote on the deal is not understood to be imminent, management will have to push the rationale behind the merger to convince sceptical partners in core departments.

As one ex-partner comments: “There are mergers that partners reject – just because people at the top think this is great doesn’t mean the partnership will as well.”