Law firm partners who struck a historic transatlantic merger deal this year have leapt to the top of the City pay pile with average salaries of £2.2 million.
A&O Shearman revealed on Thursday that profit before tax at the firm that was previously called Allen & Overy rose by more than 17 per cent, triggering a 22 per cent boost to the average pay of its equity partners.
That took A&O partners past their rivals at Freshfields Bruckhaus Deringer — another of the City’s elite “magic circle” law firms — where average pay for those with full equity shares was last reported to be £2.09 million.
Earlier this week, another magic circle practice, Linklaters, announced that average pay for its top partners had risen to £1.9 million, while the most recent reported figure for another member of that group, Clifford Chance, is £2 million.
All four of those magic circle firms are limited liability partnerships and are therefore required to publish annual financial statements.
The fifth member of the elite group, Slaughter and May, retains a traditional partnership status and therefore does not publish financial performance or partnership pay figures. However, the firm is widely known to be the most profitable of the group of five, with average partnership pay estimated at £3.5 million.
In May, Allen & Overy completed its merger with Shearman & Sterling, a New York law firm, in one of the biggest transatlantic deals in commercial legal profession history.
The deal created a firm with a combined revenue of $3.5 billion, 4,000 lawyers, including 800 partners, spread over 29 countries. However, A&O Shearman has not revealed how many of those partners have a full equity stake in the practice.
The announcement of rocketing partnership pay at the firm is in sharp contrast to its financial report a year ago. Before the merger deal, partners at Allen & Overy took an average pay cut of £130,000 amid warnings of “challenging market conditions”.
In a statement, the firm acknowledged that there remained “global economic and geopolitical challenges”, but said that its “spread of practice areas, sectors and geographies helped to drive positive performance during the year”.
Among A&O Shearman’s most recent deals was one announced this week that involved advising the government of Chile on a €1.6 billion bond offering. That deal came several months after the firm also advised Santiago on a $1.75 billion bond offering.
Earlier this month and closer to home, A&O Shearman advised the Co-operative Bank on the restructuring of its covered bond programme and a subsequent £500 million issuance — the first time the bank had done such a deal since 2011.