There was embarrassment all round at Allen & Overy this week after it was revealed that the firm's US offices had lost a quarter of a billion dollars over the last 20 years.
A&O's Managing and Senior Partners both visited the firm's New York office earlier this year and gave a Cassandra-like speech to their partners. But two of those partners have now broken ranks and spilled the beans to The American Lawyer. Apparently the New York and Washington offices have been haemorrhaging money: $250m over the last 20 years and $20m in 2011 alone. As a result partners and associates had been asked to leave, and others had their pay cut. Ouch. Although given A&O's partners still manage to pull in an average of more than £1m a year, it seems the firm has been able to soak up the cost without too much difficulty.
It's a jaw-dropping loss but it won't be just A&O who's feeling the pain. New York has proved a tough nut to crack for all the major City firms, and it's widely believed that the rest of the Magic Circle has fared equally poorly (with the exception of Slaughter and May, which has cleverly dealt with the issue by simply not having a New York office). The combination of highly paid associates, partners who expect millions every year after having been rewarded under an eat-what-you-kill culture and local clients who are reluctant to move away from their trusted domestic advisors in resulting in a perfect storm for European firms.
A spokesman for A&O said that he couldn't comment as accounts were prepared on a consolidated basis and weren't broken down according to office or practice group and also the dog ate his homework.
Tip Off ROF
A&O's Managing and Senior Partners both visited the firm's New York office earlier this year and gave a Cassandra-like speech to their partners. But two of those partners have now broken ranks and spilled the beans to The American Lawyer. Apparently the New York and Washington offices have been haemorrhaging money: $250m over the last 20 years and $20m in 2011 alone. As a result partners and associates had been asked to leave, and others had their pay cut. Ouch. Although given A&O's partners still manage to pull in an average of more than £1m a year, it seems the firm has been able to soak up the cost without too much difficulty.
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The world's smallest violin yesterday |
It's a jaw-dropping loss but it won't be just A&O who's feeling the pain. New York has proved a tough nut to crack for all the major City firms, and it's widely believed that the rest of the Magic Circle has fared equally poorly (with the exception of Slaughter and May, which has cleverly dealt with the issue by simply not having a New York office). The combination of highly paid associates, partners who expect millions every year after having been rewarded under an eat-what-you-kill culture and local clients who are reluctant to move away from their trusted domestic advisors in resulting in a perfect storm for European firms.
A spokesman for A&O said that he couldn't comment as accounts were prepared on a consolidated basis and weren't broken down according to office or practice group and also the dog ate his homework.
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They have the stated aim of being "premium global law firms", but they have no hope of fulfilling that in NYC, so why do they bother? They will never be taken seriously by US corporates and banks as competitors of the likes of Cravath and Simpson.