Vision, focus and talent have helped Allen & Overy become one of the most successful international legal services firms, but what sets it apart is the innovation-led mind-set of its people.
Anyone looking for validation that A&O is far and away the most innovative of the major law firms need look no further than the prestigious Financial Times Innovative Lawyers Awards and the firm’s record six wins of the ‘Most Innovative Law Firm in Europe’ title.
In some ways, this is hardly surprising: A&O has long been at the forefront of innovation. The firm was quick to restructure legal practices, for example starting a pensions practice in the 1950s and breaking down what had been a general commercial practice into corporate, banking and capital markets groups in the 1970s, together with a well-established litigation practice. It was also among the earliest firms to develop a derivatives specialisation in the 1980s.
Breaking the mould, A&O was the first UK law firm to laterally recruit partners when it took on three lawyers in 1989 to start a specialist insolvency practice. Philip Wood, then head of Banking, realised that insolvency was a gap in the firm’s offering and should be filled. The timing was perfect, both because the ‘Three Musketeers’, as they came to be known, wished to move firms and also because – as it turned out – the UK was about to enter recession. In 1991, there were three huge insolvencies – Maxwell, Canary Wharf and Heron – and A&O and the Three Musketeers had a lead role in all of them.
This lateral hiring initiative was not without controversy, both inside and outside the firm. But it was an A&O success story and that meant the firm was more open to making such moves in the future and also to being in a field more generally. As Gordon Stewart, one of the Musketeers, recalls: “I think our joining not only positioned the firm perfectly to capitalise on a huge commercial opportunity, it also gave the firm confidence to expand in the future through lateral hires as well as organic growth. It was definitely a step change in approach and it laid the seeds for the firm to become ever more innovative.”
1994: the pace of innovation quickens
Innovation started to take off 25 years ago, dating from two significant events in 1994: opening in Germany and acquiring a New York law capability. Germany was an obvious target market, as Europe’s largest economy and a huge opportunity for international law firms, not least because of the fall of the Berlin Wall and the prospect of German reunification. Until then, Germany’s legal market was highly fragmented – largely based on individual states – and tended to revolve around individual practitioners, even within the context of law firms. The EU’s harmonisation rules opened the door to foreign law firms. Accordingly, A&O opened an office in Frankfurt.
As it was, the firm had been among the first law firms to take advantage of opportunities in the newly Soviet-free economies of Central and Eastern Europe. A&O opened offices in Warsaw in 1991, in Prague in 1992 and in Budapest and Moscow in 1993.
The idea of starting a New York law practice was first mooted when the law was changed in 1990 to permit English law firms to have non-English lawyers as partners. This was the Courts and Legal Services Act 1990 (which was not implemented until 1993).
Coincidentally, there was also a significant change in U.S. Securities and Exchange Commission rules, which for the first time facilitated sales (with restrictions) to U.S. investors in offerings made outside the United States and sales into the United States without SEC registration to certain ‘qualified’ institutional buyers. Until that point, A&O deals, and the deals it competed for, tended to be those that expressly prohibited sales to U.S. persons or into the U.S. The change to SEC rules thus resulted in significantly more non-U.S. companies extending their offerings into the U.S. private institutional market, thus triggering U.S. law aspects.
These developments made it possible for A&O, an essentially English law-practising firm (although it was beginning to practise local law in Europe), to develop a New York law capability. A&O was a leader among the Magic Circle firms in taking advantage of this opportunity when the U.S. lawyer Jeff Golden joined the London office in May 1994. A&O thus became the first of its peers to have a U.S.-qualified lawyer as a partner in London.
The challenge was then to attract more U.S. lawyers to join the firm. The strategy to internationalise held much appeal for potential recruits, as did the firm’s vision to create a leading international capital markets practice founded on dual New York and English law capability. As Jeff reflects: “A&O’s first overseas offices were opened in the 1970s, followed by offices in New York and Asia in the 1980s. With the establishment of our U.S. law practice, the strategy of internationalising turned a corner.”
First merger and revised management structure
In 1998, A&O merged with the Italian firm of Brosio Casati (the firm’s first-ever merger) and the Thai firm of MPS & Associates, the M in the name standing for Makinson. Simon Makinson, an associate with A&O before joining MPS & Associates, remains an A&O partner.
In 2000, as A&O had grown substantially in size and global reach, it was decided to introduce a supervisory board comprised of the senior partner, the managing partner and other partners elected from the whole partnership. Reflecting the change in the make-up of the partnership, the first board included Anne Baldock, A&O’s second female banking partner after Julia Salt, Guido Brosio, previously co-head of Brosio Casati, and Sietze Hepkema.
The firm had formed an association with the French firm of Gide Loyrette Nouel and the Benelux firm of Loeff Claeys Verbeke (LCV) in the 1990s, and when that grouping did not offer as many benefits as the firm had hoped, thoughts turned to a more formal arrangement. In 2000, A&O merged with the Dutch and Luxembourg part of LCV and in 2001 with the Belgian side.
The 2000 merger was a significant step in the firm’s evolution, as Sietze Hepkema, the principal negotiator and co-head of the global Corporate practice, explains: “A&O moved from exporting English law to exporting its way of delivering legal services, which was more commercially focused and less technical than what you would typically find on the European continent and beyond.”
Continuing global expansion
Into the 21st century, A&O continued its global expansion. The firm broke into the Australian market in 2010, became the first major law firm to open an office on the African continent (Casablanca in 2011, see Targeting a continent on the rise), and spread its wings into Vietnam and Myanmar.
The underlying distinctive approach of the firm’s globalisation involved taking on the best local lawyers, integrating them into the firm and actively embracing other cultures. “We rapidly became less London-centric, becoming a firm that welcomed ideas from all quarters. That was truly innovative in the legal sector,” says Sietze – not least, with Wim Dejonghe, a Belgian, becoming global managing partner in 2008 and then senior partner in 2016.
By 2019, A&O had built a truly global network spanning more than 40 offices in 30 countries, plus strong ties with relationship law firms in more than 100 countries. This network makes A&O one of the largest and most connected law firms in the world, with a global reach and local depth that is unrivalled.
As Andrew Ballheimer, A&O’s global managing partner, notes, this does not mean that the firm has achieved all of its strategic objectives. “New opportunities will present themselves and we have brilliant people to identify and pursue them,” he says. “Asia will continue to be a high-growth opportunity, in particular China and the ASEAN region. India is also a market where A&O would certainly like to open and would have done so but for local restrictive Bar regulations. The continued investment and expansion of our U.S. law capability remains a top priority.”
It was not only offices that A&O opened and developed. A key part of the innovative globalisation strategy was developing relationships with leading local law firms in jurisdictions where the firm did not have an office. The network that the firm created proved to be another master stroke in its strategy to becoming a top global law firm.
Bringing new thinking to how A&O approached resourcing was another key part of the firm’s innovation. As competition intensified and clients challenged their legal services providers to become more cost-effective, so law firms looked to outsource elements of their work to other specialist providers or to open back offices in less expensive locations. For A&O, the solution lay in near-shoring, with the opening in 2011 in Belfast of a Support Services Centre (SSC), which included many back office functions, and a Legal Services Centre (LSC) the following year, which handled some of the more routine legal work, such as due diligence and later more specialised drafting, analysis and negotiations.
Jane Townsend, who had been instrumental in building A&O’s CEE practice from 2002 and had been elected to the A&O board in 2010, moved to Belfast to head up the LSC in 2011, the first partner to hold this new position. Jane retired in 2019 and was replaced by Angela Clist. In less than a decade, Belfast has grown to become the firm’s second largest office, now employing more than 500 people.
Another innovative approach to resourcing involved drawing on the experience of lawyers both with and without an A&O background to work flexibly, and as required on projects. Peerpoint was the first of the Magic Circle firms to have this offering and led the way establishing the market. From just three consultants in 2013, there are now more than 300. Peerpoint consultants take on a variety of roles with clients, over and above traditional legal work, such as technology integration, resourcing, legal technology and project management.
Harnessing the potential of technology
A central feature of A&O’s innovation has been the firm’s willingness – indeed, enthusiasm – to harness technology and its approach to developing and commercialising tech-based products.
Many of the ideas, and products, stemmed from the firm’s forward-thinking derivatives lawyers. Derivatives Services was established in 2001 as an A&O-owned entity by the firm’s appointed head of e-business, Marc-Henri Chamay, to develop in collaboration products such as netalytics and CSAnalytics. These were web-based products offering users scope to find answers to complicated legal issues, including multijurisdictional opinions, for themselves without having to go to their lawyers.
Other products were subsequently developed outside the derivatives field (for example, in areas such as beneficial ownership reporting and cross-border marketing rules). As a result, Derivative Services was rebranded under the name aosphere, which currently has 11 subscription services, delivering actionable information to more than 450 subscribing global institutions and 15,000 users.
Reflecting the growing importance A&O attaches to innovation, an Innovation Panel was formed in 2007, a move that was given added impetus following the Lehman Brothers insolvency of 2008 and the subsequent global financial crisis. Law firms found themselves under just as much pressure as banks to deliver their services more efficiently: doing more with less as clients cut back their legal spend.
The market in which law firms operated changed radically. The traditional business model of law firms no longer withstood scrutiny. As Wim Dejonghe puts it: “The first step was recognising that we needed to change; the second was embracing that change and welcoming the opportunity the new market presented in how we delivered our services. My way of thinking is that there is never an excuse not to try to be more efficient. How you benefit from efficiencies is up to you: you can pass it on to clients, which is generally our preference, or you can absorb those benefits in-house.”
Making the most of the rapid advances in technology – including anything and everything from software development, online applications, workflow, data processing and management, and artificial intelligence – has been central to A&O’s emergence as the most innovative of the major law firms.
Nothing exemplifies this better than the decision, in 2017, to support tech companies working at the cutting edge of technology serving the legal sector. A&O called it Fuse. It involves the firm providing space to the most forward-thinking businesses to put them in close quarters with the firm’s lawyers, technologists and clients with the aim of developing high-quality tech-driven delivery of services. The companies chosen for Fuse, which welcomed its third cohort in 2019, develop the technology that the firm and its clients often then license.
Alongside Fuse and the firm’s IT function, A&O created its own Legal Technology Group to capitalise on the growing opportunities of legaltech (the legal industry’s equivalent of the banking world’s fintech). This 45-person team’s job is to deliver the technology component whenever A&O’s lawyers come up with a challenge that can be solved through technology.
The primary originator of tech-enabled client solutions in A&O has been the Markets Innovation Group (MIG). Formed in 2018, again by the firm’s Derivatives practice, but drawing on the expertise of lawyers from all areas of the firm, MIG develops proprietary technology solutions, such as MarginMatrix™ and IBORMatrix™, for clients’ large-scale legal and regulatory challenges.
A&O also demonstrated its innovation in the services it provides when, in September 2018, it started a consulting business, A&O Consulting (see page 34). The service provides high-level advice to clients on governance, corporate purpose and culture, conduct and operational risk, and regulatory strategy and implementation.
Other innovative moves reflecting the changing nature of the firm’s people make-up include the fact that the Belfast office has recruited PhD-level scientists to assist on deals and cases where scientific expertise is needed and the increasing number of lawyers who are familiar with technology and can originate or support the development of technology-enabled solutions.
Underlying all of this is the firm’s desire to become the world’s “most advanced law firm”. Jonathan Brayne, chairman of Fuse, uses a simple metaphor to describe the firm’s approach. He says: “We want to have several tools in our toolbox. If you just have a hammer, you can only work on a limited number of tasks involving a nail. By having a range of tools, many of them technological but also those which draw on non-legal skills, such as project management expertise, we can offer clients a far wider range of services and therefore serve them better. We are definitely in the vanguard of technology development. But it is competitive and there’s no room for complacency.”
Another key factor is A&O’s egalitarian, collaborative culture. Jonathan has a quote from the former U.S. President Harry Truman on his wall, which he recognises is sometimes aspirational and which reads: “It is amazing what you can accomplish if you do not care who gets the credit.”
Wim adds that innovation necessarily involves taking risks, and people are encouraged to take those risks. “We are prepared to take risks, and some will come off and some will fail – that is the nature of risk-taking,” he says. “We allow for failure and do not apportion blame. The result is our people are genuine innovators.”
Where is the firm headed?
A&O has become, through its innovative transformation, a diversified law firm that offers legal and related business services. What unites them all is A&O’s promise of the best expertise, innovation and global delivery.
“The more we innovate, the more we realise we have to keep innovating,” Wim says. “Law firms face competition not just from other law firms but from tech businesses that can process data efficiently and in ways that – potentially – clients want.
“We prize our expertise, our people and our know-how above all. The challenge for us going forward is to continue to deliver what we are best at, using all the best tools at our disposal.”
To learn more about A&O’s history, visit our online history portal ‘A&O Story’ at alumni.allenovery.com