Top Wall Street Legal Teams Poised to Steer A&O Shearman Merger

Top Wall Street Legal Teams Poised to Steer A&O Shearman Merger

Jennifer S. Conway, the head of compensation at Davis Polk & Wardwell, is highly regarded for her attention to detail, commercial acumen, creative thinking, and thoughtfulness, according to the legal directory Chambers and Partners. These qualities will be crucial as she advises client Shearman & Sterling on their proposed merger with UK Magic Circle firm Allen & Overy (A&O), especially in addressing the complex task of integrating the two firms' partner pay systems.

Representing A&O in this process is Jeannine McSweeney from Simpson Thacher, recognised as a "Next Generation Partner" specialising in employee benefits and executive compensation, according to the Legal 500.

While opinions on A&O and Shearman's bid to create the third-largest integrated international law firm by revenue have been largely positive, the seamless presentation of the deal has received universal recognition. The selection of two leading Wall Street law firms as advisors on the deal has further enhanced its perception.

From a UK perspective, where a small group of firms has established successful niches as advisors to professional practices, enlisting the services of two M&A powerhouses may seem somewhat unconventional, even though similar specialised expertise may not be as readily available in the US.

However, Robert Bata, principal of WarwickPlace Legal, argues that it is not merely a matter of optics. He highlights the expertise of both firms in executive compensation and explains the need to retain highly compensated partners from Shearman to ensure their continued commitment to the newly merged entity. Davis Polk and Simpson Thacher, with their experience in advising on such issues for major corporations, are ideally positioned to address these concerns.

Zulon Begum, a partner at London firm CM Murray, specialising in partnership and LLP practice, emphasises the importance of employing independent legal advisors during law firm merger negotiations. She explains that while law firms often believe they possess the necessary expertise in-house, engaging external experts is beneficial, not only due to the complexities of partnership and professional regulatory law but also to reassure partners by not solely relying on management's perspectives.

Both Davis Polk and Simpson Thacher have made significant efforts to ensure the provision of independent advice.

Davis Polk's team, led by corporate partners William Aaronson and Lee Hochbaum, includes Jennifer S. Conway, tax partner Michael Mollerus, and a supporting team of counsel and associates. Simpson Thacher's team, led by M&A partners Eric Swedenburg, Anthony Vernace, and Jihyun Chung, comprises Jonathan Goldstein (tax) and Peter Guryan (antitrust), along with Jeannine McSweeney and a group of associates.

The upcoming partner votes by the end of the summer present a major hurdle for A&O, Shearman, and their respective advisors. Approval from three-quarters of the partnerships is required, although the management teams aim for a more emphatic endorsement to maintain momentum. However, the process is far from over, with completion not expected for another six to twelve months.

Zulon, who advised Taylor Vinters on their recent merger with Mishcon de Reya, is not surprised by the timeframe, considering the multitude of tax, partnership, corporate, and regulatory issues that must be addressed jurisdiction by jurisdiction. She also notes that achieving an integrated partnership from the outset, instead of relying on a Verein structure, will pose additional challenges.

Conflicts of interest pose a significant headache for the two parties involved, which is often underestimated by firms engaged in merger discussions involving the UK. Corinne Staves, a partner at CM Murray, explains that the Solicitors Regulatory Authority rules prohibit prospective merger partners from sharing client information to assess potential conflicts. Limited to publicly available information or obtaining client permission through a laborious process, firms in the UK face greater constraints compared to their counterparts in the US who can engage independent checkers as intermediaries.

To address the issue of the conflicts, the two firms released an FAQ sheet on the day of the merger announcement. They stated that they had conducted a preliminary assessment of conflicts, which will continue as they work towards the merger. They assured clients that they would be directly informed if any conflict issues arise that require management or resolution, but they do not anticipate a significant number of such issues.

Given the complexity and scope of the merger, it is clear that the process will require skill, patience, and meticulous handling from all parties involved.