The Magic Circle, once shorthand for a select group of elite UK-founded law firms, has lost some of its sparkle in recent years as its five firms have been battered by competition from larger, more profitable US firms.
The term is bound to lose even more of its meaning as Allen & Overy’s merger with Wall Street firm Shearman & Sterling becomes final, creating a behemoth with roughly 3,900 lawyers and a combined gross revenue of $3.5 billion. The merger, which closed Wednesday, highlights the differing strategies the five firms have pursued to maintain their elite status and move on from the UK-centric moniker.
“The problem for UK firms is that there is only so much truly premium local legal work around,” said Scott Gibson, a director at London legal recruiting firm Edwards Gibson. “As long as US private equity continues to drive the market, the rest of the UK global elite will keep trying to break the US. They have no choice if they want to stay elite.”
How the other four firms—Clifford Chance, Freshfields, Linklaters, and Slaughter & May will pursue the US, the world’s largest legal market, is a question that can’t be ignored.
“The US is the biggest legal market in the world, so it’s clearly important if your ambition is to be a leading global firm,” said Roger Barron, a longtime Linklaters partner who’s now a senior advisor at Montresor Legal Recruitment. “Or you roll back your ambition and you want to be the leading firm in Europe for significant deals. But for that we just need sufficient capabilities in the US.”
Freshfields US Managing Partner Sarah Solum said the firm’s build-out in the US “has gone exceedingly well for our clients,” noting the firm regularly appears among leaders for US and global deal work.
“We’re a firm with across-the-board distinction in litigation, regulatory and corporate work in the US and multiple other geographies,” Solum said in a statement to Bloomberg Law. “That’s what clients have told us they need, and we have been and intend to continue to be fully responsive.”
The remaining three firms declined to comment on their US strategy in the wake of Allen & Overy’s merger.
Freshfields
Freshfields Bruckhaus Deringer has pursued what is arguably the most aggressive US expansion among any Magic Circle firm in recent years, prior to A&O’s merger. The firm has grown to more than 400 lawyers in New York, Washington, D.C., and Silicon Valley.
The push has translated into revenue growth. The firm’s US business pulled in £311 million ($388 million) last year in revenue—leapfrogging into the leading position among its Magic Circle competitors.
Since hiring former Cleary Gottlieb M&A star Ethan Klingsberg in 2019, the firm launched an impressive Silicon Valley office the following year. It more recently poached Neal Reenan and Ian Bushner, two major private equity partners, from Latham & Watkins.
The firm plans to continue hiring in the US, according to senior partner Georgia Dawson. She said Reenan and Bushner would help “lead the next phase of expansion” for the firm’s private equity practice. The pair have a track record of building: They opened a Boston office for Kirkland & Ellis in 2017.
Freshfields caught the attention of leading US law firm leaders when it made its splash in Silicon Valley. It remains to be seen if the firm can keep that momentum.
Clifford Chance
Clifford Chance last year opened its third office in the US, launching a Houston outpost with a 10-partner group led by former Latham & Watkins lawyers. That move added to its 250 lawyers in New York and nearly 100 in Washington, D.C., per Firm Prospects data.
Sharis Arnold Pozen
Photo: Clifford Chance
The move fit into the firm’s strategy of adding “strategically” to its US presence, Sharis Arnold Pozen, regional managing partner for the Americas, said at the time. The hires bolstered the firm’s global energy and infrastructure practice, which has around 400 lawyers and Pozen said is growing thanks to demand from the clean energy transition.
Global managing partner Charles Adams said the firm was not pursuing a US merger as a reaction to the A&O Shearman deal when announcing its 2023 revenue—a 5% increase.
The firm is confident in its strategy of “steady and confident growth” in sectors where it can make a difference “globally,” Adams told the Financial Times.
Linklaters
Among the Magic Circle firms with a US presence, Linklaters has trailed its rivals.
The firm has less than 200 lawyers in the States. But it made a splashy hire in January when it hired Shearman & Sterling’s former global co-managing partner, George Casey, and five other M&A lawyers.
The move stole some of the shine from the A&O Shearman deal, and Linklaters in the process answered a broader question around its US ambitions.
“Growing our M&A capability in the US is a strategic priority for us,” Linklaters Senior Partner Aedamar Comiskey said about the move. “Adding a market-leading M&A practice in New York to our preeminent global M&A offering means we can support our clients in all core markets.”
Still, the firm has a long way to go to compete for the biggest deals with the largest firms in the world’s most lucrative legal market. And growing an M&A practice in New York will require competing in the fiercest talent war in any geography.
Slaughter & May
The smallest but most profitable partnership of the Magic Circle, Slaughter & May has avoided hiring US lawyers in favor of a “best friends” network that has seen the firm win referrals from top American firms, including Wachtell, Lipton, Rosen & Katz.
Slaughter & May says in any given year it works with more than 200 law firms across 100 countries. In the US, it has advised over 100 of the US Fortune 500, with major clients including Google, The Walt Disney Company and UnitedHealth Group, per the firm’s website.
That model has the advantage of requiring little by way of investment in international talent. But it rests on the assumption that clients will continue to work with local expert firms, rather than taking their business to the increasingly large and international players.
A report this year by Refinitiv showed that other European firms in Slaughter’s “best friends” network had referred more deals to large firms such as Freshfields, Latham, and Kirkland & Ellis.
The report said little about the firm’s American work, but it was viewed by some as a sign that clients want to work more often with the biggest law firms. That’s a trend that would likely impact US clients as well.
