Law firms in the United States and United Kingdom have long jostled in the marketplace as they seek to establish strong and profitable presences on the other’s home turf. So far in 2022, for example, U.K. Magic Circle firm Allen & Overy (A&O) has generated more than half its global revenue growth from work in the United States. Another Magic Circle firm, Freshfields, has been beefing up its Silicon Valley office, doubling the headcount. At the same time, U.S. firms are becoming more prominent in the London market, including New York-based Latham & Watkins and Chicago-based Kirkland & Ellis.
The past offers several examples of British firms struggling to establish a foothold in the U.S. Though it opened a New York office in 1985, A&O failed to win over a significant number of Wall Street clients. Then, in 2019, A&O tried a merger with Los Angeles-based O’Melveny & Myers, but that fell through when a big change in pound-to-dollar exchange rates scuttled the deal.
It seems the biggest obstacle for U.K. firms has been their own culture: paying partners according to seniority rather than according to generated revenue. The latter is the U.S. model, in combination with quickly promoting associates to salaried partners. The U.S. firms’ “eat-what-you-kill” standard is likely a big reason that U.S. firms are among the most profitable in the world, a list that includes Wachtell, Lipton, Rosen & Katz, Kirkland & Ellis, Davis Polk, and Sullivan & Cromwell.
In their desire to compete, a few U.K. firms tweaked their salary structures in 2021 – but only in their U.S. offices. Among those implementing the dual model are A&O and Linklaters. But this seemingly minor shift is expected to swamp the overall, more traditional British legal culture sooner or later, turning it into an environment that revolves around money rather than personal ties and loyalty.