Wim Dejonghe: the Belgian rainmaker has contracted Allen & Overy and Shearmann

When troubled New York law firm Shearman & Sterling’s merger talks with transatlantic rival Hogan Lovells collapsed in March, Shearman’s Adam Hakki knew who to call.

Last month, Hakki picked up the phone and picked up the phone to call Wim Dejonghe, the long-serving head of Allen & Overy, one of London’s elite magic law firms. In the space of a few weeks, the two Manhattan offices closed the $3.4 billion merger, which, if approved, will be one of the largest the industry has ever seen.

For the Belgian-born Dejonghe – A&O’s first foreign managing partner and before that managing partner – a relationship with a Wall Street firm will be the fruit of a two-decade project to crack the world’s most lucrative legal market. leaving his British rivals in the dust. For Shearman, it offers a way out of a tough period of partner exits and difficult restructuring.

“I’ve known Shearman for a long time. [Hakki] got into the role [and] he knew we were interested,” Dejonghe, 62, told the Financial Times. “The first conversation was between me and him. After many meetings between the two of us, we thought: “this could really work”.

Shearman, a 150-year-old firm that once advised the cream of corporate America, is the much smaller unit, with $907 million in revenue last year and about half of A&O’s more than 40 offices. But he has long been on Dejonghe’s dance card as a potential suitor due to the intersections of banking and finance.

“It became apparent very quickly that there was a shared vision of what this combination could be and an ability to act decisively,” Hakki said. “We were very impressed with Wim and his team.”

Both companies learned from previous failed mergers: A&O’s failed negotiations with California-based O’Melveny & Myers, which stalled in 2019 after 18 months of negotiations.

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“We knew [if] it leaks out before we turn to our partners, we are dead,” said Dejonghe. “So we agreed that it was the only way to deliver something [partners] it was sitting together in a room for weeks hammering out every detail.”

Hakki and Dejonghe, along with a small core team — including advisers from heavyweight Wall Street law firms Simpson Thacher & Bartlett and Davis Polk & Wardwell — descended on the Manhattan offices of investment bank Lazard to pull together what will arrive Sunday as a slick announcement with a website, client With FAQ and video.

Dejonghe’s predecessor, David Morley, credits him for speeding up the Shearman negotiations, which were carried out within weeks. “Very few people could have done this, but Wim has had a clear strategic vision for a long time.”

Morley, who co-led the company with then-managing partner Dejonghe for eight years until 2016, says: “Wim didn’t wake up yesterday and say, ‘A merger would be great’… The company has been thinking and working for at least two decades. debates and explores possibilities. . . So they were ready to move very quickly when it came to that.”

Morley and Dejonghe, seen as A&O’s modernizing force, spent years pounding the pavement in New York and the US West Coast in the wake of the financial crisis, dining with executives at powerbroker hotspot Estiatorio Milos in Manhattan.

“Some people would see us,” says Morley. “Others were also scared of being seen in a restaurant with us, in case their partners saw us or it would be in the press. . . We didn’t ask people, “do you want a merger?” – just building relationships and gaining insights.” He said this meant Dejonghe had built up a “very good Rolodex of American companies”.

A&O has long had offices in the United States. But growing there wasn’t all plain sailing. Like its international rivals, A&O has struggled to break into a market dominated by highly profitable domestic firms with more firepower to pay star partners. Wall Street’s leading firms tend to be tightly concentrated, with just a few international offices and a range of lucrative private equity and finance activities.

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In contrast, A&O and its magic circle peers in the UK have extensive global networks and offer a much wider range of work to clients. This has made them a one-stop shop for many companies, but they are less profitable than their American counterparts. Partners at Wall Street firms such as Simpson Thacher and Davis Polk, for example, took home an average of more than $5 million last year, while partners at M&A powerhouse Wachtell Lipton Rosen & Katz pocketed more than $7 million. By contrast, A&O partners took home an average of £1.95m ($2.4m) last year.

Bar chart showing earnings per share (millions of dollars)

Tony Williams, a consultant who was managing partner at Clifford Chance when it merged with US firm Rogers & Wells in 2000, said: “The vicious circle has been challenged over the past decade by the strength of the US economy. . . And Brexit hasn’t helped either: the pound is now at $1.23.”

One former senior A&O partner said: “Over the past 30 years, every magic circle company has been looking to enter the US market, and a merger has always been the most logical route, but it’s extremely difficult to do. The leading American companies have always been much more profitable, which for them is a test of excellence.”

He added: “Shearman has struggled over the last couple of years and suddenly they’re available and there’s an opportunity for a match.”

Huge disparities in partner pay have made it difficult for British firms to compete in the US, exacerbated by the strengthening of the dollar. As a result, under Dejonghe, A&O phased out the so-called lockstep pay structure, where partners are paid by time served, in order to pay star performers more.

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Dejonghe, described by another former partner as “charismatic and enterprising”, is no stranger to overseas mergers where the marriage of two different cultures is essential to success. The corporate lawyer, who has five sons, joined A&O when it became involved with part of Loeff Claeys Verbeke – a Brussels-based firm that Dejonghe led as managing partner.

He said the Shearman merger is a “merger of equals” just like this deal. “You can’t tell your prospective colleagues we’re going to buy you,” he said. “That’s not the mindset. . . This is not how it works.”

Becoming a managing partner of A&O meant leaving Belgium’s cobbled streets and many bike races behind. Dejonghe, who cycles to A&O’s offices in Spitalfields every day, is a veteran of amateur events including the Etape du Tour and the Tour of Flanders.

“I’ve sat in your watercourse for many years and walked up and down mountains,” Morley said. “We used to tease him that he was good in the apartment. . . He used to abuse the fact that he always cycles against the wind in Belgium. We always joked with each other; it was kind of a metaphor for how we worked together.”

“Honestly, mountains are not my favorite,” Dejonghe admitted. “Give me the Tour of Flanders anytime.”

The Shearman deal ahead of him is likely to be a very different kind of challenge and potentially the culmination of his 15 years at the top. But Dejonghe is sanguine: “I’ve always had a forward-looking mindset. I’m probably a little more optimistic than some lawyers.”

Source: https://www.ft.com/content/fe520b68-0828-47f9-9dc6-732b632b19b9