The turnover gap between Allen & Overy (A&O) and the rest of the magic circle is ­closing.

Turnover (£m): 1,120

Average PEP: 1,100

Equity spread (£k):642-1,604

Profit margin (%):38

RPL (£k): 530

Vision -  
Execution -
Governance -

While the top three firms – Clifford Chance, ­Freshfields Bruckhaus Deringer and Linklaters – have jockeyed and jostled for position over the past decade, A&O has been the fourth-placed stalwart, and not by an insignificant margin.

The differential between A&O and whatever firm has held the number three spot has been on average around £100m over the past 11 years, although it has been as wide as £171m. But in 2010-11 the disparity was just £20m, the closest it has been since 2000-01, when the firm was just £11m behind Linklaters (or Linklaters & Alliance, as it was then).

Likewise, the gap between A&O and the number one firm has shrunk. It had been as much as £443m in the past. Now it is just £99m. Not that this should come as a surprise. A&O has become the magic circle’s most expansionist member. Before 2007 the firm had only once launched more than two offices in a single year.

Since then it has been a different story (excluding its nightmarish 2008-09, when the firm cut 450 people from the business at a cost of £46m and made no acquisitions), with A&O targeting emerging markets like a firm possessed.

In 2007 A&O opened four offices, while in 2008 it opened three and established a referral agreement with Trilegal in India. In 2009-10 it opened five offices and the firm already has three openings penned in for 2011 in the form of its much-maligned ­support services centre in Belfast and offices in Casablanca and Washington DC.

Being a first mover, at least among the magic circle, in places such as Australia and Casablanca has put it in pole position to snag the top lawyers, particularly in Casablanca, where the firm hired the most renowned names in the market, including Hicham Naciri, ­leaving slim pickings for those that followed.

Indeed, such is firm’s acquisitiveness that even in markets where it denies it has plans to open (think Switzerland and Canada) A&O has a spectral presence, with local lawyers repeating rumours that make firms fear for their partners. Senior partner David Morley is the pathfinder, flying around the world and getting a feel for what partners in foreign offices want. In September 2010 Morley spent two months touring the firm’s German offices, giving the green light for it to expand aggressively in the ­country. The firm’s management promptly took its cue, snaring a team from Hogan Lovells.

Big decisions such as new offices are taken, at least formally, by A&O’s management board, which comprises the senior partner, ­managing partner, finance and business services director and a group of nine elected partners. This group meets 10 times a year – essentially every month, but with breaks over Christmas and during the summer.

The wider partnership does not get to vote on decisions such as new offices, but its right to block new partner appointments could, in theory, frustrate a decision to open an office by denying the admittance of new partners.

However, managing partner Wim Dejonghe insists that he is keen on building a consensus within the firm before big decisions are taken. Separate from the management board, he frequently meets informally with a management team comprising office and practice heads. The group aims to meet once a week to discuss strategies and problems and to get a feel for what partners want.

The way the firm handled its decision to cut back-office jobs in London and open a support services centre in Belfast, which cost the firm £4m in 2010-11 was a blight on its record of smooth communications, however. A claim that the move was not about cutting costs seemed divorced from reality ­(although in a sense this was correct, since the firm could have ­chosen a cheaper jurisdiction, but Ireland has the potential to ­double as a base for legal services), while putting the emphasis on the potential for the relocation of ­existing staff was seen as cynical, as not many people can simply

up sticks and move.

A&O operates a managed lockstep, meaning that partners can move up or down the equity. Partners join the equity on 20 points and gain two points per year until after 15 years they reach the plateau of 50 points. A&O also has salaried partners on one point plus salary. It is the longest equity track in the City. Indications that the track is being reviewed are, perhaps, overdue.