Key takeaways

  • The Financial Times reported A&O Shearman handed partners an average £2.2mn ($2.9mn), with profit per equity partner up around 12% for the year to 30 April 2026.
  • Profits have returned to roughly the level legacy Allen & Overy paid partners before its May 2024 merger with New York’s Shearman & Sterling.
  • Revenue was broadly flat in dollar terms at about $3.7bn, so the profit gain owed more to a smaller partnership and tighter costs than to top-line growth.
  • The firm cut about 10% of partners after the merger, closed offices and moved to an all-equity, three-tier lockstep pay model to bed in the combination.
  • The rebound lands amid an intensifying London pay war, where deep-pocketed US firms are pressuring Magic Circle heritage rivals on both partner profits and associate salaries.

A&O Shearman, the transatlantic law firm created by one of the largest legal mergers in a generation, has handed its partners an average of £2.2mn as profitability returned to pre-merger levels, according to reporting by the Financial Times. The pay rise, in the firm’s second full financial year since the 2024 tie-up, was presented by the FT as a sign that a combination beset by cutbacks and senior departures has finally begun to find its feet.

The figure is symbolically loaded. Roughly £2.2mn is close to what legacy Allen & Overy paid its equity partners in the year before it merged with the New York firm Shearman & Sterling in May 2024. In other words, after a fraught integration in which the enlarged firm shed partners, closed offices and rebuilt its compensation system, the average partner is now earning about what an Allen & Overy partner earned before the deal was done. For a merger sold on the promise of transatlantic scale and greater US firepower, getting back to the starting line counts, for now, as progress.

This article sets out what has been reported about the pay and profit numbers, why the 2024 merger happened, why big legal mergers are so disruptive, how partner profit is actually generated and shared, and how the rebound fits into an increasingly cut-throat contest between London’s heritage firms and the US giants muscling into their market. The July 2026 figures are drawn from Financial Times reporting and legal trade coverage and are attributed as such; they are not independently verified here.

The reported pay and profit numbers

According to the Financial Times and corroborating legal trade press, A&O Shearman’s profit per equity partner (PEP) rose about 12% in the year to 30 April 2026, reaching roughly £2.2mn, or around $2.9mn in dollar terms. Profit before tax was reported at about $1.6bn (£1.2bn), up in the region of 14% on the prior year.

The striking feature is that this profit growth came without meaningful revenue growth. Turnover was broadly flat at about $3.7bn in dollar terms, and slightly lower in sterling at around £2.8bn against £2.9bn a year earlier, reflecting currency movements as much as underlying trading. In plain terms, the firm did not sell dramatically more legal work; it made more money from a similar volume of work shared among fewer partners.

That distinction matters. When profits rise while revenue stalls, the improvement is usually a story about the denominator, not the numerator: fewer equity partners splitting the pool, tighter cost control, the closure of loss-making or marginal operations, and improved leverage of junior lawyers against partner time. A&O Shearman’s own framing, as reported, leans into this. Global managing partner Hervé Ekué was quoted saying clients are “entrusting us with more of their most important and complex mandates” and that, “combined with the way we have streamlined our operation, our profitability has grown significantly.”

Trade coverage noted the firm made 24 lateral partner hires over the year and promoted 33 lawyers to the partnership in April 2026, weighted towards mergers and acquisitions and finance. It also flagged some continued outflow at senior level, with private capital co-lead Fiona Cumming leaving for Weil and US data privacy head Helen Christakos departing for Norton Rose Fulbright. Partner numbers were reported at roughly 710, down from about 740 a year earlier, underlining that the equity pool is still shrinking even as the firm hires selectively.

The 2024 merger and its rationale

A&O Shearman went live on 1 May 2024, combining the UK’s Allen & Overy, one of London’s five Magic Circle firms, with Shearman & Sterling, a storied but recently troubled New York institution. The deal created a firm of close to 4,000 lawyers, roughly 800 partners at launch, across some 47 offices in around 29 countries, with combined revenues of about $3.5bn, immediately ranking it among the largest law firms in the world.

The strategic logic was straightforward and long in the making. Allen & Overy had spent years trying, and repeatedly failing, to crack the US market at scale; a mooted tie-up with O’Melveny & Myers collapsed in 2019. For a Magic Circle firm, the United States is both the largest legal market on earth and the source of the highest-margin work, particularly high-yield debt, US securities law, and the biggest cross-border M&A. Without a deep bench of US-qualified lawyers, London firms risk being relegated to junior roles on the transactions that pay best.

Shearman & Sterling offered exactly that capability, having built its reputation over more than a century in New York on capital markets, M&A and project finance. But Shearman had drifted, losing partners and profitability, and had itself walked away from a proposed merger with Hogan Lovells in 2023. The combination was therefore complementary on paper: Allen & Overy brought an international network spanning Europe, Asia and the Middle East, while Shearman brought US law depth in the market that matters most. Leadership was split accordingly, with Abu Dhabi-based Khalid Garousha as senior partner and Paris-based Hervé Ekué as managing partner, and Shearman veterans holding senior US roles. At launch, Garousha called the firm “a platform like no other.”

Why the transatlantic prize is so valuable

The prize is not simply size for its own sake. US clients and US-law-governed work command premium fees, and a firm that can offer New York law, English law and a genuine global network under one roof can pitch for the entire lifecycle of a multinational’s legal needs. That integrated, one-stop proposition is what the very top of the market, dominated by US firms, has been selling for years. The merger was A&O’s attempt to buy its way onto that field rather than build a US practice hire by hire over a decade.

The integration turbulence

The promise of scale came with immediate pain. In September 2024, barely four months after the merger completed, A&O Shearman announced it would cut about 10% of its global partnership, roughly 80 partners from a base of around 800. It also moved to close its Johannesburg office, affecting around 32 lawyers, and to wind down a consulting arm. Ekué described the decisions at the time as “difficult but necessary.” A further tranche of partners had already left each predecessor firm in the run-up to completion, a common feature of large mergers as individuals weigh their standing in a much bigger, restructured partnership.

These cuts were framed as removing overlap and creating headroom for strategic hires and promotions, and to a degree that is the standard grammar of post-merger restructuring. But they also fed a narrative of turbulence: a firm that had promised a transformational combination was, within months, shedding senior lawyers and shutting operations. The FT’s framing of the latest results, that the firm has “found its feet” after a period in which senior lawyers were “axed”, is a direct nod to how bumpy the first two years looked from the outside.

Large legal mergers are notoriously hard to execute, and A&O Shearman has faced the classic pressure points. Culture and client relationships are held by individual partners who can, and do, leave. Overlapping practices in the same cities have to be rationalised, which means telling well-paid, mobile professionals that there is no longer room for them. And the two firms arrived with different economics: Allen & Overy was a much larger, more international business, while Shearman was smaller and had been under profit pressure. Bridging those worlds without triggering a damaging exodus of rainmakers is the central challenge of any tie-up of this kind.

The compensation system clash

Perhaps the thorniest integration issue in any transatlantic merger is pay. In October 2024 A&O Shearman confirmed it was moving to an all-equity partnership underpinned by a three-tier “modified lockstep” model, with partners placed in entry, core and a top “super” band. Neither legacy firm had run a pure all-equity model, so the new structure was a departure for both.

That design attempts to square a circle. Traditional Magic Circle firms have historically used lockstep, in which partners move up a fixed ladder of profit-sharing units largely by seniority, prizing collegiality and stability. Many US firms lean towards “eat-what-you-kill” or heavily merit-based systems, where pay tracks the business a partner personally generates, which can command star performers but can also fracture teams and inflate the cost of retaining rainmakers. A firm merging a lockstep culture with a US-style one has to build a hybrid that pays enough at the top to hold its best partners against poaching, without hollowing out the shared-profit ethos that binds the rest. The three-band modified lockstep is A&O Shearman’s answer, and the return of PEP to pre-merger levels will be read by leadership as evidence it is holding together.

How partner profit actually works

For readers outside the legal industry, the headline “partners paid £2.2mn” can mislead. That figure is profit per equity partner, or PEP: the firm’s total distributable profit divided by the number of full-equity partners. It is a per-partner average of profit, not a salary, and it is closer to a return on ownership than a wage.

Equity partners own the business. They typically contribute capital, share in the profits and, crucially, bear the risk if profits fall. PEP is therefore driven by three levers: how much revenue the firm bills, what margin it keeps after paying salaried lawyers, staff and overheads, and how many equity partners share the resulting pool. Push revenue up, hold costs down, or reduce the number of mouths at the equity table, and PEP rises. A&O Shearman’s latest jump owes most to the second and third of those, as reported, rather than the first.

Two further nuances matter. First, an average conceals a wide spread. Under a modified lockstep with a “super” band, the best-paid partners can earn a large multiple of those at the entry level, so many partners will take home well below £2.2mn and a few well above it. Second, PEP is the industry’s headline scoreboard precisely because it is the number partners at rival firms watch when deciding whether to jump ship. A rising PEP is as much a recruitment and retention weapon as a measure of financial health, which is why firms publicise it and why it features so prominently in the pay war now gripping London.

The transatlantic pay war

A&O Shearman’s rebound is unfolding against an intensifying contest for legal talent in London. Over the past decade, elite US firms have expanded aggressively into the City, winning market share in the most lucrative transactional work and paying salaries that heritage London firms have struggled to match. Commentators note the Magic Circle no longer sits unchallenged at the top of the London market it once dominated.

The clearest battleground is associate pay. Leading London firms including Freshfields and Linklaters have pushed newly qualified salaries to around £150,000 after steep rises, yet US market pay for first-year associates sits at roughly $225,000, and some US firms in London pay well above the UK benchmark; Quinn Emanuel, for instance, has lifted London pay to around £180,000. The gap between UK and US pay has narrowed from its widest but remains material, and every ratchet upward squeezes margins. As one recruiter put it, for a UK firm to chase those numbers “in a market where it’s just harder to make money” is “a hell of a statement” that “is going to cost them.”

At partner level the same dynamic applies. US leaders such as Kirkland & Ellis and Latham & Watkins operate at PEP levels that dwarf the traditional Magic Circle, giving them the firepower to lure star partners with guaranteed packages. A&O Shearman’s entire strategy is a bet that combining scale with genuine US-law capability lets it compete for that work and that talent on more equal terms. Restoring PEP to pre-merger levels does not close the gap to the very top of the US market, but it steadies the ship and gives the firm a more credible number to wave in front of prospective laterals.

Impact on the firm, clients and market

For A&O Shearman, the immediate impact of the reported results is reputational as much as financial. A firm two years into a difficult merger needed to show that the combination could generate the profits that justify the disruption. A 12% rise in PEP and a return to pre-merger pay levels gives leadership a stabilising narrative and a stronger hand in retaining partners tempted by rivals.

For clients, a more financially secure firm is generally reassuring, since profitability underpins the ability to invest in talent, technology and geographic reach. But the source of the gain is a double-edged sword. Profit driven by a leaner partnership and cost discipline, rather than by winning more work, prompts a fair question about how much genuine top-line momentum the merger has generated. Clients will watch whether A&O Shearman can convert its combined platform into materially more high-value mandates, not just a tidier cost base.

For the wider market, the results are a data point in a long-running debate about whether large transatlantic mergers create durable value. A successful stabilisation would encourage other ambitious firms to consider bold combinations to gain US scale; continued flat revenue would strengthen the sceptics who argue that culture and integration risk outweigh the strategic logic.

Opportunities, challenges and material risks

The opportunity is clear: if A&O Shearman can move from stabilising profit to genuinely growing revenue, using its integrated US and international platform to win larger and more complex cross-border mandates, it could establish itself durably among the global elite.

The challenges are equally clear. Flat revenue suggests the growth engine has not yet fully engaged. Continued senior departures, even amid net hiring, show the retention battle is ongoing. And the new compensation model still has to prove it can hold star partners without either overpaying or alienating the wider partnership.

The material risks are worth stating plainly and without exaggeration. A downturn in deal activity would hit the transactional practices that drive profit hardest. A resurgent pay war could erode the margins that produced this year’s gain. Any renewed wave of partner exits could undo the fragile stabilisation. And because the improvement rests substantially on a smaller partnership, there is a natural limit to how long cost discipline alone can deliver profit growth before revenue has to do the heavy lifting.

A balanced view

In the round, the reported numbers are encouraging but not conclusive. Returning PEP to pre-merger levels within two years of a large, disruptive combination is a real achievement and a sign the integration has not derailed. Equally, doing so on flat revenue, through a leaner partnership and tighter costs, means the strategic case for the merger, that scale and US capability would drive materially more high-value work, remains only partly proven. Two years in, the firm has stabilised; whether it can grow is the question the next results will need to answer.

What happens next

The key test for A&O Shearman is whether profit growth can be repeated on the back of revenue rather than restructuring. Watch three things in the year ahead. First, the top line: can the firm turn flat revenue into genuine growth by winning more of the premium, US-law-heavy work the merger was designed to capture? Second, retention and recruitment: net partner movement, the calibre of lateral hires, and whether the three-tier lockstep holds star partners against US firms’ guaranteed packages. Third, the market backdrop: deal flow, interest rates and the pace of the pay war will all shape the margins beneath the headline. If the next set of results shows PEP rising alongside revenue, the merger’s strategic case strengthens considerably. If profit growth again depends on a shrinking partnership, questions about the combination’s long-term payoff will sharpen.

Conclusion

A&O Shearman’s return to pre-merger profitability, with partners handed an average £2.2mn according to Financial Times reporting, marks a meaningful moment of stabilisation for a firm that spent its first two years absorbing cuts, closures and senior departures. The 12% rise in profit per equity partner gives leadership a credible story and a stronger position in the fierce contest for legal talent. Yet with revenue broadly flat, the gain rests more on discipline than on growth, and the strategic promise that underpinned the 2024 merger, transatlantic scale translating into materially more high-value work, is only partly delivered. The firm has found its feet. The harder task, proving the combination can grow, still lies ahead.