A year like no other: progress through stormy seas
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The firm’s annual results for FY22 showed continued growth: what do you attribute that to?
Gareth: Our revenue was up 10% to GBP1.94bn (USD2.65bn; EUR2.28bn), and profit before tax was up 9% to GBP900m (USD1.23bn; EUR1.06bn).
This is largely down to our position in global M&A, capital and lending markets, as well as our investment in the U.S., which contributed more than 50% of our revenue growth this year. That was not something we expected so soon but it’s evidence that our U.S. investment is paying off. We’re also witnessing increased client demand from the energy transition, growth in private capital and tech transformation – all areas we’re strong in.
Wim: In some ways it’s been an unusual year with demand being up, but costs still down because of the pandemic. The growing market consensus is that FY22 is not going to be representative of longer-term trends.
Partners got together in person for the first time since 2018 at A&O’s Global Partners’ Conference. What was that like?
Gareth: It was like a massive shot of adrenaline! It emphasised the importance of being able to talk through challenges and goals together, and has set us up well for the next few years. It beats joining a virtual conference at home – being together again was fantastic.
Wim: It was my highlight of the past four years – a real reminder of why we like working in a partnership. It allowed us to set our strategic priorities in a more engaged way and, for all our new partners who’ve joined since 2018, it was a chance to see, in action, how collegiate and transparent we are. Gareth and I did an unscripted Q&A, something many partners had never seen before!
You focused on three macro trends during the conference. First, sustainability: what are the opportunities there?
Gareth: The push to Net Zero is going to involve the largest reallocation of capital since the Industrial Revolution. That represents opportunities for every practice area. This year we’ve also seen that energy security and affordability are as important as decarbonisation. We’re going to be dealing with those issues for some time.
But sustainability is much broader than decarbonisation – it’s about everybody moving forward together – so I think we’ll see an increase in ESG disclosure obligations and penalties for companies who can’t demonstrate enough progress. It will be interesting to see what that means for corporates.
Alongside that is the U.S.-led trend towards ‘friendshoring’, where governments attempt to mitigate risks to global supply chains by focusing on ‘friendly’ countries. That could result in resources being sought closer to home, thereby creating more sustainable national economies.
Wim: The picture is massively changing – different free trade agreements, disruption to entire industries – but I don’t believe this marks the end of globalisation. Change brings opportunities, so the most important thing for us is to work collaboratively: act as business partners to our clients and figure out what they need.
Gareth: I’m going to copy something Wim said to me: in all of this change, if we can go from highly collegiate to outrageously collaborative, that’s where the opportunities are.
What are A&O’s own environmental commitments?
Gareth: We’ve set ourselves Science-Based Targets in line with the Paris Agreement to reduce our annual global emissions by 50% by 2030.
The two biggest areas are buildings and travel. Business travel we can cut quickly; for example, we’ve launched a new global Learning Portal to provide more digital and virtual training, rather than in-person. Changing buildings takes longer. In each of our offices, we’re working through a process of how to make greater reductions in our energy consumption.
The second trend is the impact of private capital: how do you see this affecting A&O’s work?
Wim: Private capital has been filling the gap in the global economy since the financial crisis of 2008-2009. The banking sector has become more regulated and risk-averse. It’s been a growing trend for 10 years and is relevant now for every type of investment.
We made a strategic choice some years ago to focus on building strong relationships with private capital clients and that is paying off – in fact, given our footprint across all asset classes, both on the corporate and finance side, I would say we’re in a strong position.
The third trend is technology transformation: talk us through A&O’s developments in this area.
Gareth: There is no sector untouched by digitalisation. In every industry, technology is driving innovation and change. That brings huge opportunities for our global tech practice.
Wim: The technology companies themselves have specific needs, too. California is where it all started for many of them but, while the companies have gone global, the Californian law firms have not.
Clients tell us they don’t see many firms capable of taking a global view of their business – across IP, litigation, regulation, global transactions – which is in part what drove our investment in California.
Change brings opportunities, so the most important thing for us is to work collaboratively: act as business partners to our clients and figure out what they need.
Investment in Advanced Delivery & Solutions is paying off with another year of rapid growth. What is driving that?
Wim: Technology, in large part: every transaction and litigation needs a combination of intelligent brains and volume work. But we don’t need to charge clients by the hour for due diligence or e-discovery now. We can use different resourcing methods and technologies from our Legal Services Centres to deliver better value, while still being part of a high quality, integrated service.
Also, people’s desire to have a better work/life balance and clients’ need for more flexible resourcing is driving the growth of Peerpoint. We recently expanded it to Dubai and New York, and opened another Legal Services Centre in Perth, to meet growing client demand.
Diversity, equity and inclusion (DE&I) continue to be a priority. What progress have you made?
Gareth: We’ve set ourselves new targets this year around women in the partner promotion process and 50% diversity within our candidates for promotion to partnership, as well as more localised objectives based on data in each country. Every country and practice group regularly reports back on its progress.
For me, the ‘I’ should be at the start of DE&I because inclusion is the key to unlocking progress across every dimension of diversity. It’s how everybody shows up at A&O every day and the personal responsibility we all take for building an inclusive environment. If we get that right, it aids recruitment and retention, and it maximises people’s potential. But there’s no end point: you never stop working on inclusion because, if you do, complacency sets in.
Wim: I also think talent isn’t always found in the most obvious places, so we have to look harder. Otherwise we lose out. That’s what targets drive us to do.
Clients can see that diverse teams deliver better results. They will turn their backs on us if we don’t push ourselves to find the best people. Improving diversity is not optional.
Wellbeing is being talked about more across the business. Why is that important?
Gareth: We need to take care of our people because, without them, we don’t have a business. Covid-19 brought a lot of isolation and, for many, a lack of separation between work and home life. Not being in the office made it harder to spot those issues, so we want to talk about mental wellbeing out in the open.
When we understand more about what is going on in each other’s lives, it makes us more tolerant. We know we have a high performance culture here, but we only get the best out of people by prioritising wellbeing – and inclusion – within our culture.
Is A&O’s culture becoming a point of differentiation to attract talent?
Wim: Yes – I think there’s a distinct choice for people now. If you want to sprint for a few years in a firm where you do one type of deal repeatedly and make a lot of money, that’s one choice. If you want a more sustainable career with investment in your long-term development, culturally that’s a different choice.
It’s what our Employee Value Proposition is all about: feeling you belong and knowing you can excel here. I want people to know that once you’re A&O, you are always A&O. Whether you stay with us or go elsewhere, our commitment is to invest in our relationship with you.
For me, businesses need a social licence to operate. You can’t thrive unless you’re contributing to the fabric of your communities...
What does success look like for A&O’s pro bono and community investment (PBCI) work?
Gareth: For me, businesses need a social licence to operate. You can’t thrive unless you’re contributing to the fabric of your communities, so our PBCI programme is focused on bringing that work into the centre of business planning within every practice group and making the best use of our skills and experience. We’ve seen our legal pro bono hours increase by 30% in the last financial year, in part as a result of that approach and how we are recognising people’s contributions.
I firmly believe these wider experiences make you a better lawyer, not only in the legal skills but also in the world view you develop. Our response to the Ukraine crisis is a good example: our lawyers in Poland and Slovakia went straight to the Ukraine border after the Russian invasion began, to help process the influx of refugees, and mobilised a huge international team to field queries. All our European offices played a part in offering donations, goods and pro bono support. I think it grounds us all to see what others are experiencing, and we have incredibly valuable skills that can help.
How else has A&O responded to Russia’s invasion of Ukraine?
Wim: We took the decision early on to wind down our Moscow office and, wherever possible, offer to relocate people. We stopped work for all sanctioned entities plus any who were at odds with our professional responsibility. On top of the large pro bono effort, we’re also providing financial support to the Red Cross in Ukraine and through our Global Charity Partner, Street Child.
...the glue that holds everyone together may be stronger than before!
What trends are most likely to affect the legal industry in 2023?
Wim: Short-term, the Russia-Ukraine situation will create a choppy market in Europe, and the tensions between China and the U.S. will have a similar impact in Asia-Pacific. I think it will get tougher for a while, with inflation and interest rates on the rise, so we’ll need to adapt to shifting market dynamics. We’re well-hedged as a business to do that, though.
Longer term, we need to continue building a deeper bench in the U.S. because we want equal credibility in U.S. and English law, combined with strong local capabilities. If ‘friendshoring’ does take hold, a deep understanding of local markets becomes even more important.
In finance, I think private money will start to attract more scrutiny and that’s likely to mean increased regulation, but it will continue to play a big role in global finance.
Energy transition has become more difficult because of the situation in Ukraine, but while nuclear may present some opportunities, the push to Net Zero isn’t going away. So overall, while the short term requires a few shifts, beyond that our strategy stays the same.
How has A&O changed as a result of the pandemic?
Gareth: We’re seeing a spike of people wanting to get together because we haven’t been able to do it for so long. I think we’ll settle into a ‘new normal’. Working practices have shifted – we know we don’t need to fly around the world for a meeting – and mostly that’s making life easier. We do need to be together each week, but working from home for some of the time is here to stay.
I suspect there will be differences around the world; we don’t have all the answers yet. In our new London office that we move into in 2027, for example, we’re trialling different setups, consulting with our people and taking time to make sure we get things right.
Wim: People are returning to the office now because they want to: they want the social interaction, the training, the engagement with colleagues and clients, but in a more balanced way. I don’t see hybrid working as weakening our bonds – actually the glue that holds everyone together may be stronger than before!
Questions from our alumni
We invited our alumni to submit questions to Wim and Gareth this year. Here’s what you wanted to ask…
What major changes have you seen at A&O as a result of Brexit?
Wim: English law for us is not about the English economy, it’s about English law around the world, so in that sense it’s not impacted by Brexit. But in the longer term, if the UK were to close its doors to foreign students, that could have an adverse impact on the pre-eminence of English law. The global influence of English law and finance is about soft power, and that develops when you have people studying and building networks together. If they can’t do that in England they’ll do it elsewhere, in the U.S., and in 10 years we’ll see the impact as the UK’s influence decreases.
Geopolitics changes all the time, though. New York law is probably gaining market share in Europe because private money is largely U.S. money. But in the Middle East and Asia, my sense is it’s going the other way because of tensions with the U.S., so we need to be credible in both.
Do you still believe A&O’s management structure works, given how much the firm has grown?
Gareth: Global businesses far bigger than ours have one chairperson and one CEO, so I think management is less about the number of people at the centre and more about the quality of the team you have alongside you. We’ve invested in strong BD, finance, HR and IT teams and will continue to do that, particularly to support places where we’ve grown rapidly, like the U.S.
Are competitive salaries and high quality work still enough to attract young people to the legal profession?
Wim: I do worry that our industry is becoming less attractive because young people don’t see a sustainable or balanced career. More young lawyers are coming into the profession for a few years and then opting out. As an industry, we can’t just make careers about money; we have to make them interesting and we have to invest in people long-term.
What’s the biggest challenge you’ve faced since becoming senior and managing partner of A&O?
Wim: Well, I’ve been doing this a long time so it’s quite a list, but the global financial crisis certainly stands out.
Gareth: Mine was walking into a crisis meeting, the morning after I won the election, to figure out how to shut our offices temporarily and become a virtual law firm. Covid-19 required a fundamental rewiring of our entire operating model, and taking on that responsibility, in a new role, was definitely the most challenging thing I’ve faced.
What I took from it, though, was the exceptional quality of our business teams who carried the firm through that. If generations of partners hadn’t invested in the non-legal side of our business, we could not have carried on.
Finally, we held the first Global Alumni Reunion since 2019. How did it feel to reconnect?
Gareth: Great! It was wonderful to see so many old friends. I look forward to the next one.