Overlaps in headcount and the need to rationalise merging businesses will mean an uncomfortable reckoning for some staff at the combined firm created by the merger of Allen & Overy and Shearman & Sterling.

That is according to Christopher Saul, former senior partner at Slaughter and May, who last November published a provocative paper on the future of the magic circle.

Saul, now a governance and strategy consultant, said then that the magic circle has problems. While profitability at what he calls the big four – Allen & Overy, Clifford Chance, Freshfields and Linklaters – has soared, it ‘pales’ in comparison with US titans such as Davis Polk and Latham & Watkins.

Saul raised the prospect of a merger between a magic circle and US firm ‘only to dismiss it’. Writing on LinkedIn today, however, he admits he must now ‘eat his words’ in light of the newly announced A&O/Shearman deal.

A&O’s rivals will come under pressure to respond by revisiting their US strategies, he says. 

'5 thoughts off the bat,' Saul writes: '1. This is a smart move by Allen & Overy. Shearman & Sterling is a renowned brand, albeit one that has struggled to keep pace with peers in recent years, and A&O were quick to spot the opportunity arising from the failed Hogan Lovells deal.

2. It is notable that it has been announced ahead of working out finer details (including the combined remuneration structure) and partner votes. This pre-empts the risk of an agonising endless courtship, as A&O endured with O’Melveny, and suggests that A&O had the negotiating leverage to treat partner votes as something of a formality. Shearman partners surely can hardly say no when the vote comes.

3. The name thing is rather clever. Mutuality in removing ampersands from the full name either side of the Atlantic (to produce the slightly breathless Allen Overy Shearman Sterling) but majoring on A&O Shearman as the go-to combined brand.

4. Some reshaping will surely follow. There will be uncomfortable overlaps in headcount and rationalisation in broader infrastructure. There will be devil in that detail.

5. This inevitably will put pressure on the rest of the magic circle. They may like to characterise this as an opportunistic strike back by the empire but will be wondering how to ratchet up their US strategy in response.’