Double-Dilution Dismay; Major Developments in Clayton Utz/Allen & Overy Defection Debacle

We reported yesterday on the astute comments from an anonymous spy that the A&O foray into Australian soil might do no more than dilute its healthy equity pool. It is, of course, a huge risk. And while A&O risks the dilution of its equity, it appears that the defection may also soon result in a major additional strain on the remaining value of the equity points at Clayton Utz.

This incredible update from an anonymous Clutz spy last night:

I am told that a group of my colleagues, ranging from senior associates to senior lawyers, met privately yesterday to discuss the demands they would place on the Clayton Utz partnership to remain at the firm. I suspect, though I cannot be certain, that the senior associates/lawyers remaining in the affected (defective?) groups will be asking for considerable pay rises. I am not aware that any will immediately be asking to be made up to the partnership, though I imagine this is on the radar for some. I think these lawyers are wise enough to realise that this is a once in 20/30-year event and if they don’t hold the partnership to ransom, they may be “dodged” – as the Firm Spy so eloquently put it – on pay into the future.

This rumour was sent just hours after CEP David Fagan told Lawyers Weekly that Clayton Utz was rapidly regrouping and had announced a number of leadership replacements. He alse told LW that:

It also gives an opportunity to critically review different areas – it makes sense for us to restructure in those areas.

This announcement of a ‘rapid regrouping’ came, however, mere moments after Clayton Utz confirmed that another partner, accompanied by 3 Clayton Utz lawyers, was defecting from its Canberra office to rival Sparke Helmore.

Is CEP David Fagan regrouping or degrouping? Are you a Clayton Utz groupie?

Meanwhile, three of the other mysteries surrounding the defections becmae slightly clearer overnight. Firstly, how can A&O open its offices on March 1 with partners having announced their defection only last Monday? What about gardening leave? Lawyers Weekly very helpfully reported that the relevant defecting partners intended “to retire on May 8″. The 1 March A&O kick-off will therefore apparently involve very little legal work. Secondly, where will A&O be located? The Lawyer reported that A&O would occupy the recently vacated Sydney tenancy of merged Australian firm Deacons. Thirdly, did anyone know about the imminent defections? Lawyers Weekly reported that the Clayton Utz Chairman only became aware of the defection when he took a phone call from an A&O partner announcing that the relevant partners would be retiring. This accords with the information sent to us by an anonymous Clutz spy yesterday:

…what I find most intriguing about this saga is that none of my colleagues here in the Sydney Clayton Utz office had any idea that the departures were about to happen. Many of the junior lawyers were mid-way through the completion of tasks/projects for the partners leaving…

Finally, ALB  reported yesterday that A&O has set a target of 50 lawyers and 20 partners for the Sydney & Perth offices for their first year, rising to 25 partners and more than 60 lawyers in three to five years. This adds considerable weight to the rumours, reported by us that some 25 Clayton Utz lawyers and senior associates will be accompanying their defecting partners.

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