Where does Allen & Overy's (A&O's) notoriously bank-led leveraged finance practice stand? After all, the criticism articulated of the firm's sponsor-light practice when Kohlberg Kravis Roberts relationship partner Tony Keal quit for Simpson Thacher & Bartlett was damaging back in 2005. Two years down the line, with the negotiating power of private equity borrowers growing seemingly by the week, the question of how A&O's most influential team has adapted to the market is all the more pertinent.

The firm itself still gives contradictory signals on the matter; although head of leveraged finance Tim Polglase is unambiguous that bank work remains the driving force for the team. Nevertheless, A&O is doing more work for sponsors, even if the firm's own estimate that 25%-30% of its practice is from private equity clients is questioned by rivals.

Only last month the team advised alongside corporate partner Derek Baird on the finance aspects of Apax's £1.35bn acquisition of a stake in Trader Media from Guardian Media Group, on Charterhouse's £1.6bn acquisition of Ista International from CVC, and Exponent's £173m acquisition of a share in V Holdings. The Trader Media mandate was particularly noteworthy as the deal was structured with 'covenant-lite' debt, one of the most sponsor-friendly techniques to hit the European market. The work of Robin Harvey, relationship partner for clients such as PAI and Apax, also contradicts the frequent claim that this is not a firm for buy-out clients.

Other notable instructions have seen finance partner Ian Borman advise Providence Equity on its £1.5bn bid for Phones4U while Polglase advised Providence and Carlyle on their E1.3bn (£886m) bid for Swedish cable TV operator Com Hem in 2005.

Just as important is that A&O is trying to improve its corporate offering in private equity, especially since the arrival of Baird from Lovells last year. A&O insiders and rivals alike agree that Baird's arrival has helped bring together corporate and finance sponsor roles. Previously, instructions for sponsors often came without the corporate role. With Baird and fellow private equity specialist Chris Thornes working with respected partners like Alan Paul and Susan Howard, who still have a decent profile with buy-out clients, the finance team can at last look forward to more support. Still, many remain unconvinced that the firm can ever move away from its bank-driven roots, with one partner pointing out that many of A&O's sponsor instructions are on minority stakes, rather than the heavy lifting of a full acquisition.

Perhaps most importantly, A&O still culturally gravitates towards banks. This factor has sometimes been aggravated by a needlessly fractious relationship with corporate, although, by all accounts, cooperation between the two sides has improved considerably over the last 18 months. Likewise, there is scant evidence in the current market, where arranging bankers are as eager to court buy-out clients as the lawyers, that a law firm still gets much advantage by downplaying its sponsor ambitions.

Clifford Chance's leveraged finance team acts for sponsors and banks almost equally without conflict issues arising. One CC partner argues that, with auction sales now the norm and firms usually backing two or more 'trees', banks are far more relaxed about advisers acting for sponsors on rival bids. With sponsor power still on the rise, a promising corporate push in private equity under way and an influx of buy-out focused rivals like Simpson Thacher to contend with, the mystery is why A&O remains so reluctant to target – or at least be seen to target – the sponsor shilling.