Five years after Linklaters turned the trend for firms planting flags around the world on its head with a return to alliance deals, its partner firms – Australia's Allens and South Africa's Webber Wentzel – do not let you forget their ties to the magic circle firm.

Both feature the Linklaters' name heavily in their branding, with Webbers quite literally shouting it from the rooftops of its headquarters in Johannesburg – 'Linklaters' is picked out in lights 40 feet up the building for the benefit of passing motorists.

When then Linklaters managing partner Simon Davies inked the deals with Allens in 2012 and Webber in 2013, Australia and South Africa were hot markets.

As UK firms desperately clamoured for a way in, Linklaters' looked to have made a bold move – access to great lawyers and clients from highly rated local firms with none of the risks associated with a self-funded play.

Here, after a significant shift in local market conditions and a five-year review of the deals by the firms themselves, we take a look at how the alliances are faring and whether they've delivered what was promised.

The deals

The bilateral alliances between Linklaters and Webber and Allens Arthur Robinson, as it was then, won broad support from partners across all three firms.

Shared clients include a host of major banks, as well as mining giants Anglo-American with Webber and Rio Tinto with Allens.

It put the cat among the pigeons with the magic circle – Africa was very much the sexy story of the time

Combined with the international resources and commodities boom in South Africa and Australia, the benefits for the UK firm of such an unprecedented foothold in both markets were obvious.

Every bit as obvious in the short term  at least were the benefits to its regional allies – a guaranteed global referral partner for increasingly global clients for two firms that had made only a limited play outside their own markets.

As such, Australian partners overwhelmingly backed the move in a vote in April 2012, with the alliance live by May.

Former Allens corporate partner Marcus Clark recalls: "It was widely supported, maybe one or two who voted against but that was it."

Combining Allens' network of small Asian offices with Linklaters' own offering, the pair hoped to capitalise on their relationship with a joint venture in Indonesia, as well as a cost-sharing energy joint venture in the region that was projected to grow to between 30 and 60 partners.

Webber's deal, which went live in February 2013, was similar, with around 90% of partners voting in favour of it according to some partners of the firm at the time.

As with Allens, there were no shared profits or revenues but the South African firm took on Linklaters' branding. While Legal Week reported at the time that joint investments in offices elsewhere on the continent were considered as part of the discussions, they did not feature in the final agreement.

One former Webber partner suggests that a wider deal was also considered initially – encompassing the African Legal Network (ALN) and premier Nigerian firm Aluko & Oyebode.

"In the very early stages the idea was to do a simultaneous alliance with Webber, Aluko and the whole of ALN but that deal fell apart," they say.

Instead, the pair pushed ahead with a deal together.

Roughly five years on, the alliances are now managed by coordinating committees, with firm-wide management also meeting regularly. Linklaters managing partner Gideon Moore went to Webbers annual partner retreat in October for example.

The play

Taken together the two deals looked to offer a powerful combination for Linklaters:  risk free access to booming markets, piling the pressure on UK rivals to respond.

As one partner at a rival South African firm says:  "It put the cat among the pigeons with the magic circle firms. At the time, going back five years, the Northern Hemisphere was still in the post-financial crisis slump; Africa was very much the sexy story of the time. My sense is that the others, Clifford Chance, Freshfields and Allen & Overy, were all: 'Crikey what do we do? Have these guys stolen a march on us?'"

While rumours have abounded ever since, so far only Allen & Overy (A&O) has made it to South Africa – launching a finance-focused boutique in Johannesburg in 2014 – though Freshfields is understood to have deepened its relationship with Bowmans.

Meanwhile in Australia, Clifford Chance and A&O are the only magic circle firms with their own offices, though a host of other UK firms have made their own march into the country – with various well-documented degrees of success.

Linklaters Africa head, Andrew Jones (pictured, left), who negotiated the deal with Webber, says the advantage Linklaters gained through the alliances rather than by setting up its own offices, was immediate scale.

"The great advantage for us has been the full service angle," he says. "We have watched with great interest what other firms have done in South Africa and we still think we are they only people who have managed to do both full service and top quality."

Clients agree that service can be seamless. Head of emerging markets legal, EMEA for ‎Barclays Investment Bank, Amol Prabhu, has worked with both Linklaters and Webber on deals in South Africa and the wider Africa market.

Describing how he instructs the pair he says:  "I will contact the Linklaters London partner and ask them to link in a Webbers partner as a first port of call. We execute a significant amount of South African business so have clear preferences as to whom we work with at both firms."

"Each law firm is increasingly used to how each other works and what each expects of the other on a transaction so it is a far more efficient and smooth process," he adds.

Because the deals are alliances, rather than mergers, he is free to work with Linklaters in tandem with other firms in each jurisdiction if he wishes.

To date, Linklaters and Webber have worked on 226 joint matters across 29 different offices and referred more than 500 matters between them.

This figure rises significantly for Allens, with the pair working on some 700 joint matters and referring more than 1,400.

Problems in paradise?

But what may have worked well for Linklaters and its clients has arguably had a more questionable impact on its overseas allies, both of which have undergone significant changes in the wake of the deals.

It was a really convenient way for Allens to exit Asia, which had been incredibly unprofitable

For Allens, in addition to an inevitable drop in referral work from other firms (the firm used to work closely with Slaughter and May and Freshfields), the biggest change has been its shape in Asia.

Numerous partners have left Allens across Asia-Pacific and multiple offices have been shuttered.

In October 2012, Allens insurance head John Edmond led a seven-partner team to Clydes, spread across offices in Sydney, Perth, Hong Kong and Singapore.

Clark says: "The insurance team did a lot of work for insurers in directors and officers insurance, so there was the potential for conflicts with Linklaters financial services clients."

However, he argues that there were existing issues around profitability which meant that team may have left regardless of the deal.

"There was an understanding on both sides it was the best decision and while the Linklaters deal was a factor there was some existing underlying problems around pricing in what is a price-conscious sector of the market," he says.

These exits were only the beginning.

Some Allens Asia partners, such as Rio Tinto relationship partner and energy JV head Nic Tole, returned to Australia. Others left for international firms, including oil and gas partners Darren Murphy and Anthony Patten, who joined Jones Day and Shearman & Sterling respectively and energy partner Gavin MacLaren who joined Freshfields.

Others have moved over to Linklaters, including former corporate head Niranjan Arasaratnam, who joined the magic circle firm in Singapore earlier this year.

The firm has gone from 180 partners to nearer 130 and has essentially moved from "a regional firm to a single market firm",  according to partners.

Over time, far from opening new offices with Linklaters – as was discussed at the time of the deal – Allens has shuttered the majority of its Asian offices – closing bases in Beijing, Shanghai, Hong Kong, Singapore and Cambodia, as well as terminating an alliance in Thailand.

The closures leave Allens with lawyers on the ground in Vietnam and Papua New Guineau and a Singapore office listed on its website that does not appear to house any permanent staff.

Similarly, the profit-sharing joint venture between the two firms in Indonesia was absorbed by Linklaters in 2015, and while the official line is that the energy joint venture they established in 2012 is still in operation, former partners say it has been wound up, and Allens concedes that there is no longer a need for a regional energy JV "as the energy market is now genuinely global".

Discussing the shift, one former partner says: "If you look back at when it started out I don't think the Allens partnership would have expected that five years later they would be an almost entirely domestic firm."

Another adds: "The messaging at the time of the alliance was that this would help Allens in Asia but the terms of the alliance precluded them from working on a variety of matters outside the Australian market so it seemed inevitable there would be not much left of the Allens Asia operations and they were shut on a rolling basis over a few years."

According to some former partners, Allens' Asia network was a drag on the firm's profitability and letting the UK firm take the lead outside Papua New Guinea and Vietnam has been beneficial.

"It was a really convenient way for Allens to exit Asia, which had been incredibly unprofitable and a drain on the Australian partnership," says one former partner.

Allens managing partner Richard Spurio (pictured left) appears to back this up, saying: "There was a point where we had a broader Asian footprint but we decided that it is not really right for us, Indonesia is a good example of where it made more sense for that team to sit within Linklaters' network."

Rivals point to an increase in profitability under Spurio, in part driven by the Asian retreat as well as partner exits in Australia.

One management figure at a different Australian firm says: "Allens were suffering from profitability issues, they needed to do something to fix the haemorrhaging of money in their offshore offices and Linklaters allowed them to quietly abandon those offices so I think that decision was good for them."

In South Africa, Webber's changes have been less dramatic. The fact Linklaters does not have any of its own offices in Africa puts less pressure on its pan-Africa network or its ties with the ALN network.

Not that the last four years have been entirely without incident. After signing the deal with Linklaters, Webber saw both English qualified and Africa lawyers leaving. High-profile exits included the 2013 departure of Africa group head Roddy McKean leaving to join Anjarwalla & Khanna in Kenya in 2013.

To be honest I don't really know how it works

Other exits have come as international firms have targeted the South Africa market – these include an insurance group leaving for Clydes in 2014, the exits of projects and mining partners Brigitte Baillie and Peter Leon to Herbert Smith Freehills in 2015 and big hitting corporate partners Johannes Gouws and Peter Bradshaw to DLA Piper in 2016.

A former partner says:  "People left in two phases, the Africa group left then a second group of 10 to 15 partners left."

There is a widespread market perception that the terms of the deal with Linklaters, which is understood to include clauses that mean Webber has to carry out conflict checks with Linklaters on Africa mandates and check with the UK firm before signing any associations or opening new offices in the rest of Africa, mean that Linklaters may end up taking the lead on Africa work outside South Africa as well as English law matters.

Webber senior partner Christo Els (pictured left) though rejects the idea that Webber's wider Africa practice has suffered since signing up with Linklaters.

"The first year and a bit we were very focused on being joined up on mandates in South Africa, we are now moving to a further phase where we are doing an amazing amount of pitch work and joined up bids in the rest of Africa. It has evolved from a South Africa focus to a broader sub-Saharan Africa focus, which was the plan all along."

He also rejects the idea that Webber's independence has been affected by the  tie-up.

"There are some reports that we can only operate with Linklaters, which is not true. Yes it makes sense in some matters to do it jointly but sometimes the client thinks the matter is of such a nature so that it is not necessary and we can do it on our own," he says.

Long distance relationships

Talking to partners in Linklaters' City headquarters,  it is clear that to many, their alliance partners feel a long, long way away.

Many partners spoken to for this feature seemed distant and disconnected from Webber and Allens – even those in practices with a focus on international and emerging markets.

One London partner says: "To be honest I don't really know how it works. In my own experience there have been a couple of things where we have talked about mutual clients or where there is an Australian angle to a deal and we talk to them."

Another says: "I work with them both but it is not a daily feature of my practice."

A third partner adds: "Allens is challenging because it is so far away."

Their detachment adds to the perception that the deal means more to Webber and Allens than it does to Linklaters, despite the obvious benefits that the UK  firm receives from the deals.

One Linklaters London partner acknowledges that the firm needs to continue to invest in the deals to ensure the alliance firms continued to benefit.

"We need to work hard at them so both sides feel like they are going well. We need to ensure we are making enough effort so our JV partners are benefiting as we are," they say.

Former partners of both Webbers and Allens complain that relationships between Linklaters and its alliance firms have tended to be restricted to a relatively small group of senior partners.

One former Allens partner says: "You needed to be on management's favourites list to get the benefits of the referrals – there were quite a lot of partners who didn't see any benefit."

A former Webber partner adds: "You will always find with an association rather than full integration that there are fewer touchpoints and that means you end up having gatekeepers so it works better for some than for others."

At Linklaters though Moore argues that it is not necessary for every partner to have connections with their Southern hemisphere counterparts.

"You don't need all 460 partners to know all the Allens or Webbers partners," he insists. "You just need someone who can point you towards who you should be speaking to."

Another Linklaters partner agrees, saying: "It grows organically and by client needs, you will end up with people who know counterparts in their practice area and there are also designated point people in both firms to help with information sharing and pointing people in the right direction."

Another issue raised by London partners is confusion over branding. Despite the fact Allens and Webbers prominently use the Linklaters branding, they are separate firms and can – and do – work on opposite sides of deals on occasion.

On the £79bn 2016 SABMiller – AB InBev brewery deal for example, Linklaters acted as lead adviser to SABMiller, while Webber took the lead on Africa work for InBev.

A London partner says: "They use our name everywhere so there can be some confusion because if you see Allens-Linklaters on one side and we [Linklaters London] are on the other side that can be difficult. You have to say: 'that's not really us, we are not the same firm and there is no profit share'."

In some situations, this has led to friction. Two former Allens partners suggest that Linklaters' representation of key mining client Glencore in respect to a potential union with Rio Tinto, a client of both Allens and Linklaters, created tensions earlier this year when discussions took place.

"Linklaters acted for Glencore in connection with its possible takeover of Rio and that created a certain frisson," one says.

What's next?

Five years' in, Moore says the trio used their recent anniversary to look at whether the deals were still working as intended, as well as where to go next.

"Five years is a good time to reflect and think what has gone well and less well. We each decided that rather than say 'let's have a drink' to mark the five years, we would make positive decisions about where we wanted to go into the next five-year period," he says.

Former Allens partners say that the deal with Linklaters was only for an initial period of five years. Spurio argues it was open-ended but concedes: "There was an opportunity to think about whether we needed to tweak things going forward after five years, it's an appropriate time to check whether the focus is right."

Els comments: "At the five year anniversary we did a whole series of interviews with our clients and the feedback across the board was incredibly positive, they say it really added to the Webbers offering."

According to Moore and Els the recent review is likely to result in an increase in the number of secondments between firms, as well as more shared training and career development.

One such example is Allens following Linklaters in its adoption of the Rare contextual recruitment system in 2016, when it became the first Australian firm to do so.

From a practice perspective, the firms want to  focus on working together in the funds, infrastructure, energy and disputes sectors.

Linklaters Asia managing partner Nathalie Hobbs (pictured left) says: "The disputes and risk and compliance areas are firmly on the radar screen as an area where by working more closely together we will be able to grow the business jointly."

Hobbs explains that this will take the form of small groups of lawyers from both firms working together to identify potential opportunities.

Ever closer union?

Despite rumours at the time, what does not appear to be on the agenda is tightening the ties between the trio in a more formal way.

Linklaters acted for Glencore in connection with its possible takeover of Rio and that created a certain frisson

While Linklaters' string of European alliances ultimately led to a series of mergers that created the firm as it stands today, former partners suggest mergers were never explicitly discussed at the time the Allens and Webber alliances were signed, despite implicit expectations that there would be further integration.

With Webber at 151 partners and Allens at 131, both firms are far too big for Linklaters to easily assimilate, even allowing for significant profit disparities between the trio.

A former Webber partner says: "A merger could be on the cards in the next 10 years or so but right now the partnerships are too large, so they would need to clean them up. They would have to get to 25-30 partners, then it becomes interesting and Linklaters could do what they did in Europe in the 90s."

An ex-Allens partner comments: "Some partners thought that in time it might lead to a closer relationship with Linklaters, where there would be a captive Linklaters partnership within the Allens partnership for the real high performers."

Linklaters profit per equity partner (PEP) stood at £1.568m in 2016-17, while top performers at both Allens and Webbers are estimated by former partners to be on less than £600,000 based on current exchange rates.

The result is that many expect little to change in the coming years.

For Linklaters, the current formula is working.

As one former Allens partner says: "What does it cost Linklaters? They don't have to distribute any equity and they have a good referral agreement."

While the picture may be less clear for Allens and Webber the pair are in a tricky position that makes it almost impossible to go back at this point.

One leader of a rival South African firm says:  "Before Webber did the deal they were leading the ALN and doing amazing things. Linklaters has a big Africa practice and they are not going to hand it over to Webber; we are now seeing Webber reverse out of continental work and becoming a premium South African firm."

They have given up on their international ambitions and shrunk

Webbers partners though insist the union is still delivering the goods.

A former partner says: "When you look at the numbers Linklaters are the biggest referrer of work to Webbers and on balance it makes sense."

Els concludes: "It was never our strategy to open international offices. We believe that to serve our clients in Africa it is best to do it through a network of the best firms in each jurisdiction. Apart from the ALN network we have bilateral agreements with a number of those countries and we continue to drive those relationships very hard. The Linklaters alliance adds another dimension that allows us to do something that other firms don't have. Our strategy has remained what it is and what Linklaters does is enhance that."

While Allens has arguably gone through a rockier journey since the alliance, former partners argue the firm has been helped by being able to wind down its Asian operations with relatively little loss of face.

Of the three alliance firms though it seems to be the firm that is most dependent on making the union work. Unprofitable or not, if the Linklaters deal collapsed, Allens would effectively be left without access to most of the Asian market.

For this reason, former partners ask: "From Allens' perspective it is important that they keep the Linklaters' brand, if they don't, it looks terrible as they have given up on their international ambitions and shrunk to accommodate the market. The branding allows them to call themselves an international firm, it gives them an angle and perception in the market and without it what would they have left?"