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The Magic Circle: To most Brits that phrase means the professional body of the United Kingdom’s conjurers. But to lawyers in the U.K., it refers to an exclusive group of top London firms that has cast an increasingly potent spell over the business of law. Over the past decade, the five Magic Circle firms — Allen & Overy, Clifford Chance, Freshfields Bruckhaus Deringer, Linklaters, and Slaughter and May — have emerged from the pack to dominate British firms in profits per partners and in their grip on top-quality, high-margin work. And they’re coming your way. Clifford Chance has entered the U.S. market already, by merging with New York’s Rogers & Wells in January. And Clifford Chance’s expansionist rivals (Allen & Overy, Freshfields, and Linklaters) all acknowledge that the United States is so important to their global ambitions that eventually they will have to pull off their own U.S. mergers. The Magic Circle has its roots in the Interfirm Comparison Group, an association of eight firms (the Magic Circle firms plus Lovells, Herbert Smith, and Norton Rose) whose senior partners have met since the 1970s to share information. It wasn’t until the Thatcher revolution of privatization, deregulation, and tax breaks for businesses, though, that the Magic Circle concept really took hold. By the end of the 1980s there were a dozen or more firms working on the big British deals that exploded during that era. By the mid-1990s it was clear that the five Magic Circle firms had become the first choice for the biggest, most desirable corporate and financial work. But the Magic Circle is no monolith. In terms of strategy, culture, and practice strengths, they are a disparate bunch. Slaughter and May, for instance, is the U.K.’s Cravath, Swaine & Moore — small, corporate, patrician, and traditional, a contrast to expansionist-minded Freshfields and Linklaters. And set somewhat apart from those corporate powerhouses are Allen & Overy and Clifford Chance, rivals for the title of U.K. banking champion. Neither is as blue-blooded as its corporate counterparts, but culturally, Clifford Chance is the closest of the five to New York’s Skadden, Arps, Slate, Meagher & Flom — a firm full of go-ahead deal-doers unconcerned with the traditions of the gentlemen’s club. This year saw the end of a no-poaching agreement among the eight firms in the Interfirm Comparison Group, which could allow the Magic Circle firms to try to pick off star partners from their rivals. “The effect [of the agreement] was more beneficial to the three who were not in the Magic Circle than to the Magic Circle, because there’s relatively little movement between the five at partner level,” says a member of management at one of the Magic Circle firms. Not everyone buys into the idea of the Magic Circle’s dominance. Nigel Boardman, head of Slaughter and May’s corporate practice, says he doesn’t find the Magic Circle “a useful concept” because he believes there are firms outside the circle that have stronger corporate finance practices than “one or two” inside the group. Of the Magic Circle firms, Allen & Overy and Clifford Chance are widely regarded as being the weakest in that area, while Herbert Smith says its corporate practice should put it in the elite. The globalization of the legal business means that a U.K.-centric list of Magic Circle firms could soon become irrelevant. A merger between Freshfields, Allen & Overy, or Linklaters and the kind of top New York firm they covet would start a whole new ball game. And with globally minded American firms like Shearman & Sterling and Cleary, Gottlieb, Steen & Hamilton already competing head-on with the Magic Circle in Europe, the question of whether a firm has its headquarters in London or New York may be moot in a few years. With each of the Magic Circle firms making big gambles on their international future, who’s to say that the composition of the Magic Circle will be the same in ten years? But for now, profitability, international reach, and prestige make for a powerful potion in the competition for new talent and clients. Success begets success. In that sense, it’s a virtuous Magic Circle. Related Chart: The Magic Circle, at a Glance

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