Alternative fee arrangements fact fiction and future Lisa

Alternative fee arrangements: fact, fiction and future Lisa Göransson Copenhagen 26 November 2014 © Allen & Overy 2012 CO: 23009868

Agenda – Trends in the market – Alternative fee arrangements: – what are they? – are they used? – do they work? – A&O’s tools and management systems © Allen & Overy 2012 2

An evolving legal services market: factors driving change – GCs under pressure to demonstrate better value, efficiency gains and reduced costs – more work is brought in-house – pushing for alternative fee arrangements – greater use of procurement teams and technology when buying legal services (online auctions) – New service delivery models on the up – clients are ‘multi-sourcing’ – Collaboration trend (collaboration portals such as Association of Corporate Counsel, Legal On. Ramp, Pfizer Legal Alliance) © Allen & Overy 2012 3

Traditional and alternative fee arrangements Time-based Results-based Budget-based Hourly rates Success/abort Fixed fees Reduced hourly rates Contingency fee Capped fees Blended rates Incentive fee Retainers Volume discounts Relative-value fee Task-based fees Performance bonus Risk to client © Allen & Overy 2012 Risk to firm 4

AFAs are increasing as a proportion of revenue, but their use is different across practice areas… - ICM - Banking - Corporate - Litigation Most popular AFAs in descending order – Flat/fixed fee – Contingency/success fee – Capped fee – Blended rates – A mix of fixed fee or discounted fees with a possible success fee © Allen & Overy 2012 5

Are AFAs here to stay and do they work? – Clients ask for AFAs – To remain competitive we have to be able and willing to offer AFAs, although hourly rates are most common in the end – Clients want simplicity – Examples: – Tyco (Eversheds) – Thames Water (BLP) © Allen & Overy 2012 6

Allen & Overy’s response 1 2 3 4 5 6 Systems Governance Pricing best practice Project management and resourcing Cost management Brand client management © Allen & Overy 2012 7

Allen & Overy’s ‘non-traditional’ legal services Document review Online legal services Our Legal Services Centre (LSC) in Belfast is led by an experienced partner and comprises junior legal professionals handling transaction-related work including document reviews, drafting and research tasks. They are supervised by qualified associate solicitors, each with at least six years’ post-qualification experience. The legal professionals are top -quality law graduates who have completed an intensive Business Law programme, designed and delivered by the College of Law and A&O. Derivative Services, established over a decade ago and serving over 185 institutions, provides online subscription products to help clients reduce legal, regulatory and operational risk. The products codify A&O’s unique legal expertise and cover all aspects of derivatives trading and key compliance issues, such as shareholding disclosure, marketing restrictions and cross-border data transfers. Contract lawyers Legal consulting/hybrid solutions Peerpoint, A&O’s flexible resourcing business, was launched in late 2013 in London. Peerpoint provides a panel of experienced, high-calibre lawyers available to work flexibly on contract for Allen & Overy. Within a year, once Peerpoint reaches a critical mass, it will also offer clients direct access to A&O-quality lawyers for temporary placements or for specific projects. A group of ten A&O partners is developing a consultingstyle approach to solving our clients’ legal challenges. We are deploying technology, business process and project management to combine traditional law firm services and new legal services into hybrid legal solutions. © Allen & Overy 2012 8

Peerpoint from Allen & Overy Flexible resourcing – Augment our permanent workforce at times of high busyness or for specialist skills – Offer clients access to quality lawyers for temporary placements for backfill or projects – Retain access to talented lawyers who might otherwise leave The proposition for clients The proposition for lawyers – On-demand access to experienced A&O-quality lawyers – a strata not currently available in this market – Attractive rates, increased flexibility; less expensive than a traditional law firm, more flexible than permanent recruitment – The same quality, flexible lawyers that A&O uses – Flexibility to support lifestyle preferences, while offering: – opportunities to work for A&O and top tier clients – challenging work, meeting individual aspirations – Alternative path to the traditional lawyer model – Access to continued development and training Started recruitment Peerpoint lawyers working for A&O Client pilot Wider client launch November 2013 January 2014 July 2014 Late 2014 (est) UK Other countries © Allen & Overy 2012 9

Our Legal Services Centre: benefits to clients Significant cost efficiencies on document review and complex but repetitive document production projects Wide experience in managing and delivering to budget intensive due diligence exercises. Cost savings compared with using the London office, for example, are typically between 25% and 35%. Quality control, systems and ways of working which are our own High quality of service in line with A&O standards. Risk-related matters, including confidentiality and liability, can be more easily managed than with a third-party provider. Prioritising the document review element of projects A&O is the only firm of its kind that has a facility like the LSC, specialising in the handling of large-scale document exercises across all practice groups: transactional, litigation and advisory. Use of technology and expertise in managing very large documentintensive projects Experienced in the use of a number of technology tools designed to bring efficiencies both at a micro level (individual documents and tasks) and a macro level (the overall project management of an exercise). Continuity and institutional experience Dedicated teams working on particular types of matters, reducing time spent familiarising the team with specific requirements and enhancing continuity. © Allen & Overy 2012 10

Online legal services: product range e. Library and e. Alerts Rulefinder Marketing Restrictions $ Rulefinder Marketing Restrictions$ Loans and Security dealroom$ Equity-Linked Instruments ABS Regulatory Reform Roadmap Restructuring Across Borders Green. Light$ Prospectus Directive Covered Bonds Employment Restructuring Roadmap netalytics$ Transparency Directive Euro-Commercial Paper Global Shareweb CSAnalytics$ Rulefinder Shareholding Disclosure$ Medium Term Notes Restrictive Covenants around the Globe diligence$ Rulefinder Marketing Restrictions$ Liquidity Spotlight Annual General Meetings repo. Analytics$ International Listing Requirements Anti-Trust Practice Guides Public Takeover Offers SLAnalytics$ Selling Restrictions Dawn Raid Guides Rulefinder Cross-Border Data Transfer$ EFETalytics$ All clients Derivatives $ Fees apply on annual subscription basis © Allen & Overy 2012 Capital markets Equity capital markets Debt capital markets Service provided by Derivative Services LLP, an affiliate of Allen & Overy LLP Competition Bank lending Employment and benefits Compliance Privacy Service provided by netalytics DSI GP, a joint venture between ISDA and Derivative Services LLP, an affiliate of Allen & Overy LLP 11

Legal consulting/hybrid solutions “ Innovation will not come from A&O simply expanding these new services and running them all as separate high-quality businesses under the A&O brand. The value to our clients will be in combining these services alongside high-end law firm work to create a totally different, joined up legal solution. ” Jonathan Brayne, head of A&O’s Innovation Panel Consulting Law firm Business process Technology Document review © Allen & Overy 2012 Hybrid legal solutions for clients Contract lawyers 12

Questions? These are presentation slides only. The information within these slides does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources. Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP's affiliated undertakings. © Allen & Overy 2012 13