Allen & Overy (A&O) is spinning out its risk management business aosphere to two private equity groups ahead of its planned merger with Shearman & Sterling. 

The Magic Circle firm said today (30 October) that it had formed a partnership with Inflexion that will see both companies invest in aosphere alongside US-based Endicott Capital. 

A&O will retain a “significant minority stake” in the business it founded in 2002, which will become a stand-alone entity. The deal values aosphere at around £200m according to a report in the Financial Times. 

“We see incredible potential in continuing to expand the platform,” said David Whileman, partner and head of partnership capital at Inflexion. “The sector is one we’ve tracked for some time as heightened regulatory scrutiny and complexity have led to growing demand for efficiency and thus outsourcing in legal spend.” 

aosphere provides more than 700 clients including banks and asset managers with online legal analysis on a subscription basis across compliance topics such as financial derivatives, shareholder disclosure requirements and data privacy. 

aosphere is expected to use the investment to develop and expand its product, with the company looking in particular to grow in the US and through mergers. 

Chamay commented: “This partnership creates a significant opportunity for us to accelerate our growth. By combining our strengths, we will be able to offer our clients more choice, more value and more impact. We’re excited to embark on this journey.”

A&O was advised on the deal by Macfarlanes, with the team led by corporate and M&A partners Jessica Adam and Tim Redman; senior counsel Felicity Powell; and senior associate Dennis Mok. Tax advice was provided by Jeremy Moncrieff and commercial and IP advice by Will Hedges. 

Meantime a Travers Smith team led by private equity and financial sponsors partners Tom Hartwright and Adam Orr advised Inflexion. 

The spin-off comes ahead of A&O’s planned merger with US law firm Shearman & Sterling, which was approved by the partnerships of both firms earlier this month and is expected to be completed by May 2024. 

The merged firm – to be known as A&O Shearman – will have revenue of around $3.5bn and house almost 4,000 lawyers across 48 offices.

For its part Inflexion’s investment in aosphere follows the company completing its take private of UK law firm DWF earlier this month for a reported £342m. 

Inflexion specialises in mid-market deals and has around £8bn in assets under management, according to its website, investing between £10m and £400m per transaction. It has backed more than 100 companies since it was founded in 1999 and in 2018 completed the acquisition of legal rankings provider Chambers.