Lisa Göransson Copenhagen 26 November 2014

1. Alternative fee arrangements: fact, fiction and future Lisa Göransson Copenhagen 26 November 2014 CO:23009868

2. Agenda • Trends in the market • Alternative fee arrangements: • what are they? • are they used? • do they work? • A&O’s tools and management systems

3. 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 OnRamp, Pfizer Legal Alliance)

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

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

6. 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)

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

8. Allen & Overy’s ‘non-traditional’ legal services Document review 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. Online legal services 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 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. Legal consulting/hybrid solutions A group of ten A&O partners is developing a consulting-style 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.

9. 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 November 2013 Peerpoint lawyers working for A&O January 2014 Client pilot July 2014 Wider client launch Late 2014 (est) UK Other countries

10. 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 document-intensive 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.

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

12. Legal consulting/hybrid solutions Consulting Law firm Business process Hybrid legal solutions for clients Technology Document review Contract lawyers

13. 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.