Published in Legal Business
Persistent troubles at King & Wood Mallesons’ (KWM) beleaguered European arm came to a head in November as the partnership, which is carrying more than £30m in debt, failed to get a deal over the line to recapitalise its business. As Legal Business went to press, the firm was assessing its options for a merger or pre-pack administration deal. It was understood that a shortlist of potential suitors had been drawn up.
KWM’s recapitalisation plan, which required the partnership to inject £14m into the business, was paused in October after a number of key partners left the firm, including high-billing investment funds head Michael Halford, who will join the City office of US law firm Goodwin Procter.
KWM’s Asia arm agreed to provide the cash needed in exchange for partners agreeing to a 12-month lock-in and a capital contribution of £14m, including £60,000 from each salaried partner. The Asia partnership said it would also guarantee European partners £11,000 per equity point in remuneration. However, the partners failed to agree with only 21 coming out in favour.
The failed recap plan came amid a troubled five weeks for KWM, which also saw global managing partner Stuart Fuller resign from his role; merger discussions with Morgan, Lewis & Bockius were unveiled and subsequently called off; and nine partner exits were revealed, including Jonathan Pittal, Andrew Wingfield and former managing partner Rob Day. ‘Everything that has been happening at KWM was an accumutner One former partner said: ‘Everything that has been happening [at KWM] was an accumulation of one bad management decision after another, badly executed and aligned with the fact that SJ Berwin was full of incredibly selfish people insisting on blowing the firm up for their own benefit.’
Another added: ‘It’s historic. The firm did not manage itself well after the financial crisis. It’s been a combination of poor decisions ever since which ultimately resulted in this. Other firms suffered a similar loss but they pulled together and found new ways of working together. The culture at SJ Berwin has always been different, people didn’t work together in a collegial manner.’
Ronnie Fox, principal at Fox Lawyers and a specialist in partnership law, said: ‘It’s unlikely that they will find anybody willing to take over the business, as different firms have already been cherry-picking for some months. That makes an orderly disposal of the business less and less likely.’