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King & Wood Mallesons partner cash injection plan fails as firm eyes possible merger

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International giant will now look at “a range of strategic options”

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King & Wood Mallesons (KWM) has revealed that a planned £14 million partner-funded lifeline to cover the firm’s debts has not been given the go-ahead.

Back in October it emerged the firm’s partners were holding “crisis” talks over KWM’s debts — believed to be in excess of £25 million — when four of the outfit’s top senior lawyers decided to head for the exit.

Putting recapitalisation plans on hold, the firm quickly issued a statement confirming that “in light of these resignations” KWM was pressing pause on the scheduled programme, that would have seen partners inject some of their own cash into the firm.

Several weeks on and the international giant has now revealed that the recapitalisation programme — which many viewed as a vital lifeline for the firm — will now no longer go ahead. In a statement released in the past hour, a spokesperson for KWM said:

It was announced today that King & Wood Mallesons EUME has not been able to complete its planned recapitalisation programme. The programme was paused at the end of October 2016 whilst the firm assessed the financial impact of a number of partner departures. Having completed its assessment, a revised plan was submitted to the EUME partnership under which the same level of new partner capital was required, but with the financial support of the verein member firms. Regrettably, insufficient value of new capital was committed.

According to the statement, the firm will now consider “a range of strategic options” including the possibility of a merger. Continuing, the spokesperson said:

The firm will continue to service the needs of clients, operating on a business as usual approach. The EUME partnership board and management are considering a range of strategic options, including mergers, in conjunction with the firm’s bankers and financial advisers. A further statement will be made in due course.

The megafirm — the amalgamation of three recent mergers between top City of London player SJ Berwin, Chinese market leader King & Wood and Australian giant Mallesons — has lost over 50 partners in the last year, making up just 25 new ones through lateral hires.

Legal Cheek understands that all staff have been asked to attend a meeting scheduled for later today. More as we get it…

41 Comments

Choccy Splendid

I hear Andrew Leatherland is queuing up – DWF Berwins is the hopeful new name.

(9)(3)

IM trainee, honest.

So the DWF Furniture store may want to rebrand as a law firm.

Likely not – it will have to increase salaries across the board. Which DWF doesn’t like doing.

Ever.

(9)(1)

Gus

I just saw “injection” and “eyes” and nearly passed out!

(1)(0)

Anonymous

Look like they’re bust

(12)(1)

Ferboober

Addleshaw – now’s the chance!

(8)(2)

Anonymous

Goodbye SJ Berwin, you were good.

(16)(1)

Anonymous

…before they got flogged to the Chinese for a tuppence. Some ‘game changing merger’ alright.

(14)(0)

Anonymous

Gordon Dadds have an excellent record in sweeping up distressed firms…

(9)(1)

Marky Cuckerberg

Lol!

(1)(0)

Anonymous

Sad, looks like that’s curtains. I don’t see that they are that attractive as a merger partner given their top billers are jumping/have jumped ship. I suspect the remaining decent teams (PE/funds, competition etc.) will be snapped up piecemeal.

(10)(0)

Anonymous

They’re not. This is going to end up in tears. Everyone who was worth something has either left or has a spot lined up already? Those who left are either useless or deluded loyalists, both unlikely to save this shop.

It’s a Dewey v.2 by the looks of it.

(11)(0)

Anonymous

To think I interviewed for a TC with them a few years ago… I wish I could see the faces of all those smug toffs I met there. Who’s laughing now lads? 😂

(41)(12)

Anonymous

Still them, you peasant.

(20)(28)

Anonymous

I hope you sent out your CV mate, you might be without a job in 2017. 😂

(20)(3)

Anonymous

You don’t seem to be laughing much mate..

We are…:D

(Peasants ffs…. :D)

(0)(0)

Anonymous

Shit firm. Was going downhill for years

(8)(0)

Anonymous

I’m looking at a KWM pen on my desk as we speak.

(6)(0)

Leviticus

Thanks for this insight – does this mean you work for them or stole one from somewhere?

(6)(0)

Anonymous

You’re very welcome for the insight! I’m glad I could brighten up what is obviously a dreary day for you.

I don’t work for them, I’m at a legal services company (as in, providing services to law firms) so I assume that’s how the mysterious pen wended its way here.

(1)(0)

Anonymous

Nothing wrong with stealing stationary pal!

(1)(0)

Michael Loveridge

… or even stationery!

(11)(0)

Anonymous

Sad for all the hardworking employees but once again it is a tale of massive and rapid expansion and overreach with ambitions that exceeded the realistic prospects of the firm.

(3)(0)

Anonymous

Too big to fail surely.

(1)(12)

Anonymous

Hah you wish. This shop is closed within 6 months, mark my words.

(8)(0)

Anonymous

Feel sorry for KWM future trainees.

(19)(0)

Tyrion

Often overlooked, this is an important point. However the law society has a good record of placing trainees in defunct firms somewhere e.g. Dewey, Fasken, Haliwells.

(8)(0)

Anonymous

Feel sorry for the senior associates – too expensive to be hired, credit on past matters gone, too late to reskill practice areas, no clients, 100s competing for the in-house jobs.

(8)(0)

Tyrion

A half decent senior associate at KWM can get a good in-house job or a job in a firm in the west end. Yes they will take a hit on pay, but there are worse things. Also if they are flexible they can go to Dubai and cash out.

(2)(0)

Anonymous

The roof terrace was pretty epic for summer drinks…

(5)(0)

Anonymous

Yeah, it was really nice. But that’s part of the problem: it’s hardly a secret just how expensive the posh office building is and it clearly contributed to the financial difficulties the firm is in now. When you live beyond your means…

(6)(0)

Anonymous

(1) extraordinary that SJ Berwin (“silver circle”) is in this position
(2) extraordinary that Mallesons is in this position. Mallesons almost merged with Clifford Chance a decade ago; that’s how good its position was
(3) the four guys who put together the merger all resigned on the day the rescue deal was approved; what a pack of so and sos.

(18)(0)

Anonymous

Mallesons Stephens Jacques always were miles ahead of SJB in terms of reputation. What a dud this merger turned out to be.

(9)(0)

Anonymous

The Herbert Smith Freehills and HogLove mergers were hard enough – with firms that were pretty similar and involving people who had similar cultural backgrounds (Aussie/Brits, Americans/Brits). KWM – an establishment firm and SJB (the complete opposite) with a 100s of Chinese partners was destined to fail from the start. What a debacle. I am really sorry for the employees who as always will get the raw end of management’s incompetence.

(11)(0)

Anonymous

Well said. The fact that the minds behind this mess (including Rob Day who very smugly reassured me at the Open Day that the merger was ‘revolutionary, the finest in the City’ ) all jumped ship for golden handshakes at US firms is revolting.

(17)(0)

In side view

They defiantly live well beyond they’re means!!!

(0)(0)

Anonymous

Is this about partners bleeding the place dry by their drawings?

(1)(0)

Anonymous

I’m not sure that I would blame the merger.

SJ Berwin was always over rated and unstable. The internal culture was poisonous. The practice had too many fiefdoms and lacked coherence and unity. The firm had pretensions to be seen as comparable to Travers Smith and Macfarlanes in quality but the reality was pretty mid market.

A firm like that can unravel fast. It needed to do something though, it was in a strategic muddle and its international network was sub scale and bleeding cash.

The firm remains very strong in Asia and it’s unlikely to disappear.

(2)(0)

Clergs

The firm is so-so in Asia and somewhat strong in Oz, although widely known for being utter turbokhunts – possibly the most hated of the Big Six.

Judging by the reception SJB received in Sydney and Melbourne, they’ll be more than happy to cut the deadwood loose. Pity SJB didn’t manage to score that coveted US merger…

(2)(0)

Anonymous

Thoughts on how this will affect future KWM trainees?

(0)(1)

Anonymous

Not sure there is such a thing as a future KWM trainee. Be proactive and start looking for a job. Students who are not even at the firm yet will be low on people’s priority at the moment so don’t rely on others to find you a firm to train at.

(2)(0)

Schadenfreude

I’m afraid you’re f*cked mate, better start sending out applications/emails to other firms. That shop is definitely bust within 3 months.

(2)(0)

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