Legal Business Blogs

Comment: Buck-passing and buyers’ remorse as KWM saga nears end

Though it will be outdated by the time this issue hits desks, I am professionally obligated I suppose to return to the subject of King & Wood Mallesons (KWM) as the firm’s troubled European business reaches what must be the decisive chapter of its post-merger tale.

With the recapitalisation deal having failed to secure the required backing from the legacy SJ Berwin partnership that would have seen its Australian and Chinese counterparts offer much-needed support, the only obvious next step in Europe if the firm is to stay in anything like a coherent whole appears to be a transfer to another firm. With debts over £30m and partners peeling away, the chances of that outcome do not look great. That is even before you address the complications of shifting part of a business contained within a multi-profit centre verein.

It did not have to come to this. The legacy SJ Berwin was a decent asset, albeit one badly mis-sold to its Asia-Pacific suitors three years ago. If there is one lesson from decades of law firm mergers, it is that you need to be honest about what is on the table. Once you have sold a practice to your partnership that turns out to be different, it is near impossible to constructively adjust course.

The result is the worst of both worlds – partners in perpetual buyers’ remorse, unable to accept the value of what they actually have. KWM wanted a firm with institutional muscle in Europe – not a bunch of world-weary mavericks. It was always going to struggle to secure such a suitor and KWM should have been more realistic on the point.

But the legacy SJ Berwin partnership bears more of the responsibility, right to the end. The firm was under-capitalised for years and various figures, among them former managing partner Rob Day, had tried to get its finances in order.

Certain influential figures in the firm resisted any such move. SJ Berwin had also for years attempted to modernise the business’ operations, strategy and governance. They were half measures that ended up diluting its entrepreneurial culture without putting anything coherent in its place. There have been a series of mis-steps at SJ Berwin spanning at least a decade. Its unflappable former leader David Harrel used to warn the firm was unable to critically consider its own culture and the collateral damage of partners’ ‘sharp elbows and insecurities’.

Even at the latter stages the old SJ Berwin culture surfaced, with the joint ticket bid for managing and senior partner of Gareth Amdor and Michael Halford apparently derailed by the attempt to get partners to accept the pair as a non-negotiable duo. Instead Amdor was defeated by Tim Bednall and Halford – the point man for KWM’s profitable funds teams – pulled out of the senior partner contest, resigning several weeks later.

The collective result of all this? The cost and consequence of such discord will be felt more by staff than partners. Let us hope new managing partner Bednall lives up to expectations and can salvage something from this mess.

Read the latest: ‘Another blow for KWM as Addleshaws hires former European head Boss along with two other partners’

For more analysis see: ‘Global 100: Branded – Inside the troubled takeover of SJ Berwin’