A fêted global giant acquires a punchy mid-tier player to provide coverage in a key global region. Hopes are high. Yet just a few years later the combined firm is plagued by culture clashes, an identity crisis and damaging departures. Buyer’s remorse sets in and the ‘acquired’ firm longs for freedom or even just the good old days.
As we report this month in our cover feature on King & Wood Mallesons (KWM), the painful reality is that SJ Berwin has become, for the global legal market, the modern equivalent of Rogers & Wells, the troubled US acquisition that halted Clifford Chance (CC)’s once unstoppable momentum.
The Rogers & Wells saga was a defining moment for the legal profession not once but twice. First, the 1999 deal embodied the rise of the global law firm… only to subsequently highlight the model’s limitations.
When SJ Berwin agreed its tie-up with KWM in 2013, a union with the strongest legal brands in China and Australia at the height of the gold rush into Asia’s legal market, it seemed a good deal for a London firm that was struggling to find its way in the global market but still had many assets.
As with Rogers & Wells, the problem is less that SJ Berwin was not a good firm, more that yawing gaps in culture and business model were downplayed when the deal was brokered. If you go into such matters with open eyes, the chances of managing the challenges are much improved. Belatedly realising you bought a dog at the cat show is quite different.
The legacy SJ Berwin had one of the most idiosyncratic and driven partnerships in the City. It was not always pretty, but it worked, and many partners felt a real attachment.
Ditch the brand, shake up the strategy and make it a lot easier for partners to leave – the result has been a highly damaging string of departures with clients following partners out the door. These losses culminated this year in the exodus of a productive Paris deal team that will cost KWM at least £8m in annual billings.
The exits have been so devastating that KWM’s biggest achievement in Europe has been to keep its well-regarded funds team, which has always operated in a self-contained bubble, relatively intact. Ominously finances are strained, aggravated by considerable debts. But the most worrying point for KWM is that its European practice appears to have lost much of its fight.
For this state of affairs, successive management teams have some awkward questions to answer. The firm has been continually behind the curve on key issues of costs, performance and operational polish. The sideshow of William Boss’s appointment, nine-month run as European managing partner and delay in naming a replacement has further undermined confidence. That lack of grip has contributed to the growing exasperation at the firm’s Chinese and Australian partnerships.
The key contrast with Rogers & Wells, of course, is that CC had underwritten its US operation. The verein structure of KWM offers no such support for SJ Berwin. A neutral observer would have to question if KWM is reaching the point at which the Asia-Pacific business must choose to more materially support and oversee its European arm, or step away.
Because the time for half measures is past. KWM in Europe simply cannot continue to drift as CC did and remain a credible player. As such, robust leadership figures are needed now. If, as some believe, William Naunton is the best man to lead in Europe, KWM should just get on and appoint him rather than worrying about who is Berwin man and boy. Now it is time to park the regrets and move on. The legacy SJ Berwin is dying as an institution and culture. And it needs to if something is to be built in its place.
For more on King & Wood Mallesons, subscribers can see ‘Branded’ for an in-depth look at the firm.