These are tough times for the house that Stanley Berwin built, with exhibit A being recent news that King & Wood Mallesons (KWM) is undergoing a sweeping partnership restructuring set to trim its European business by nearly two dozen partners, or 15% of its ranks.
While global managing partner Stuart Fuller (pictured) attempts to frame the move as repositioning KWM for the future, the storm clouds are ominous. The firm has suffered a string of significant exits in the last 18 months in its funds, litigation and corporate practices, losing several notable clients along the way. The firm was already going through a performance-driven partnership review set to manage out at least 10% of its ranks by this April (the firm’s German practice has struggled particularly).
While the firm managed to achieve respectable growth in 2014/15 and increases in profitability in Europe, having to go through more major cuts is hardly an advertisement for its partnership. And within days of announcing the latest restructuring, KWM lost no fewer than nine partners to rivals, punching a hole in its productive Paris deal team.
Moreover, it is hard to find the dividend SJ Berwin was supposed to receive for hooking up with KWM in November 2013. At a time of busy levels of Asian investment into Europe, the persistent feedback is that the deal has been slow to generate work for the firm’s corporate and funds practice in Europe.
It was also hardly confidence-inspiring that William Boss, the new managing partner touted as the performance-driven man at the helm in place of the more laid back Rob Day, unexpectedly stood down in January less than a year into the role.
True, the firm has been active in the lateral hiring market and its real estate practice, as one beneficiary of this senior recruitment, has been on solid form. But given that its high-profile merger was hardly based on property work and that SJ Berwin had for years been down-scaling real estate to focus on corporate, that is not an unqualified result.
The message from Fuller – still a well-regarded leader despite the post-merger turbulence – is that the restructuring will align KWM’s European practice with its global practice rather than being a defensive play. He does concede, however, that its European practice was the weakest performer within the firm, with revenues marginally down in the 2015 calendar year after a tough post-summer period.
Perhaps, but the time is rapidly running out for KWM to show that it can get the traction it needs post-merger. On top of the challenges facing the firm, 2016 is rapidly shaping up to be one of the toughest years seen by the legal industry in recent memory (and that’s saying something). Meanwhile, its private equity and funds practices are under siege from more profitable US rivals.
KWM simply doesn’t have the firepower to compete directly on remuneration, so the only hope it has of retaining its top transactional lawyers is that they believe the project is going somewhere. But proving that will not only be about getting Europe lined up with Asia; KWM has to demonstrate that Asia is willing and able to deliver the business it was supposed to.