Legal Business Blogs

Comment: Myths and monsters – how KWM got swallowed by its own culture

Hearing that Legal Business was gearing up for an in-depth look at the collapse of the European arm of King & Wood Mallesons (KWM), a well-informed contact told me that this story could not be told without going back to the Stanley Berwin days.

True, the old SJ Berwin had a maverick spirit that mesmerised its own partners but, having twice presided over lengthy pieces about the firm, I had no stomach to dwell once more on its legend.

Instead we get in this month’s cover feature the final chapter of what was, for a lot of good and even more ill, a remarkable institution. And the firm in that final year packed in leadership intrigue, a partnership restructuring, multiple attempts to overhaul its capital, a divisive management election, spiralling debt, a stream of departures and toxic office politics. All this before the old SJ Berwin reached the administration and firesale that concludes the story.

What went wrong? It is easier to ask what – if anything – went right? The collapse of Halliwells and Dewey & LeBoeuf by comparison are one-dimensional and event-driven. The old SJ Berwin was in contrast riven with serious issues before it opted for its 2013 merger, a deal that looked fine on paper but was inaccurately sold to all sides, creating a global ‘firm’ without the governance or cultural affinity to function as one.

Certainly, the much-cited difficulties of combining Western and Asian law firms proved to be on the money and KWM’s administration has been only the latest evidence to pile up on the material limitations of verein law firms. The notion much touted five years ago of Asian practices reshaping the global legal market is currently nothing more than a professional fairytale.

But ultimately the legacy SJ Berwin partnership bears the greatest responsibility. Thanks to a partnership of colourful and sometimes selfish and bullying characters, the firm never gripped the financial and operational challenges facing it. Big names got their way, or blocked those that attempted to modernise the firm. Even in the final months, with debt topping out at £37m and its lenders putting intense pressure, one team ‘chose not to bill’ for a month in a gesture of defiance.

If you are looking for heroes in the final months, there are a few who come out well but, at the senior level, not many.

The final disastrous leadership election – which killed off the modest chances of a last-minute reprieve – was the final hurrah for its rampant office politics. But perhaps it was always going to end this way – there were too many forces externally and within pushing in this direction.

Which is a reminder that in the end, it was a collective failure of all who signed up to the partnership and chose to dwell on the mythic side of the firm’s ethos and turn away from the uglier side of that culture. Some the senior hands that bailed out in 2014 and 2015 think the claims of professed surprise about the collapse from the partners there at the end are a lie but that kind of collective denial is common within partnerships.

One partner still with KWM told us: ‘Something I will not forgive myself for is not looking at the broader picture and not asking more questions. I started asking in November when the articles started coming out.’ At that point, ‘the articles’ about the state of the firm had been appearing for over a year. There were staff that didn’t realize how bad it was until December, when it filed for administration.

Years after leaving SJ Berwin, former senior partner David Harrel in 2013 wrote an article for us about the dramatic impact of culture on institutions and the ability of the people in those institutions to delude themselves about it. You did not have to be a deductive genius to work out who he was writing about.

The consequences of that collective failure will now play out as usual: messily and with scant relation to the virtue or culpability of those involved. You want a moral? It’s not really that kind of story but I wouldn’t lend any law firm more than 5% of revenue and do remember that private equity lawyers are hard to herd. That’s me done. This is my last SJ Berwin leader.

For further coverage of King & Wood Mallesons, see Shattered – The final chapter of ‘SJ Berwin’ (£)

Click here to read David Harrel’s article on culture.