Legal Business

Comment: The moment of truth arrives in the SJ Berwin saga

Even if you discount the more lurid claims made regarding King & Wood Mallesons, it is clear the firm is facing a huge challenge to get its Europe and Middle East business back on track.

In this week alone, five significant partners have indicated they are to go – a group including four of its most significant billers. Around 40 partners have now left the firm in Europe this year, including 24 the firm restructured out of the business, and the last two months have seen a number of significant departures, most damagingly at the end of August that of German funds star Sonya Pauls for Clifford Chance.

A partners’ meeting on Thursday (27 October) in London indicated the scale of the challenge, with partners told that KWM was halting its recapitalisation for the European business while it assesses its options, a process which it says will be concluded in four weeks. With the firm already having a £25m loan, KWM’s finances are strained for a firm generating £181m in the region.

That things took another turn for the dramatic was hardly a shock given the election this month of new managing and senior partners for its European and Middle East business. That a legacy SJ Berwin partner from its City heartlands didn’t win either role spoke volumes.

Most damaging was the news that Michael Halford was among yesterday’s resignations. Halford is the point man for KWM’s profitable funds practice, a team that always operated as a self-contained fiefdom. Given that funds has for years been top of the City priority list for high-paying US law firms, stopping the group splitting away will be difficult to say the least. Another of the leavers, Andrew Wingfield, is probably the most significant operator left in the firm’s City corporate practice, a stand-out individual in a team not exactly over-flowing with senior talent.

It will require something dramatic to resolve this situation if partners are not to peel off rapidly. The remarkable saga of SJ Berwin, including its turbulent three-year marriage with KWM, is reaching a decisive phase. Beyond a suitor prepared to take on the practice it is hard to see where this goes.

How did it get here? Much of it is due to SJ Berwin’s governance, a yawning cultural chasm between the Asia Pacific business and the City firm and a fundamentally mis-sold union. SJ Berwin had already struggled to mature beyond the entrepreneurial fire that powered its rapid rise. That struggle was evident well before KWM came calling. The result of that failure, particularly after the KWM union, is that the firm in Europe was left with the worst of both words – the passion was gone but neither did the firm have the polish and process to take its business to the next stage.

Likewise, it has been plain for some time that the Asian Australian practice was growing weary of the SJ Berwin soap opera, even as many of the old Berwin hands argue that KWM singularly failed to deploy the City firm’s considerable assets. Both jaded viewpoints are surely true. Very soon we’ll know how this story plays out.

alex.novarese@legalease.co.uk

For an in-depth assessment of KWM, subscribers can see our July cover feature ‘Branded’