As the European and Middle East partnership of King & Wood Mallesons considers a rescue plan to stabilise the business, Legal Business can reveal the firm has made a cash call to salaried partners, and guaranteed minimum earnings to equity partners.
Partners were informed of the deal on Thursday last week, which involves an injection from salaried partners of the European business. KWM is asking junior partners to each plough £60,000 into the business as part of the rescue plans.
It has also emerged that Chinese and Australian management has set a point value guarantee to its equity partners, where the value of each equity point will not fall below £11,000. This provides a minimum of what each partner will be paid if they agree to a lock-in and stay with the firm.
KWM’s Asia Pacific partnership has promised that if profits fall, the point value will not fall below £11,000. With its points ladder running between 20 to 60 (with a discretionary bonus at the top), this gives the highest earning partner the ability to pocket £660,000 and the lowest earning equity partner £220,000.
Management’s guarantee to hold the point value at £11,000 is a far cry from previously voiced ambitions by management. Earlier this year global managing partner Stuart Fuller, who has since confirmed he will step down from his management position, put forward a target to the partnership earlier this year to increase profit per point to £20,000 in Europe by 2019, which required a huge hike in profitability against a current figure of around £14,000.
KWM has had a turbulent time of late with its legacy European practice, which is carrying more than £30m in debt and was forced to halt its recapitalisation plans after the loss of four key partners, funds partner Michael Halford, former managing partner Rob Day and corporate finance partners Andrew Wingfield and Jonathan Pittal.
The new leadership for the Europe and Middle Eastern partnership, managing partner Tim Bednall and senior partner Michael Cziesla, flew to China in early November to talk about the future of the firm.
Partners at legacy SJ Berwin were told if they continue with the recapitalisation plan of putting in around £14m in the firm and agree to stay until October 2017, then China will stump up the rest of the cash.
The deal is subject to a vote, of which at least 70 partners (around 60% of the Europe and Middle East partnership) must agree to. The partners have until the week beginning 21 November to agree the deal. In July, 98% of the partnership had voted in favour of the original recapitalisation plan.
KWM declined to comment.
Read more on KWM in ‘Comment: The moment of truth arrives in the SJ Berwin saga’
For an in-depth assessment of KWM, subscribers can see our July cover feature ‘Branded’