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King & Wood’s American dream over as merger talks with Morgan Lewis called off

Following a long courtship, merger discussions between King & Wood Mallesons (KWM) and Morgan, Lewis & Bockius have been called off, Legal Business can reveal.

A combination between the global giant and Philadelphia-based Morgan Lewis would have created the world’s second biggest firm by turnover, combining KWM’s revenue of $1.02bn with Morgan Lewis’ $1.84bn. Morgan Lewis posted profits per equity partner (PEP) at $1.53m for 2015 while KWM’s stand at $900,000.

It understood talks between the firms had been strained in recent weeks following uncertainty over the future of KWM’s European business. Discussions had been led by Morgan Lewis’ chair Jami McKeon opposite global managing partner Stuart Fuller, who has since quit his leadership post.

The European and Middle Eastern partnership is currently considering a rescue deal from its Australian and Chinese counterparts after it was forced to halt its recapitalisation plan after the loss of four key partners, including Halford, former managing partner Rob Day and corporate finance partners Andrew Wingfield and Jonathan Pittal. The legacy SJ Berwin practice is carrying more than £30m in debt.

While the Asia Pacific arm has agreed to underwrite the debt and has promised minimum earnings for equity partners, the deal includes a year lock-in and salaried partners must also contribute to the recapitalisation. As with the original recapitalisation, equity partners must stump up £14m, with the shortfall to be made up by the Chinese and Australian partnerships.

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.

However, KWM was not the only firm vying for a union with Morgan Lewis, as CMS Cameron McKenna has approached the firm in recent months. A Morgan Lewis partner told this publication that Camerons had indicated that Morgan Lewis was its preferred choice of US suitor.

KWM declined to comment while Morgan Lewis did not respond to requests for 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’