Legal Business

Unsecured creditors to lose almost £34m as KWM Europe admin continues

Unsecured creditors to lose almost  £34m as KWM Europe admin continues

KWM China buys reassurance by taking SJ Berwin name

An initial report into the financial affairs of King & Wood Mallesons’ (KWM) now defunct European arm estimates that unsecured creditors are set to lose £33.5m as the firm’s inner financial workings begin to surface.

Legal Business

Scaling back: KWM pulls out of Riyadh in latest loss for global giant

Scaling back: KWM pulls out of Riyadh in latest loss for global giant

King & Wood Mallesons (KWM) confirmed today (3 April) that it is closing its Riyadh office, one of two bases the firm has in the Middle East.

Legacy SJ Berwin opened its only Saudi base in 2014, following its merger with Sino-Australian giant KWM, through an association with a local law firm led by corporate lawyer Majed Almarshad. As well as Almarshad, the firm had one other partner in the office, Glenn Lovell.

In a statement, KWM said following its ‘relaunch of offices’ in Europe and the Middle East earlier this year, the firm and the Law Office of Majed Almarshad have reached a mutual agreement to exit from their arrangement. KWM’s Middle Eastern presence continues through its Dubai office, which is currently home to four partners including former senior partner contender Tim Taylor QC. Dispute resolution partner Andrei Yakovlev is also based both in London and Dubai.

The spokesperson said: ‘KWM China remains committed to its Dubai office, which will allow KWM to continue to service its clients in the Middle East. The Dubai office will continue to support clients in dispute resolution, corporate and construction matters.’

‘However as the agreement to exit the arrangement is still being finalised, we cannot comment on any individual partner, fee earner or staff member at this stage,’ they added.

Riyadh was one of the bases retained by KWM China following the collapse of its European entity, legacy SJ Berwin, which went into administration earlier this year.

This closure also comes as KWM halved its US partnership last month, after losing New York-based international funds partner Parik Dasgupta to Reed Smith.

An initial administrators’ report into KWM’s now defunct European arm, released last month, states that unsecured creditors are expected to lose £33.5m as Quantuma continues to sift through the affairs of legacy SJ Berwin.

georgiana.tudor@legalease.co.uk

Read more in: ‘Shattered – The final days of ‘SJ Berwin’

 

Legal Business

KWM New York co-founder Dasgupta quits for Reed Smith leaving one partner in legacy SJ Berwin outpost

KWM New York co-founder Dasgupta quits for Reed Smith leaving one partner in legacy SJ Berwin outpost

Reed Smith confirmed today (21 March) King & Wood Mallesons (KWM) New York-based international funds partner Parik Dasgupta has joined the firm’s corporate practice.

Dasgupta (pictured) launched KWM’s US funds practice and was one of two co-founding partners based in the firm’s New York office. The office was until recently part of the collapsed European arm and has now been taken on by the new European entity dubbed KWM 2.0, which is funded by KWM’s Chinese verein.

Dasgupta’s exit leaves George Pinkham the only partner in the New York base.

Before KWM, Dasgupta was an associate at Mayer Brown, Kirkland & Ellis and Baker & McKenzie. He focuses on the commercial, legal and regulatory issues associated with private equity and venture capital fund formation. His key clients include PAI Partners, Triton, Macquarie, Astorg, Antin, First State, Capital Dynamics and UBS. Dasgupta was also a member of the firm’s India practice.

Matt Petersen, co-chair of Reed Smith’s global corporate group said: ‘Parik’s practice is a great fit for our corporate group and, in particular, our strong and growing funds practice. His high-end fund formation experience in connection with private equity and venture capital funds is a perfect addition to our existing practice.’

He added: ‘Parik also worked closely with many of the KWM attorneys who joined us earlier this year in Europe. All of these connections will be invaluable to us as we further grow our fund capabilities locally, nationally and globally,’ he added.

The addition of Dasgupta follows Reed Smith’s recent hire of 50 former KWM lawyers, including 17 partners who joined its London, Munich, Frankfurt and Paris offices in January.

Earlier this month, Reed Smith also took on three partners from Winston & Strawn, part of an eight-lawyer team in Paris.

However the firm’s global revenues fell for the second consecutive year in 2016, by 4% to $1.08bn from $1.12bn, which the firm said was the result of strategically managing down headcount by 81 lawyers over the year.

georgiana.tudor@legalease.co.uk

Read more on King & Wood Mallesons in: ‘Shattered – The final days of ‘SJ Berwin’

Legal Business

KWM admin: Quantuma to bill £1.3m as pensions, business rates experts assess payments

KWM admin: Quantuma to bill £1.3m as pensions, business rates experts assess payments

The inner financial workings of King & Wood Mallesons‘ (KWM) failed European arm have become evident in the joint administrators’ proposals report, issued last week.

As reported yesterday administrators estimate that there will be a £33.5m shortfall to unsecured creditors. Total unsecured debt topped £37m at the legacy SJ Berwin practice.

The report also reveals the firm’s financial state in the months leading up to the administration, as well as what investigations continue into the legacy practice.

On 30 September 2016, KWM had £39.5m in equity reserves when the firm’s liabilities amounted to £63.4m. With various partners departing in the first part of 2016, the firm lost £11m in equity reserves from April 2016 to September 2016, and had £15m less capital in Autumn 2016 than it had in April 2015.

Also according to the report, as of 30 September 2016 the firm had £63.4m worth of liabilities, £5m more than 30 April 2016, and it had £11m less net assets in September 2016 than it had in April last year.

Among KWM’s main unsecured trade creditors, listed as being owed the most money are former administrators AlixPartners, property consultant Knight Frank, property consultant Mace Macro, Ukranian law firm Lexwell and LexisNexis.

The administrators, Quantuma, were paid £255,172 between 17 January and 10 March, and estimate their total bill will amount to £1.3m overall for work done on KWM LLP as well as KWM Services.

Following the pre-packaged sales of WIP and accounts receivables, there were also a small number of files which remained with the firm, amounting to unbilled WIP of £943,000, unbilled disbursements of £309,000 and £1.7m of outstanding account receivables.

The entity under administration retains work in progress (WIP) and account receivables worth £3.6m from previous partner transfers and Quantuma is currently trying to collect this amount but cannot comment further on its recoverability prospects.

The administrators are currently investigating whether there is a possibility of historic business rates payments being challenged. They have also instructed independent pensions specialist Broom Consultants to review and administer the pensions scheme, while Quantuma continues to investigate those in senior management at the firm and director of services in the three years preceding administration, the circumstances for the firm’s failure as well as the affairs of the firm more widely and whether any civil proceedings should be taken.

In addition to previous reports, the proposals reveal that KWM’s Brussels office was sold on 25 January 2017, including £650k in work in progress (WIP) and accounts receivable (payable in three instalments throughout 2017) and £253k in cash.

KWM’s Germany offices in Frankfurt and Munich are also currently in the process of being closed and all employees have been made redundant – the administrators entered into negotiations with both landlords of both offices to secure ongoing occupation, admins paid property and payroll costs for a period of time for gross realisations of 3.4m Euros to date in WIP and account receivables.

The report also reveals that KWM Europe LLP, the new entity which KWM China retained, bought the SJ Berwin name, goodwill and all remaining archived files, closing the chapter on what was once legacy SJ Berwin.

georgiana.tudor@legalease.co.uk

Read more in: ‘Shattered – The final days of ‘SJ Berwin’ or ‘Comment: Myths and monsters – how KWM got swallowed by its own culture’


Legal Business

Barclays among unsecured creditors set to lose £33.5m in KWM Europe administration

Barclays among unsecured creditors set to lose £33.5m in KWM Europe administration

An initial report into King & Wood Mallesons‘ now defunct European arm states unsecured creditors are expected to lose £33.5m as administrators Quantuma continue to sift through the affairs of legacy SJ Berwin.

The firm was moved into administration in mid-January, in what was Europe’s largest ever legal collapse. The report says £37m is owed to unsecured creditors, but only £3.5m was available at 17 January.

Barclays, which is listed as having both secured and unsecured debt, has £13m of debt which is unsecured. The report says of its total debt, Barclays has a valid security over £16.5m, which the joint administrators’ lawyers are reviewing as per standard procedure. It is not yet clear how much of this money will be recovered.

Of the unsecured creditors, £6.8m is owed to trade creditors, just over £3m for premises and £985,000 to HMRC. Former members of the LLP are also still owed £12.6m.

The report states that Quantuma has recovered £6.7m from sales of parts of the business, such as to DLA Piper, Reed Smith, Greenberg Traurig and other purchasers, and made payments from this of about £1.6m to pay for the administration. This means about £5.02m has been recovered for Barclays as at 10 March 2017.

The report says in the five months to 30 September 2016, KWM’s European arm had an operating profit of £9.3m, while it profit had stood at £52.3m for the 12 months to April that year, a fall from £63.8m in April 2015.

While in early 2016 legacy SJ Berwin had more than 160 partners and 900 staff in Europe, its collapse meant its partnership headed to more than 20 firms by January 2017.

georgiana.tudor@legalease.co.uk

Read more in: ‘Shattered – The final days of ‘SJ Berwin’ or ‘Comment: Myths and monsters – how KWM got swallowed by its own culture’

Legal Business

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

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.

alex.novarese@legalease.co.uk

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.

Legal Business

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

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 noted 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.

Legal Business

Comment: As KWM cracks, beware re-written history and schadenfreude

Comment: As KWM cracks, beware re-written history and schadenfreude

Happy New Year, profession. Barely have we gotten into 2017 and the inevitable has happened: the legacy SJ Berwin business has entered administration, becoming the largest collapse in European legal history.

From the point last spring that a high-billing Paris private equity team quit for Goodwin Procter, it was hard to see King & Wood Mallesons’ (KWM) European business avoiding a bad outcome. But this comment is not really about KWM’s fate, more about how we try to interpret events and re-write history after the fact.

Take Halliwells, until last month Europe’s biggest legal insolvency. In the aftermath a once-lauded institution was vilified, in some cases by the same people who did the lauding. I would argue that Halliwells was a well-run business that made one or two bad judgement calls that – thanks to largely unforeseeable economic events – had disastrous consequences.

In that case a £24.5m property deal punched a hole in its finances at the wrong time. In itself it was a reasonable bet but the spoils were handed out in a way that harmed the business long term. And it was done in a way that divided the partnership, and law firms struggle to come back from that.

But that is business – you make your decisions in an environment in which you have to make wild guesses about the outcome. Sometimes they are right, sometimes wrong – often people in the business do not even know if chance or agency gets you the result. Halliwells managing partner Ian Austin was no villain to me, I quite rated him actually.

But then the need to pretend we comprehend more than we do grips, hindsight bias takes hold and blame gets parcelled out. ‘The market’ talks, the pundits opine, ex-partners sing and we all get too self-righteous. Journalists, being hugely disposed to pomposity once past the age of 26, are usually the worst offenders. I flatter myself I have a pretty sound take on the legal services market but I have lost count of the wrong judgement calls I have made as a pundit, including giving a qualified thumbs-up to the KWM/SJ Berwin tie-up three years back and initially taking a jaded view of Herbert Smith’s merger with Freehills, which proved far more successful. The longer you do this, the more you need to keep challenging your prejudices with the facts as they come in. Well, you do if you want to avoid spouting nonsense.

That is not to whitewash KWM. As best I can tell its problems were considerably more systemic and foreseeable than Halliwells, and there will be time to delve into the events leading up to the collapse and find those teachable moments. Neither am I massively sentimental about the old SJ Berwin. It had admirable qualities and its collapse is to be regretted but it was always a pretty hard-edged environment, not the mecca of entrepreneurial group-hugging some old hands now remember.

So as we settle ourselves into what promises to be yet another turbulent and eventful year for City law, let us keep the schadenfreude on a leash and remember there are no angels here, only interests.

alex.novarese@legalease.co.uk

Read more: ‘‘Morality is a difficult term’: King & Wood EUME collapses in Europe’s largest legal failure’

Read more in the cover feature: ‘Branded – Inside the troubled takeover of SJ Berwin’

 


Legal Business

As KWM cracks, beware re-written history and schadenfreude

As KWM cracks, beware re-written history and schadenfreude

Happy New Year, profession. Barely have we gotten into 2017 and the inevitable has happened: the legacy SJ Berwin business has entered administration, becoming the largest collapse in European legal history.

From the point last spring that a high-billing Paris private equity team quit for Goodwin Procter, it was hard to see King & Wood Mallesons’ (KWM) European business avoiding a bad outcome. But this comment is not really about KWM’s fate, more about how we try to interpret events and re-write history after the fact.

Legal Business

Greenberg reveals list of European relationships gained through KWM hires

Greenberg reveals list of European relationships gained through KWM hires

Following the collapse of King & Wood Mallesons‘ (KWM) European arm last week and the lateral moves of all but 33 of its partners, Greenberg Traurig has confirmed CBRE, Westfield and British Airways’ Pension Fund have followed a six-strong group of former KWM partners to Greenberg as new clients.

Others in the list that Greenberg will now advise include Brockton, Cain Hoy, Europa Capital, M3 Capital, Paloma Capital, Revcap and Rockspring.

The group joined Greenberg in late December and includes real estate funds partners Steven Cowins and Marc Snell, real estate partner Matthew Priday, corporate finance partners Michael Goldberg and David Fitzgerald, and tax partner Clive Jones and their respective teams.

The Crown Estate, another one of Cowins’ (pictured) key clients, announced earlier this month that following a review process last year it has given Berwin Leighton Paisner (BLP) the sole mandate for its £7bn Central London property portfolio. The Crown Estate has not been named as a new client by Greenberg.

Greenberg executive chairman Richard Rosenbaum said: ‘We are pleased to see that our strategy of delivering excellence and value in both real estate and funds across the firm attracted these top tier lawyers to our London office.’

‘We are of course excited that world class, sophisticated companies of this nature would choose to follow, and are committed to serving them as the very important clients they are,’ he added.

The list represents mostly clients that were brought on by Cowins, whilst some clients went to Greenberg through other team members.

According to Ashfords partner Sam Palmer, who as solicitor manager to legacy SJ Berwin’s administrators Quantuma has been dealing with the orderly transfer of client files since the practice went into administration, only around 5% of clients decide not to follow partners to their new firms and decide to take their work in progress elsewhere.

While Greenberg is adding to its books, Quantuma released their first interim report to creditors earlier this week. This concluded that partner exits accelerated the demise of legacy SJ Berwin practice, and begins an investigation into the firm’s previous financial practices.

georgiana.tudor@legalease.co.uk